CITY OF FONTANA
ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED
JUNE 30, 2022
CITY OF FONTANA
ANNUAL COMPREHENSIVE FINANCIAL REPORT
Year Ended June 30, 2022
TABLE OF CONTENTS
INTRODUCTORY SECTION
Page
Number
i
x
xi
1 Letter of Transmittal
List of Principal Officials
Organizational Chart
FINANCIAL SECTION
Independent Auditors’ Report
Management’s Discussion and Analysis
Basic Financial Statements
Government-Wide Financial Statements
Exhibit A - Statement of Net Position
Exhibit B - Statement of Activities
21 22
6 CITY OF FONTANA
ANNUAL COMPREHENSIVE FINANCIAL REPORT
Year Ended June 30, 2022
TABLE OF CONTENTS
FINANCIAL SECTION (continued)
Basic Financial Statements (continued)
Fund Financial Statements
Page
Number
Exhibit C - Balance Sheet – Governmental Funds
Exhibit D - Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position
Exhibit E - Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds
Exhibit F - Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities Exhibit G - Statements of Revenues, Expenditures, and Changes in Fund Balances -- Budget and Actual
General Fund
Fire Protection District - Special Revenue Fund
Housing Authority Low/Mod Housing - Special Revenue Fund Economic Stimulus - Special Revenue Fund
Exhibit H - Statement of Net Position – Proprietary Funds 23 24
25 26
27 28
29 30
31 CITY OF FONTANA
ANNUAL COMPREHENSIVE FINANCIAL REPORT
Year Ended June 30, 2022
TABLE OF CONTENTS
FINANCIAL SECTION (continued)
Basic Financial Statements (continued)
Page
Number
Exhibit I - Statement of Revenues, Expenses and Changes in Fund Net Position – Proprietary Funds 32
Exhibit J - Statement of Cash Flows - Proprietary Funds 33 Exhibit K - Statement of Fiduciary Net Position 34 Exhibit L - Statement of Changes in Fiduciary Net Position 35 Notes to the Financial Statements
Note 1: Organization and Summary of Significant Accounting Policies 36 Note 2: Stewardship, Compliance and Accountability 47 Note 3: Cash and Investments 49
Note 4: Leases 53
Note 5: Receivables 54
Note 6: Capital Assets 55
Note 7: Interfund Receivables, Payables and Transfers 57 Note 8: Long-Term Debt 60
Note 9: Risk Management 64
Note 10: Litigation 64
CITY OF FONTANA
ANNUAL
COMPREHENSIVE
FINANCIAL
REPORT
Year
Ended
June
30,
202
2 FINANCIAL SECTION (continued)
Basic
Financial
Statements
(continued)
TABLE
OF
CONTENTS
Page
Number
Notes
to
the
Financial
Statements
(continued)
Note
11:
Jointly
Governed
Organization
6 5
Note
12:
Other
Post
-
Employment
Benefits
6 5
Note
13:
Pensions
68 Note
14:
Public Agency Retirement Services
7 8
Note
15:
Classification of Fund Balances
7 8
Note
16:
Fontana Fire Protection District
80 Note
17:
S
uccessor Agency
Trust for Assets of Former Redevelopment Agency
8 3
Note
18:
Tax Abatement
8 8
Note
19:
Prior Period Adjustments
8 8
Required
Supplementary
Information
Schedule
of
Changes
in
Net
Pension
Liability
and
Related
Ratios
during
the
8 9
Measurement
Period
-
Safety
Plan
Schedule
of
Changes
in
Net
Pension
Liability
and
Related
Ratios
during
the
90 Measurement
Period
-
Miscellaneous
Plan
Schedule
of
Plan
Contributions
–
Safety
Plan
91 Schedule
of
Plan
Contributions
–
Miscellaneous
Plan
92 Schedule
of
Changes
in
Total
OPEB
Liability
and
Related
Ratios
9 3
CITY OF FONTANA
ANNUAL
COMPREHENSIVE
FINANCIAL
REPORT
Year
Ended
June
30,
202
2 TABLE
OF
CONTENTS
Page
Number
FINANCIAL SECTION (continued)
Basic
Financial
Statements
(continued)
Supplementary Information
Combining
and
Individual
Fund
Statements
and
Schedules
Schedule
1 -
Combining
Balance
Sheet
–
Non
-
Major
Governmental
Funds
9 8
Schedule
2 -
Combining
Statement
of
Revenues,
Expenditures
and
Changes
in
Fund Balances
–
Non
-
Major Governmental Funds
10 3
Schedule
3 -
Budgetary
Comparison Schedules
-
Governmental Funds
108
Schedule
4 -
Combining
State
of
Net
Position
–
All
Fiduciary
Funds
13 4
Schedule
5 -
Combining
Statement
of
Changes
in
Assets
and
Liabilities
–
All
Fiduciary
Funds
13 5
STATISTICAL
SECTION
Net
Position
by
Component
–
Last
Ten
Fiscal
Years
1 38
Changes
in
Net
Position
–
Last
Ten
Fiscal
Years
1 39
Fund
Balances
–
Governmental
Funds
–
Last
Ten
Fiscal
Years
14 1
CITY OF FONTANA
ANNUAL COMPREHENSIVE FINANCIAL REPORT
Year Ended June 30, 2022
TABLE OF CONTENTS
Page
Number
STATISTICAL SECTION (continued)
Changes in Fund Balances of Governmental Funds – Last Ten Fiscal Years 142 Assessed Value and Estimated Actual Value of Taxable Property – Last Ten Fiscal Years 144 Direct and Overlapping Property Tax Rates - Last Ten Fiscal Years 145 Principal Property Taxpayers – Current Year and Nine Years Ago 146 Property Tax Levies and Collections – Last Ten Fiscal Years 147 Ratio of Outstanding Debt by Type – Last Ten Fiscal Years 148 Ratio of General Bonded Debt Outstanding – Last Ten Fiscal Years 149 Direct and Overlapping Bonded Debt 150
Legal Debt Margin Information – Last Ten Fiscal Years 151 Demographic and Economic Statistics – Last Ten Fiscal Years 152 Principal Employers – Current Year and Nine Years Ago 153 Full-time City Government Employees by Function – Last Ten Fiscal Years 154
CITY OF FONTANA
ANNUAL COMPREHENSIVE FINANCIAL REPORT
Year Ended June 30, 2022
TABLE OF CONTENTS
STATISTICAL SECTION (continued)
Page
Number
Operating Indicators by Function/Program – Last Ten Fiscal Years 155 Capital Asset Statistics by Function/Program – Last Ten Fiscal Years 156 Miscellaneous Statistical Information 157
July 13, 2023
The Honorable Mayor and City Council
State law requires that all general-purpose local governments publish a complete set of financial statements presented in conformity with generally accepted accounting principles (GAAP) and audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. Pursuant to that requirement, we hereby issue the annual comprehensive annual financial report of the City of Fontana for the fiscal year ended June 30, 2022.
This report consists of management’s representations concerning the finances of the City of Fontana. Consequently, management assumes full responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making these representations, management of the City of Fontana has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft, or misuse, and to compile sufficient reliable information for the preparation of the City of Fontana’s financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the City of Fontana’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects.
The City of Fontana’s financial statements have been audited by Davis Farr LLP, a firm of licensed certified public accountants.
The goal of the independent audit was to provide reasonable assurance that the financial statements of the City of Fontana for the fiscal year ended June 30, 2022, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and City of Fontana
C A L I F O R N I A
i
significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the City of Fontana’s financial statements for the fiscal year ended June 30, 2022, are fairly presented in conformity with GAAP. The independent auditor’s report is presented as the first component of the financial section of this report.
The independent audit of the financial statements of the City of Fontana was part of a broader, federally mandated “Single Audit” designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government’s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in the City of Fontana’s separately issued Single Audit Report.
GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City of Fontana’s MD&A can be found immediately following the report of the independent auditors.
Profile of the Government
The City of Fontana is located about 50 miles east of Los Angeles. The City spans approximately 52.4 square miles and has an estimated population of 212,809. The City was first developed as an organized rural community through the vision of Mr. A. B.
Miller. Although self-sufficient, the farming community was abruptly reshaped to accommodate the industrial revolution in 1942 with the transformation of Mr. Miller’s farm into a steel mill by Henry J. Kaiser. The area became Southern California’s leading producer of steel and steel-related products. The steel industry dominated the City’s economy until 1984 when the steel mill closed. Today, Fontana has emerged as an affordable suburb, attracting both residents and businesses.
The City was incorporated on June 25, 1952, under the laws of the State of California and enjoys all the rights and privileges applicable to a general law city. The City is governed by a five member City Council under the Council-Manager form of government. Policy-making and legislative authority are vested in a governing council consisting of the mayor and four other members. The council is elected on a non-partisan basis. Council members serve four-year staggered terms, with two council members elected every two years. The mayor is elected to serve a four-year term. The mayor is elected at large and the four council members are elected by district. The governing council is responsible for, among other things, passing ordinances, adopting the budget, appointing committees, and hiring both the City Manager and City Attorney. The City Manager is responsible for carrying out the policies and ordinances of the governing council, for overseeing the day-to-day operations of the government, and for appointing the heads of the various departments.
The City of Fontana employs approximately 600 full-time employees. Services provided include police protection; contract for fire services; the construction and maintenance of highways, streets, and other infrastructure; wastewater and sanitation services; and recreational activities and cultural events. In addition to general government activities, the City Council also serves as the ii
Board of Directors of the Fontana Industrial Development Authority, the Fontana Public Financing Authority, the Fontana Public Facilities Financing Authority, the Fontana Housing Authority, the Fontana Community Foundation, the Fontana Fire Protection District as well as the Successor Agency for the Former Fontana Redevelopment Agency. Therefore, these activities have been included as an integral part of the City of Fontana’s financial statements. Additional information on these entities can be found in Note 1 in the notes to the financial statements.
The annual budget serves as the foundation for the City of Fontana’s financial planning and control. Each year the City Council reviews budget development guidelines for use in preparing the next year’s budget. These guidelines are structured to reflect the City Council’s goals and objectives and to provide the framework in which the Operating Budget is prepared. The Finance Department is responsible for compiling the estimated revenues and appropriations for the City Manager. Prior to the beginning of the new fiscal year, the City Council adopts the annual Operating Budget at a public meeting.
The City’s budget policy is that all appropriations lapse at fiscal year-end. Outstanding encumbrance balances at fiscal year-end require re-approval by the City Council at the First Quarterly Budget Review. The City Council may amend the budget at any time during the fiscal year. Budget reports are presented to the City Council and the public on a quarterly basis. They include appropriation adjustments and revised revenue projections as needed. The legal level of budgetary control is set at the department level. Budget-to-actual comparisons are provided in this report for each individual governmental fund for which an appropriate annual budget has been adopted.
Factors Affecting Financial Condition
The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the City of Fontana operates.
Local economy. The Inland Empire continued to recover from the COVID-19 pandemic, which disrupted lives and businesses alike. The Inland Empire’s housing markets are strengthening, new home developers are continuing to build, job growth is strong and consumer spending is continuing to grow. Despite the increase in the interest rates by the Federal reserve, the Inland Empire’s economy does not expect an economic slowdown.
Strong Jobs, Balanced Growth. After experiencing significant job reductions in the wake of the State government COVID -19 shut down of the non-essential portions of the economy with unemployment reaching a high rate of 14.7% in May 2020 Fontana has continuously decreased their unemployment rate from 4.7% in February 2022 to 4.2% in February 2023.
Retail Sales Are Increasing. Taxable sales are a major revenue source for cities. Due to the State government COVID -19 shutdown, taxable retail sales declined 3.9% from June 2019 to June 2020 within the City. During fiscal year 2020-21 sales tax rebounded by growing 20% from June 2020 and increased again by 10% from June 2021 to June 2022. For San Bernardino County, the taxable sales were up 13.4% in the first quarter and 7.2% in the second quarter of 2022.
iii
Housing Market Steady Prices, Modest Sales. The Inland Empire’s housing markets, as a whole, remain stuck in a narrow band of home sales that has gone on nine years. Lack of supply combined with increased demand and barriers for consumers to obtain financing continue to drive price escalation in San Bernardino County, where home prices increased 11.8% from June 2021 to June 2022. Affordability remains high in the Inland Empire, when compared to other southern California communities. coastal communities, where 43-54 percent of home buyers can afford the median priced home. Lack of affordability in the coastal communities, where only 24-27 percent of wage earners can afford a median priced home, will continue to drive homebuyers inland.
The median home prices for the City of Fontana continued to increase in Fiscal Year 2022 and were up 12.93% for existing homes $620,000which is reflected in the growth of assessed valuations for the city of Fontana as it increased by about 7 percent to $25.25 billion for FY2022.
Fontana has competitive advantages related to its neighbors in the Inland Empire as it continues to be the westernmost city with available space to accommodate both residential and industrial development. It offers new residents housing cost advantages and companies locating here can benefit from lower labor costs. Fontana continues to experience a robust level of new housing permits for the last 3 years and, based on the availability of land and redevelopment opportunities, expects that trend to continue over the next decade.
The Ventana Specific Plan is coming to fruition. Planning Area 6 of the Ventana Specific Plan brings a taste of Europe to Fontana.
The project consists of 257 units and will have many recreational amenities including a fitness center, pool area, recreation room, and open plazas. Paseos and walkways will weave through the project to give it an old-world feel. The project is located at the Interstate 15 and Duncan Canyon Road.
The center of San Bernardino County’s growth is moving west into Fontana. The population has grown 7 percent over the past ten years and, at 212,809 Fontana is the second largest city in San Bernardino County, the third largest in the Inland Empire, and twentieth in the State.
With the ever-increasing demand for housing and ongoing addition of new residential units in the City, it is expected that the City’s population will exceed 280,900 by the year 2040.
The City of Fontana continued to see a number of significant events during the past year
0%
1%
2%
3%
4%
5%
70,000
100,000
130,000
160,000
190,000
220,000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
GROWTH RATE
POPULATION
Population Growth
iv
Significant Events of FY 2021-22
■ Auto Center: Construction has been completed and Fontana Hyundai opened for business at the corner of Sierra Avenue and South Highland Avenue in August 2021. Construction is currently underway on Fontana Chrysler, Dodge, Ram and Jeep, which is expected to be open in early 2023.
■ Energy Services Project (Parks): The city completed the energy services project a $3.6m project that included upgrading and replacing lighting at 30 different parks with new Light Emitting Diode (LED) fixtures. .
■ Central City Park Project : Central City Park was accepted as complete at the beginning of Fiscal Year 2021-2022. Central City Park was opened to the public on May 6, 2021. It is a premier 14.5 Acre sports facility and community gathering place located adjacent to the existing Cypress Community Center and also serves as a trail head to the Pacific Electric Trail. The park includes (3)lighted turf fields, a concession stand/restroom building, horseshoe pits, and an inclusive ADA compliant playground.
■ South Fontana Sports Park: Construction is underway on this 18-acre sports park with four lighted artificial turf fields for football and soccer use. The project will include parking, restroom, snack bar, playground and storage facilities. It’s located on Santa Ana Avenue between Cypress Avenue and
Juniper Avenue. Construction begins March 2022, with an estimated completion date of September 2023
■ 9/11 Memorial Monument: City Council identified funds for the 9/11 memorial monument project. The actual steel beam recovered from the World Trade Center site will be used as a main piece of the monument. The 18’ long beam will be resurrected to its upright position as it once stood at the World Trade Center. The upright position of the beam speaks to resilience, perseverance, and strength against tragedy. The conceptual design has been approved and the detailed design is currently underway. Completion of the v
project construction is projected in summer 2023, with a dedication ceremony planned for September 11, 2023.
■ Fire Station #80: The training center (Phase 1) will be approximately 3,300 square feet with a training tower that will be incorporated into a future Fire Station #80 (Phase 2) planned for the same site (Cherry and So. Highland Avenues). Design and environmental phases began in March 2021 with construction expected to commence in 2022.
■ American Rescue Plan Act (ARPA) Grant: To aid the country in the recovery from the government imposed COVID-19 lockdown, the U.S. Treasury issued the $350 billion American Rescue Plan Act (ARPA). The City of Fontana was allocated $50.3 million which includes various spending categories such as: support public health expenditures; address negative economic impacts; serve the hardest-hit communities and families; replace lost public sector revenue; provide premium pay for essential workers; and invest in water, sewer, and broadband infrastructure. The City Council has approved various eligible projects within these categories.
■ Pavement Rehabilitation Program: The program is an ongoing program that targets various areas of the City to repair potholes, sidewalks, curb miles, and gutters.
Challenges Ahead
While the City recovers from the COVID-19 pandemic, there are other challenges that lie ahead. The following is a summary of challenges that the City will face over the next few years.
Inflation. As the economy emerges from COVID-19 and the Russian-Ukrainian Crisis, a combination of the year-over-year growth and various national political decisions have brought about inflation levels not seen in decades. To cool down the record inflation growth the Federal Reserve has announced periodic interest rate hikes that in turn will raise the cost to buy homes.
The affect on Fontana’s housing market remains to be seen but will be watched.
State Budget. The economic fallout from the pandemic happened quickly and hit the economy hard. The pandemic did its worst damage in California in the labor market. Since California’s labor market underperformed the nation in 2020, the expectation is that this will translate into higher job gains for the state’s economy in 2021 and future years. By the end of March 2023, the state unemployment rate was 4.4% which stayed consistent from March 2022 but decreased from 8% in March 2021. The unemployment rate for the U.S. as of March 2023 was 3.5%. California’s state unemployment rate is vi
forecasted to be 4.7% this year and increase to 5.2% in 2024 with the slowing of job growth. California Public Employees Retirement System (CalPERS). At the July 2021 board meeting, CalPERS further reduced the discount rate assumption from 7.0% to 6.8% due to the Funding Risk Mitigation Policy, requiring the reduction of the discount rate in years of high investment returns. CalPERS also adopted new actuarial assumptions which included longer lif e exp
ectancies and earlier retirement ages. the City’s PERS Rate Stability Reserve has a balance of $10.8 million. Unfunded Liability. The City’s CalPERS net pension and OPEB liabilities are $120.8 million and $68.9 million, respectively, as of June 30, 2022. The Annual required contribution to fund the City’s retiree health program for both current and futu re re
tiree has been calculated to be $2.5 million (excludes implicit subsidy amount). The retiree health program has been closed to new hires since 1990.
Pro
perty Value Reassessments. The annual Consumer Price Index (CPI) adjustment which provides the basis for chan ges in
assessed valuations state-wide continues at the 2% level, although properties that have enjoyed Prop 8 valuation reductions are not subject to this limit.
Capital Reinvestment Program. Since 1996/1997, the City Council has been investing a portion of the annual General Fund Bu
dget back into the community in the form of capital projects (streets, parks and facilities), with a goal of 10%. A total of $7.20 million from various funds was allocated in the FY 2022-23 Operating Budget to this critical area. Proposition 218. On November 5, 1996, the California electorate approved Proposition 218 affecting a change to th e Ca
lifornia State Constitution by making numerous changes to local government finance law. This measure impacts the generation and use of many fundamental revenue sources including fees, charges, assessments, and taxes. This proposition also changes the methods by which certain assessments and taxes are challenged by the electorate. The FY 2022-23 Operating Budget fully complied with the provisions of Proposition 218. Services and Growth. The City of Fontana has experienced significant growth over the past several years. With this growth comes the need to service a growing community. The funding sources for these additional services are revenue growth and the Municipal Services Fiscal Impact Fee Program (MSFIF).
Financial Information. Management of the City is responsible for establishing and maintaining internal control designed to ensure that the assets of the government are protected from loss, theft, or misuse, and to ensure that adequate accounting data are compiled to allow for the preparation of financial statements in conformity with U.S. generally accepted accounting principles.
Internal control is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurances recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management.
This report consists of management’s representations concerning the finances of the City. As a result, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. Management asserts that, to the best of their knowledge and belief, this financial report is complete and reliable in all material respects. vii
Budgetary controls. The City maintains budgetary controls, the objective of which is to ensure compliance with legal provisions embodied in the annual appropriated budget approved by the City Council. Activities of the General Fund, special revenue funds, debt service funds, capital project funds, and all the proprietary funds are included in the annual appropriated budget. The level of budgetary control (that is, the level at which expenditures cannot legally exceed the appropriated amount) is established at the department level. The City also maintains an encumbrance accounting system as one technique of accomplishing budgetary control. Encumbrances generally are re-appropriated as part of the following year’s budget.
Regarding long-term financial planning, as of June 22, 2021, the City Council adopted the City’s first biennial budget for fiscal years 2021-2022 and 2022-2023. Additionally, as a companion to approving the budget plan, a seven-year Capital Improvement Plan was presented to the City Council. The seven-year plan links anticipated expenditures for infrastructure development with community needs and desires and provides a citywide perspective of recommended projects and proposed funding sources. The Capital Improvement Plan was finalized in June 2021 and totaled $806.8 million for the seven-year fiscal period ending June 30, 2028. The seven-year Capital Improvement Plan has been submitted and annually updated, in its present form, since 1991, for effective long-range planning purposes. It is City Management’s belief that these two plans give City Council members an expanded opportunity to set policy and provide direction for implementation, resulting in improved management efficiency and improved financial results.
Debt administration. At June 30, 2022, the City had a number of debt issues outstanding as shown in detail in the notes to the financial statements. The City’s ratios of net bonded debt to assessed valuation and the amount of net general bonded debt per capita are useful indicators of our debt position to management, citizens, and investors.
At June 30, 2022, the City has $53.0 million in authorized, outstanding tax supported general obligation bonds with no authorized but unissued general obligation bonds. This level of general obligation debt is well below the legal limit of $3,604 million, or 15% of assessed valuation.
Awards and Acknowledgements
The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City for the fiscal year ended June 30, 2020. This was the twenty-eighth consecutive year that the City has received this award. The Certificate of Achievement is the highest form of recognition in governmental accounting and financial reporting, and its attainment represents a significant accomplishment by a government unit and its management. In order to be awarded this certificate, a governmental unit must publish an easily readable and efficiently organized annual comprehensive financial report, with contents that conform to program standards. These reports must satisfy both generally accepted accounting principles and applicable legal requirements. We believe our current Annual Comprehensive Financial Report conforms to the Certificate of Achievement program requirements The Government Finance Officers Association of the United States and Canada (GFOA) has given an Award for Outstanding Achievement in Popular Annual Financial Reporting to the City for its Popular Annual Financial Report for the fiscal year ended June 30, 2019. This was the twentieth consecutive year the city has received this award. This is a prestigious national award viii
ix
Matthew C. Ballantyne City Manager
Phillip Burum Deputy City Manager / Development Services Ramon Ebert Deputy City Manager / Administrative Services Jennifer Barcenas Innovation & Technology Director
Jeffrey Baughman Director of Building & Safety
Jeffrey Birchfield Fire Chief
Jessica Brown Chief Financial Officer
Michael Dorsey Chief of Police
Gia Kim Public Works Director / City Engineer
Patty Nevins Director of Planning
Daniel Schneider Community Services Director
Rakesha Voss Director of Human Resources & Risk Management Vacant Deputy City Clerk
ELECTED OFFICIALS
(At Date of Issuance)
CITY OF FONTANA
LIST OF PRINCIPAL OFFICIALS
ADMINISTRATIVE STAFF
Janet Koehler-Brooks, City Treasurer
Germaine Key, City Clerk
Acquanetta Warren, Mayor
Phillip Cothran, Council Member
Peter Garcia, Mayor Pro Tem
John B. Roberts, Council Member
Jesus Sandoval, Council Member
X
Citizens of Fontana
Elected Officials
Mayor
City Council
City Treasurer
City Clerk
City Manager
Matthew C. Ballantyne
City Attorney
Administrative
Services
Ramon Ebert
Deputy City Manager
Police
Michael Dorsey
Police Chief
Development
Services
Phillip Burum
Deputy City Manager
Human Resources
Rakesha Voss
Finance
Jessica Brown
Planning
Patty Nevins
Community Services
Daniel Schneider
Building & Safety
Jeffrey Baughman
Public Works/City Engineer
Gia Kim
Fire Protection
District
Jeffrey Birchfield
Fire Chief
Office of the City Clerk
Vacant
Innovation Technology
Jennifer Barcenas
xi
City Council
City of Fontana
Fontana, California
Independent Auditor’s Report
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Fontana (the “City”), as of and for the year ended June 30, 2022, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.
In our opinion, the accompanying financial statements present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information, the Budget to Actual Statement of the General Fund, the Budget to Actual Statement of the Fire Protection Special Revenue Fund, the Budget to Actual Statement of the Housing Authority Low/Mod Housing Fund Special Revenue Fund, and the Budget to Actual Statement of the Economic Stimulus Special Revenue Fund, of the City of Fontana as of June 30, 2022, 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. 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 Matter
As described further in Note 4 to the financial statements, during the year ended June 30, 2022, the City implemented Government Accounting Standard (GASB) No. 87: Lease Accounting. In addition, the financial statements reflect certain prior 1 period adjustments as described further in note 19 to the financial statements. Our opinion is not modified with respect to these matters.
Responsibilities of Management for the Financial Statements
The City’s 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 one year after the date that the financial statements are issued.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, 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. 2 We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, Schedule of Changes in Net Pension Liability and Related Ratios During the Measurement Period, Schedule of Pension Plan Contributions, and Schedule of Changes in Total OPEB Liability and Related Ratios during the Measurement Period be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements.
We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
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 nonmajor fund financial statements and budget to actual schedules are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements and budget to actual schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements.
Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements and budget to actual schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole.
Report on Summarized Comparative Information
We have previously audited the City of Fontana’s 2021 financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated June 9, 2022. In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2021 is consistent, in all material respects, with the audited financial statements from which it has been derived.
3 Other Information
Management is responsible for the other information included in the Annual Comprehensive Financial Report. The other information comprises the introductory section and statistical section but does not include the financial statements and our auditor's report thereon. Our opinions on the financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated July 13, 2023 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 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.
Irvine, California
July 13, 2023
4 5
MANAGEMENT’S DISCUSSION AND ANALYSIS
This narrative overview and analysis of the City of Fontana’s financial activities for the fiscal year ended June 30, 2022 is presented by the management of the City of Fontana to readers of the City’s financial statements. Management encourages readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found in the introductory section of this report and the City’s basic financial statements in the financial section of this report.
FINANCIAL HIGHLIGHTS
▪ The City’s governmental and business-type activities resulted in total assets and deferred outflows of resources exceeding its liabilities and deferred inflows of resources by $1,085.5 million as of June 30, 2022 (“current fiscal year”). Of this amount, $ 272.0 million represents the portion for restricted uses as specified by entities outside of the City government, the amount for unrestricted uses in accordance with finance-related legal requirements as reflected in the City’s fund structure is in a positive position at $84.6 million, and $728.8 million accounts for investments in capital assets in excess of related debt. ▪ The City’s total net position increased $25.0 million during the current fiscal year. The increase is primarily due to the $7.4 million increase in property taxes, $5.3 million in increase in sales tax and $11.8 million increase in charge for services. In addition, our overall expenses decreased compared to FY2021.
▪ As of the fiscal year end, the City’s Governmental Funds ending fund balances were $559.3 million, an increase of approximately $32.1 million or 6.1% from the prior fiscal year. Of this balance, $286.2 million is either nonspendable or restricted for use set by various legal requirements, $10.9 million is committed for PERS rate fluctuations and $262.2 million is either assigned or unassigned based on the nature of the funding source.
▪ The General Fund’s fund balance at the close of the current fiscal year was $124.1 million, an increase of approximately $7.0 million or 6% from the previous year. The General Fund’s fund balance consists of $1.9 million in nonspendable and restricted fund balance, $10.9 million committed for the purposes of PERS rate fluctuations, and $111.3 million in assigned and unassigned fund balances. See page 15 for further discussion.
▪ The City’s business-type activities yielded operating revenues of $27.2 million, while operating expenses amounted to of $24.7 million. ▪ General Fund revenues were $3.6 million more than the final budget, and expenditures were $18.8 million less than the final budget. 6 OVERVIEW OF THE BASIC FINANCIAL STATEMENTS
Management’s Discussion and Analysis is intended to serve as an introduction to the City’s basic financial statements. The C ity’s basic financial statements include three components: government-wide financial statements; fund financial statements; and notes to the basic financial statements.
Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private-sector business.
The statement of net position presents information on all of the City’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating.
The statement of activities presents information showing how the government’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).
Both of the 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 go vernmental activities of the City include general government , public safety, public works , community development, community services and engineering. The business-type activities of the City include sewer and water operations. 7 Component units are included in the basic financial statements and consist of legally separate entities for which the City is financially accountable and that have the same governing board as the City. The blended component units include the Successor Agency of the Former Fontana Redevelopment Agency, the Fontana Public Financing Authority, the Fontana Public Facilities Financing Authority, the Fontana Housing Authority, the Fontana Industrial Development Authority, the Fontana Community Foundation and the Fontana Fire Protection District. The redevelopment agency was dissolved as of January 31, 2012 through the California Supreme Court decision on Assembly Bill 1X26. See Note 17 of the notes to the financial statements for more information on the dissolution.
The government-wide financial statements can be found on pages 21 and 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 the City’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 City’s near -term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balance provide a reconciliation to the government- wide financial statements in order to facilitate this comparison between governmental funds and governmental activities.
The City maintains 53 individual governmental funds for financial reporting purposes. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balance for the General Fund, the Fire Protection District Special Revenue Fund, the Housing Authority Special Revenue Fund, the Economic Stimulus Special Revenue Fund, the Capital Reinvestment Fund, the Future Capital Projects Fund, the Sewer Expansion Fund, the Community Facility Districts Fund, and the Traffic Mitigation Capital Project Fund, which are considered to be major funds. Data for the other 44 governmental funds are combined in a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the non-major funds supplementary section of this report.
The City adopts an annual appropriated budget for its general fund, special revenue funds, debt service funds, and capital project funds. A budgetary comparison statement has been provided for the General Fund, the Fire Protection District Special Revenue Fund, the Housing Authority Low/Mod Housing Special Revenue Fund, and the Economic Stimulus Special Revenue Fund in the basic financial statements and for the remaining special revenue funds, the debt service funds, and the capital project funds in the supplementary information.
The governmental fund financial statements can be found on pages 23-30 of this report. 8 Invested in capital
assets, net of related
debt 67%
Restricted:
Community
development 10%
Restricted: Public
safety 4%
Restricted: Public
works 5%
Restricted: Debt
Service 0%
Restricted:
Government-access
channel 0%
Restricted: Capital
projects 6%Unrestricted 8%
Net Assets by Type
Proprietary funds. The City maintains two different types of proprietary funds. 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 its Sewer and Water Operations. Internal Service Funds are an accounting device used t o accumulate and allocate costs internally among the City’s various functions.
The City uses an internal service fund to account for its fleet of vehicles; because this service predominantly benefits governmental rather than business-type functions, it has been included with governmental activities in the government-wide financial statements.
Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements can be found on pages 31-33 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 those 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.
The basic fiduciary fund financial statements can be found on page 34-35 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 government-wide and fund financial statements. The notes to the financial statements can be found on pages 36-92 of this report.
Government-wide Financial Analysis
9 As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. The City’s net position is comprised of Net Investment in Capital Assets, Restricted Net Position, and Unrestricted Net Position. As of June 30, 2022, assets exceeded liabilities by $1,085.5 million.
The City’s net investment in capital assets (land, buildings, infrastructure, machinery, equipment, and vehicles), less any related debt used to acquire those assets that is still outstanding, is $728.8 million. 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 i n its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used t o liquidate these liabilities. An additional portion of the City’s net position ($272.0 million) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position $84.6 million may be used to meet the government’s ongoing obligations to citizens and creditors, unrestricted net position is in a positive position at the end of the fiscal year.
Net Position
(000 omitted)
2022 2021 2022 2021 2022 2021
697,543$ 619,294$ 31,702$ 30,845$ 729,245$ 650,139$ 715,583 706,671 59,324 62,117 774,907 768,788 1,413,126 1,325,965 91,026 92,962 1,504,152 1,418,927 44,198 47,290 1,114 1,303 45,312 48,593 278,868 307,057 10,962 14,806 289,830 321,863 101,018 76,865 4,438 3,058 105,456 79,923 379,886 383,922 15,400 17,864 395,286 401,786 66,879 3,748 1,845 133 68,724 3,881 675,179 638,865 53,603 55,533 728,782 694,398 272,038 253,988 - - 272,038 253,988 63,342 92,732 21,292 20,735 84,634 113,467 1,010,559$ 985,585$ 74,895$ 76,268$ 1,085,454$ 1,061,853$ Net investment in capital assets
Restricted
Unrestricted
Total net position
Deferred outflows of resources
Long-term liabilities outstanding
Other liabilities
Total liabilities
Deferred inflows of resources
Net position:
Total assets
Governmental Activities Business-Type Activities Total
Current and other assets
Capital assets
10 Changes in Net Position
(000 omitted)
2022 2021 2022 2021 2022 2021
Revenues:
Program Revenues:
Charges for services 73,330$ 63,006$ 26,819$ 25,359$ 100,149$ 88,365$ Operating grants and contributions 20,860 46,511 - - 20,860 46,511 Capital grants and contributions 27,263 68,782 337 198 27,600 68,980 General Revenues:
Property taxes 84,070 76,703 - - 84,070 76,703 Sales tax 56,727 51,408 - - 56,727 51,408 Franchise taxes 9,749 8,670 - - 9,749 8,670 Business license taxes 7,584 6,677 - - 7,584 6,677 Transient occupancy taxes 1,374 1,132 - - 1,374 1,132 Motor vehicle in lieu 459 156 - - 459 156 Investment earnings (10,525) 4,008 (749) 19 (11,274) 4,027 Other 11,901 9,176 (177) 14 11,724 9,190 Total revenues 282,792 336,229 26,230 25,590 309,022 361,819 Expenses:
General Government 40,459 41,708 - - 40,459 41,708 Public Safety 111,899 111,355 - - 111,899 111,355 Public Works 49,008 50,078 - - 49,008 50,078 Community Development 5,492 38,019 - - 5,492 38,019 Engineering 37,814 24,000 - - 37,814 24,000 Community Services 13,344 13,156 - - 13,344 13,156 Interest on long-term debt 2,134 1,860 112 - 2,246 1,860 Gain/(Loss) on sale of capital assets - - - - - - Sewer - - 24,542 24,980 24,542 24,980 Water - - - - - - Total expenses 260,150 280,176 24,654 24,980 284,804 305,156 Change in net position before transfers 22,642 56,053 1,576 610 24,218 56,663 Transfers 2,949 2,644 (2,949) (2,644) - - Change in net position 25,591 58,697 (1,373) (2,034) 24,218 56,663 Net Position - beginning of year as restated 984,968 926,888 76,268 78,302 1,061,236 1,005,190 Net Position - end of year 1,010,559$ 985,585$ 74,895$ 76,268$ 1,085,454$ 1,061,853$ Governmental Activities Business-Type Activities Total
11 Governmental activities
The most significant revenues of the governmental activities are general taxes (56.4%), which include property taxes (29.7%), sales and use taxes (20.1%), and various other taxes (6.6%), and general revenues ( 0.7%), which include various other revenues ( 4.4%) and investment earnings ( -
3.7%). Program revenues are 42.9% of the total revenues of the governmental activities, which include charges for services ( 25.9%), operating grants and contributions (7.4%), and capital grants and contributions (9.6%).
Public safety (police and fire) is the most significant ( 43%) of all governmental activities’ expenses, followed by Public works (18.8%), General government (15.6%), Engineering (14.5%), Community services (5.1%) Community development ( 2.1%), and interest on long -term debt ( 0.8%).
Included in these amounts is depreciation expense, which is 14.3% of the total expenses for governmental activities.
Governmental activities revenues decreased by $53.3 million (15.9%) in the current fiscal year. The changes in revenues are a result of the following:
• General tax revenues increased by $14.9 million (10.3%) which is primarily due to increased sales tax revenue ($5.3 million) as a result of recovery from the 2020 pandemic shutdown and high inflation rate. Property tax revenues increased by $7.4 million because of increased assessed valuation. Other taxes increased by $2.2 million. • General revenues (not including general taxes) decreased by $11.35 million (-86.1%), primarily the result of unrealized/realized loss on investment securities due to the Federal Reserve board raising its interest rate.
Property taxes,
29.7%
Sales taxes,
20.1%
Franchise taxes,
3.4%
Business license
taxes, 2.7%
Transient
Occupancy
Taxes, 0.5%
Other, 4.4%
Charges for
services, 25.9%
Operating
contributions
and grants,
7.4% Capital
contributions
and grants,
9.6%
REVENUES BY SOURCE -
GOVERNMENTAL
-
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
Program Revenues
2022 Expenses
EXPENSES AND PROGRAM REVENUES -
GOVERNMENTAL ACTIVITIES
12 • Charges for services increased by $ 10.3 million (16.4%) and this is mostly attributed to 1) an increase of $ 3.7 million of Community Development revenue related to development activity; 2) an increase of $5.0 million in Engineering; 3) a n increase in community services of $2.1 million.
• Operating contributions and grants decreased by $25.7 million due to a one time payout of U.S. Treasury Emergency Rental Assistance Grant of $6.4 million, and other grants related to the pandemic of $5.3 million in FY 2021. • Capital contributions and grants decreased from $68.8 million to $27.3 million primarily due to the decrease in creation of new CFD capital project contributions related to various land development within the city.
Governmental activities expenses decreased by $20 million (7.1%) in the current fiscal year. The most significant changes in governmental expenses were:
• Community development and Engineering expenses decreased by $18.7 million due to one-time capital acquisition under Community facilities development ,The Meadows, in the amount of $6.18 million in FY2021 . In addition, this is also attributable to increase in capital expenses in FY2021 on several traffic signals and storm drain projects throughout the City , such as Valley -Oleander Traffic Signal, Etiwanda-Slover Arterial project, and Cypress Strom Drain and other various developments such as Etiwanda Ridge.
Business-type activities
Business-type activities net position decreased by $1.3 million (-1.8%).
Business-type activities revenues for current year is in-line with prior year, showing an increase of $0.6 million. • Investment earnings decreased by $ 1.0 million as a result of the Federal Reserve Board raising its interest rate as some of our City’s securities were purchased at a lower interest rate.
• Charges for services increased by $1.5 million primarily due to an increase in rates charged by other entities such as IEUA and City of Rialto that are collected by the city and passed through to the proper entities. • Capital contributions increased by $0.1 million due to one-time project reimbursement incurred during the current fiscal year.
Total expenses increased by $0.32 which is in-line with prior year levels.
13 Financial Analysis of the City’s Funds
The City of Fontana employs Fund Accounting to ensure and demonstrate compliance with finance-related legal requirements.
Governmental funds. The focus of the City’s governmental funds is to provide information on near -term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, assigned and unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year.
As of the end of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $ 559.3 million, an increase of $32.1 million (6.08%) from the previous year. Of this total amount, $262.2 million constitutes assigned or unassigned fund balance, which is available for spending at the government’s discretion. The remainder of fund balance is either nonspendable ($14.1 million), restricted ($272.0 million) or committed ($10.9 million) and is not available for new spending. The nonspendable fund balance consists of 1) land held for resale of $10.0 million, 2) deposits on account of $0.02 million, 3) inventories held ($1.2 million), and 4) loan receivables ($2.9 million). Restricted fund balance includes amounts that are constrained on the use of the resources by outside parties and committed fund balance includes amounts that are constrained on the use of the resources pursuant to City Council formal action . For additional details of the City’s fund balance s, please refer to Note 1 5 in the Notes to the Basic Financial Statements.
Charges for
services
99%
Capital
contributions
and grants
1%
REVENUES BY SOURCE -
BUSINESS-TYPE
-
10,000,000
20,000,000
30,000,000
Sewer Water
Program Revenues
Expenses
EXPENSES AND PROGRAM REVENUES -
BUSINESS-TYPE ACTIVITIES
14 The general fund is the chief operating fund of the City. At the end of the current fiscal year, the assigned fund balance of the general fund was $33.9 million, while total fund balance reached $ 124.1 million, which was $7.0 million or 6.0% higher than the prior year. The City’s management assigns fund balance to a particular function, project or activity and may also be assigned for purposes beyond the current year. However, assigned fund balance is available for appropriation at any time. The General Fund has committed fund balance of $10.9 million for purposes of PERS rate fluctuations.
General fund revenues decreased by $5.7 million (4.1%) from the previous fiscal year; this decrease is primarily due to:
• Intergovernmental revenues decreased by $9.9 million primarily due to the one time payout of U.S. Treasury Emergency Rental Assistance Grant of $6.4 million in FY2021 and other various covid grant • Sales tax revenue i ncreased by $4.9 (9.75%) million due to new signs of a resurgent economy emerge as the city saw sale tax increase from Fuel/Service stations and restaurants/hotels
• Property tax revenue increased by $2.5 million (8.25%) due to increased assessed property valuation. • Investment earnings decreased by $ 5.8 million due to Federal Reserve Board raising its interest rate as our previous treas ury securities were purchased at a lower interest rate.
General fund expenditures increased by $5.3 million (4.1%) from the previous fiscal year, the increased costs were primarily due to:
• Due to the increase in personnel cost under public safety (police) and the return of part-time staff as facilities reopen and programs resume.
The Fire Protection District special revenue fund has a fund balance of $ 38.5 million. The Fire Protection District accounts for all of the operating activities of the Fire District. The fund balance increased by $17.3 million during the current fiscal year; current year revenues and transfer in were $62.3 million and total expenditures and transfers out were $45.0 million. Revenues increased $3.7 million (7.8%) primarily as a result of property tax valuation increases. Expenditures increased $ 6.5 million (19.4%) primarily as a result in increased contract costs with the San Berna rdino County Fire Department for fire protection services due to inflation. In addition, there was a one-time transfer out of $10.5 million to the fire protection district for the fire station No.81 and fire station No.80.
The Housing Authority special revenue fund has a fund balance of $86.2 million. The fund balance decreased by $1.5 million during the fiscal year.
The decrease is primarily due to the decrease in investment earnings in the amount of $0.6 million due to federal reserve board raising its interest and a restatement of the housing authority due to the revenue being overstated related to one of the loan receivables in the prior year in the amount of $0.7 million.
The Capital Reinvestment fund has a total fund balance of $15.1 million. The fund balance decreased during the current fiscal year by $ 4.8 million mainly due to the one time purchase of land held for resale property in the amount of $3.0 million during FY2022 .
The Future Capital Projects fund has a total fund balance of $42.7 million. The fund balance decreased during the current fiscal year by $2.3 million due to expenditures related to Park Lighting Upgrade project for various parks and ball fields in the City.
15 The Sewer Expansion Fund has a total fund balance of $0.36 million. The fund balance decreased slightly during the current fiscal year by $0.8 million due to a decrease in investment earnings in the amount of 0.6 million and an interest allocation adjustment of $0.2 million through transfer.
The Traffic Mitigation capital project fund has a fund balance of $15.4 million. The fund balance increased during the current fiscal year by $7.6 million as a result of circulation impact fees being collected.
Proprietary funds. The City’s proprietary funds provide the same type of information found in the government -wide financial statements, but in more detail. Unrestricted net position of the Sewer and Water Operations at the end of the year amounted to $19.5 million. The total increase in net position was $0.47 million, primarily due to increase in charge for services.
General Fund Budgetary Highlights
Over the course of the year, the City Council revised the City ’s budget on a quarterly basis. The Council approves supplemental appropriations throughout the year based on individual items that are brought forward by various departments. The General Fund budgetary comparison statement can be found on page 27 of this report.
Revenues:
During the year, the original General Fund revenue budget was amended to increase revenues by $9.3 million. The increase is primarily due to:
• an increase in sales tax of $1.8 million, as a result of the conservative budget originally adopted due to COVID-19 and the unexpected economic recovery.
• an increase in intergovernmental revenues of $5.0 million associated with the recognition of the State and County COVID-19 Relief Fund. allocation and Coronavirus Emergency Rental Assistance program revenue in FY2022. • an increase in property tax revenue of $0.4 million due to increased assessed property valuation.
General Fund revenues of $135.9 million were $3.6 million more than the final budget. The increase from the adopted budget of $122.9 million was due to the conservative budget originally adopted due to COVID-19 and the unexpected economic recovery. The positive variance to the final budget was primarily due to:
• higher than expected tax revenues ($12.1 million) compared to the final budget, which was increased by $2.72 million from the adopted budget,
• higher than expected charges for services ($1.8 million) compared to the final budget, which was increased by $0.22 million from the adopted budget,
• higher than expected fine and forfeitures ($0.08 million) • lower than expected investment earnings ($5.4 million) • lower than expected licenses and permits revenue ($1.2 million) • lower than expected intergovernmental revenue ($3.8 million) • lower than expected licenses and permits ($0.02 million) 16 Expenditures:
During the year, the original General Fund expenditure budget was amended to increase appropriations by $ 21.45 million, the increase in appropriations was due to various requests throughout the fiscal year such as:
• increase of administrative services admin (personnel cost) in the amount of $5.05 million. • increase of $3.15 million for IT department under other prof essional services and $1.16 million under hardware for various IT project such as salesforce 311 and CC modernization and computer software. • increase of $0.67 million for various settlement claim.
General Fund expenditures were less than budgeted. Of the total appropriations of $ 154.2 million, approximately 1 2.2%, or $1 8.8 million were unspent. The budgetary savings included Treasury Emergency rental assistance in the amount of $3.0 million, Application cost, operations cost and IT administration cost with the IT department ($6.6 million), Personnel cost in the police department ($1.9 million), $2.1 million services cost in the community development and $3.4 million in HR admin cost and risk management. The aforementioned savings will be carried over to next fiscal year.
Capital Asset and Debt Administration
Capital assets. The City’s investment in capital assets for governmental and business -type activities as of June 30, 20 22, amounts to $ 774.9 million (net of accumulated depreciation). This investment in capital assets includes land, buildings and improvements, machinery and equipment, vehicles and infrastructure (roads, highways, sewer and sto rm drain systems). The total change in the City’s investment in capital assets net of accumulated depreciation for the current fiscal year was an increase of $6.1 million (1%). Major capital asset events during the current fiscal year included the following:
• Developer contributions (CFD 90 Summit @ Rosena phase one and CFD 85 the Meadow) related to amounting to $9.3 million were received. • Several big constructions in progress projects such as So Fontana sports park, Fire station#81, helicopter purchase permit system incurred current year cost of $12.4 million, while other small projects in aggregate incurred a total of $11.9 million. • The city also had a onetime purchase of land held for resale property from Rosemead properties in the amount of $3.0 million . • $3.4 million worth of Structure improvements were added such as Jack Bulik Part lighting improvement ($0.55 million), Ralph Lewis Park lighting improvement ($0.56 million), Bill Martin park lighting improvement ($.48 million) and other various small improvemen t projects. • Various machinery, equipment, vehicles, and easements were added in current year amounting to $4.0 million. • Accumulated depreciation at year-end is $38.8 million higher than prior year.
17 Capital Assets
(Net of depreciation)
(000 omitted)
2022 2021 2022 2021 2022 2021
Land 161,362$ 156,533$ -$ -$ 161,362$ 156,533$ Building and improvements 162,291 155,994 1,106 1,152 163,397 157,146 Machinery and equipment 4,248 5,386 7 11 4,254 5,397 Vehicles 13,968 12,497 - - 13,968 12,497 Infrastructure 313,297 334,570 57,735 60,517 371,032 395,087 Intangibles 2,929 3,001 - - 2,929 3,001 Right to use assets 106 - - 106 - Construction in progress 52,383 33,694 477 437 52,860 34,131 Easements 4,996 4,996 - - 4,996 4,996 Total 715,581$ 706,671$ 59,324$ 62,117$ 774,905$ 768,788$ Governmental Activities Business-Type Activities Total
Additional information on the City’s capital assets can be found in Note 6 in the footnote disclosure.
Long-term debt. At the end of the current fiscal year, the City’s total long -term debt outstanding is $283.4 million. This amount is comprised of $120.9 million net pension liability, $68.9 million other post-employment benefits liability, $53.0 million of lease revenue bonds which are secured by future revenue sources from the lease of City property and $40.6 million of various other loans and obligations payable.
18 Outstanding Debt
(000 omitted)
2022 2021 2022 2021 2022 2021
53,015$ 36,185$ -$ -$ 53,015$ 36,185$ 118,172 171,768 2,674 5,447 120,847 177,215 20,654 13,983 - - 20,654 13,983 11,099 10,320 242 345 11,341 10,665 66,534 68,947 2,325 2,430 68,859 71,377 2,959 5,854 5,721 6,584 8,679 12,438 Total outstanding debt 272,433$ 307,057$ 10,962$ 14,806$ 283,395$ 321,863$ Other post employment benefits liability
Other debt
Governmental Activities Business-Type Activities Total
Lease revenue bonds
Net pension liability
Claims and judgments
Compensated absences
Additional information on the City’s long-term debt can be found in Note 8 in the footnote disclosure.
Economic Factors and Next Year’s Budget and Rates
In preparing the budget for Fiscal Year 202 2-23, management’s goal was to produce an operating budge t that adhered to City Council goals and objectives with an emphasis on cost containment. Expansion of the City’s economic base continues to be a City Council priori ty.
The Operating Budget for Fiscal Year 2022-23 is financially balanced and includes:
- General Fund designation of fund balance for contingencies of 15% of recurring appropriations. - A net increase in budgeted revenues of $3.5 million (or +2.9%) in the General Fund as compared to the prior year’s final budget is primarily attributed to the following:
• An increase in sale tax revenue of $1.1 million reflecting continuing post-pandemic recovery • An increase in property tax revenue of $0.8 million assuming an anticipated growth of 3 percent in assessed valuation • An increase in recreation revenue of $1.1 million projecting facilities and programs will be opened all year - A net increase in budgeted expenditures of $ 3.6 million or ( +3.3%) in the Gener al Fund as compared to the prior year’s final budget is primarily attribute to contractual obligations related to full -time City staff and the return of part -time staff as facilities reopen and programs resume.
19 Requests for Information
This financial report is designed to provide our citizens, taxpayers, customers, investors, and creditors with a general overview of the City of Fontana’s finances and to show the City’s accountability for the money it receives. Questions concerning any of the informat ion provided in this report or requests for additional information should be addressed to the City’s Finance Department at the City of Fontana, 8353 Sierra Avenue, Fontana, CA 92335.
20 Exhibit A
Governmental Business-Type
Activities Activities Total
Assets:
Cash and investments 440,652,514 $ 24,205,303 $ 464,857,817 $ Receivables:
Accounts 3,874,233 1,429,132 5,303,365 Assessments 862,452 - 862,452 Interest 5,097,581 50,683 5,148,264 Loans 82,581,632 4,200,937 86,782,569 Loans to Successor Agency 24,978,218 3,305,829 28,284,047 Allowance for doubtful accounts (358,698) (3,305,829) (3,664,527) Leases 17,689,158 - 17,689,158 Internal balances (1,750,465) 1,750,465 - Due from other governments 19,959,684 12,903 19,972,587 Inventories 1,346,862 52,372 1,399,234 Deposits 19,200 - 19,200 Land held for resale 10,029,872 - 10,029,872 Restricted assets:
Cash with fiscal agent 92,562,793 - 92,562,793 Capital assets not being depreciated 218,741,384 477,105 219,218,489 Capital assets, net of depreciation 496,839,337 58,847,219 555,686,556 Total assets 1,413,125,757 91,026,119 1,504,151,876 Deferred Outflows of Resources:
Deferred outflows of resources - pension related 31,737,504 678,954 32,416,458 Deferred outflows of resources - OPEB related 12,460,834 435,467 12,896,301 Total deferred outflows of resources 44,198,338 1,114,421 45,312,759 Liabilities:
Accounts payable 16,899,325 3,610,686 20,510,011 Deposits payable 5,095,541 792,169 5,887,710 Interest payable 701,683 35,224 736,907 Due to other governments 24,865,560 - 24,865,560 Unearned revenue 52,796,542 - 52,796,542 Retentions payable 659,454 - 659,454 Noncurrent liabilities:
Due within one year 13,058,614 1,120,383 14,178,997 Due in more than one year
Net pension liability 118,172,369 2,674,376 120,846,745 OPEB liability 66,533,882 2,325,151 68,859,033 Other 81,103,155 4,842,202 85,945,357 Total liabilities 379,886,125 15,400,191 395,286,316 Deferred Inflows of Resources:
Deferred inflows of resources - pension related 40,273,332 1,517,726 41,791,058 Deferred inflows of resources - OPEB related 9,351,250 326,796 9,678,046 Deferred inflows of resources - Leases 17,254,696 - 17,254,696 Total deferred inflows of resources 66,879,278 1,844,522 68,723,800 Net Position:
Net investment in capital assets 675,178,954 53,603,452 728,782,406 Restricted for:
Community development 105,924,398 - 105,924,398 Public safety 44,772,494 - 44,772,494 Public works 57,192,723 - 57,192,723 Debt service 15,368 - 15,368 Government-access channel 1,510,351 - 1,510,351 Capital projects 62,622,768 - 62,622,768 Unrestricted 63,341,636 21,292,375 84,634,011 Total net position 1,010,558,692 $ 74,895,827 $ 1,085,454,519 $ See accompanying notes to financial statements
CITY OF FONTANA
Statement of Net Position
June 30, 2022
21 Exhibit B
Operating Capital
Charges for Contributions Contributions Governmental Business-type Expenses Services and Grants and Grants Total Activities Activities Total General government:
City council and commissions 1,200,656 $ - $ - $ - $ - $ (1,200,656)$ - $ (1,200,656)$ City administration 7,003,932 - - - - (7,003,932) - (7,003,932) Management services 3,838,556 1,208,266 - 54,597 1,262,863 (2,575,693) - (2,575,693) Information technology 12,827,024 - - - - (12,827,024) - (12,827,024) Human resources 15,589,197 6,373,262 - - 6,373,262 (9,215,935) - (9,215,935) Public safety:
Police 70,415,712 1,082,804 7,682,166 - 8,764,970 (61,650,742) - (61,650,742) Fire 41,483,715 916,218 - - 916,218 (40,567,497) - (40,567,497) Public works 49,008,197 22,934,465 4,798,048 1,656,146 29,388,659 (19,619,538) - (19,619,538) Community development 5,492,363 25,431,821 4,593,322 21,704,957 51,730,100 46,237,737 - 46,237,737 Community services 13,344,407 3,181,475 3,580,908 - 6,762,383 (6,582,024) - (6,582,024) Engineering 37,814,087 12,201,965 206,124 3,847,869 16,255,958 (21,558,129) - (21,558,129) Interest on long-term debt 2,132,558 - - - - (2,132,558) - (2,132,558) Total governmental activities 260,150,404 73,330,276 20,860,568 27,263,569 121,454,413 (138,695,991) - (138,695,991) Business-type activities:
Sewer 24,541,611 26,819,169 - 336,864 27,156,033 - 2,614,422 2,614,422 Interest on long-term debt 112,532 - - - - - (112,532) (112,532) Total business-type activities 24,654,143 26,819,169 - 336,864 27,156,033 - 2,501,890 2,501,890 Total functions/programs 284,804,547 $ 100,149,445 $ 20,860,568 $ 27,600,433 $ 148,610,446 $ (138,695,991) 2,501,890 (136,194,101) General revenues:
Taxes:
Property taxes, levied for general purpose 84,070,144 - 84,070,144 Sales taxes 56,726,526 - 56,726,526 Franchise taxes 9,749,087 - 9,749,087 Business license taxes 7,583,660 - 7,583,660 Transient occupancy taxes 1,374,182 - 1,374,182 Total taxes 159,503,599 - 159,503,599 Intergovernmental, unrestricted:
Motor vehicle in lieu 459,175 - 459,175 Investment earnings (10,525,380) (748,794) (11,274,174) Other 11,900,515 (176,562) 11,723,953
Transfers 2,949,200 (2,949,200) -
Total general revenues and transfers 164,287,109 (3,874,556) 160,412,553 Change in net position 25,591,118 (1,372,666) 24,218,452 Net position at beginning of year, as restated 984,967,574 76,268,493 1,061,236,067 Net position at end of year 1,010,558,692 $ 74,895,827 $ 1,085,454,519 $ Governmental activities:
See accompanying notes to financial statements
CITY OF FONTANA
Statement of Activities
Year Ended June 30, 2022
Program Revenues Net (Expense) Revenue and Changes in Net Assets Functions/Programs
22 Exhibit C
TotalOtherCommunityFutureFire
TrafficSewerCapital Governmental Governmental FacilitiesCapitalEconomicHousingProtection MitigationExpansionReinvestment Funds Funds DistrictsProjectsStimulusAuthorityDistrictGeneral Assets:
Cash and investments 56,667,510$ 38,228,944$ 14,893,223$ 50,356,428$ 9,890,861$ 7,689,424$ 16,840,104$ 21,461$ 42,258,220$ 191,648,713$ 428,494,888$ Receivables:
Accounts 3,610,035 28,755 - - 3,940 - 17,934 - 566 103,026 3,764,256 Assessments - - - - - - - - - 862,452 862,452 Interest 177,025 49,223 3,559,813 - - 19,668 - 65 86,217 1,180,715 5,072,726 Loans - - 71,819,475 - 71,128 - - - - 10,691,029 82,581,632 Loans to Successor Agency 24,978,218 - - - - - - - - - 24,978,218 Allowance for doubtful accounts (207,433) - - - - - - - - (151,265) (358,698) Leases 10,876,556 - - - - - - - - 6,812,602 17,689,158 Deposits 7,877 - - - - - - - - 11,323 19,200 Due from other funds 10,688,518 - - - - - - - - 1,177 10,689,695 Due from other governments 10,595,299 333,503 - - - - - - - 9,030,882 19,959,684 Inventories 375,878 - - - - - - - - 868,948 1,244,826 Land held for resale - - - - 5,650,178 4,379,694 - - - - 10,029,872 Advances to other funds - - - - - 30,703,911 - - - - 30,703,911 Restricted assets:
Cash with fiscal agent 31,698,881 2,933 177,835 - - - - 38,618,065 - 22,065,079 92,562,793 Total assets 149,468,364 $ 38,643,358 90,450,346 50,356,428 15,616,107 42,792,697 16,858,038 38,639,591 42,345,003 243,124,681 728,294,613 Liabilities, Deferred Inflows and Fund Balances:
Liabilities:
15,896,418 $6,734,613 $205,328 $704,260 $- $(21,213) $468,044 $241,466 $12,794 $151,520 $7,399,606$Accounts payable 5,095,541-------5,247-5,090,294Deposits payable
659,454306,5993,936206,447-142,41161----Retentions payable -----1,177Due to other funds 7,471,787 10,689,695 3,216,731- 24,865,5608,369,772--16,494,821-----Due to other governments 967 52,796,5422,796,980-----49,999,562--Unearned revenue -
30,703,9114,012,36926,691,542-------Advances from other funds - 140,707,12125,437,06426,900,8068,382,49416,494,821121,198468,10550,241,02818,041151,520Total liabilities 12,492,044 Deferred inflows of resources:
11,020,0304,392,160----3,940-4,272,36028,0552,323,515Unavailable revenues 17,254,6966,663,327--------10,591,369Leases
28,274,72611,055,487----3,940-4,272,36028,05512,914,884Total deferred inflows of resources Fund balances:
14,149,8353,736,208---4,379,6945,650,178---383,755Nonspendable 272,038,101100,087,32815,444,19730,257,097---115,40086,159,94538,463,7831,510,351Restricted 10,886,393---------10,886,393Committed
186,501,765104,408,453--363,21738,291,8059,493,884---33,944,406Assigned --------77,336,531Unassigned (1,599,859) 75,736,672 559,312,766206,632,13015,444,19730,257,097363,21742,671,49915,144,062115,40086,159,94538,463,783124,061,436Total fund balances Total liabilities, deferred inflows of
149,468,364 728,294,613 $ 243,124,681 $ 42,345,003 $38,639,591 $16,858,038 $42,792,697 $15,616,107 $50,356,428 $90,450,346 $38,643,358 $$resources and fund balances See accompanying notes to financial statements
CITY OF FONTANA
Balance Sheet
Governmental Funds
June 30, 2022
Capital ProjectSpecial Revenue
23 Exhibit D
559,312,766 $Fund balances of governmental funds
Amounts reported for governmental activities in the Statement of Net Position are different because:
Capital assets, net of depreciation, have not been included as financial resources in governmental fund activity. 707,168,370 Deferred outflows are not an available resources and, therefore, are not reported in the funds. 44,198,338 Long-term liabilities, including net pension liability, OPEB liability and compensated absences, are not due and payable in the current period and, therefore, is not recognized in the funds. (278,868,020) Accrued interest payable from the current portion of interest due on long-term debt has not been reported in the governmental funds. (701,683) Deferred inflows represent an acquisition of net position that applies to a future period so it will not be recognized until that time. (49,624,582) An Internal Service Fund is used by management to charge the costs of fleet management to individual funds. The assets and liabilities of the Internal Service Fund must be added to the Statement of Net Position. 18,053,473 Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. 11,020,030 Net position of governmental activities 1,010,558,692 $ See accompanying notes to financial statements
CITY OF FONTANA
Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position
June 30, 2022
24 Exhibit E
Fire Future Community Other
Protection Housing Economic Capital Capital Sewer Facility Traffic Governmental General District Authority Stimulus Reinvestment Projects Expansion Districts Mitigation Funds Totals Revenues:
Taxes 108,183,439$ 50,763,828$ $ - $ - $ - $ - $ - $ - $ - 570,081$ 159,517,348$ Licenses and permits 7,218,687 940,074 - - - - - - - 10,638,481 18,797,242 Intergovernmental 2,780,614 - - 257,551 - - - - 612,115 26,008,991 29,659,271 Charges for services 15,407,066 - - - - - - - 9,443,829 6,287,394 31,138,289 Fines and forfeitures 696,245 - - - - - - - - 79,154 775,399 Special assessments - - - - - - - - - 18,389,887 18,389,887 Investment earnings (loss) (1,966,368) (1,155,615) (413,973) 98,202 (311,993) (240,539) (526,718) 35,425 (1,309,715) (5,775,075) (11,566,369) Contribution from property owners - - - - - - - 21,704,957 - - 21,704,957 Contribution from other governments 400,300 - - - - - - - - - 400,300 Other revenue 3,132,185 2,000 127,958 - 61,820 - - - - 6,570,857 9,894,820 Total revenues 135,852,168 50,550,287 (286,015) 355,753 (250,173) (240,539) (526,718) 21,740,382 8,746,229 62,769,770 278,711,144 Expenditures:
Current:
General government:
City council and commissions 1,194,130 - - - - - - - - - 1,194,130 City administration 5,628,870 - - - - - - - - 373,806 6,002,676 Management services 3,373,760 - 536,475 250,351 381 - - - - 4,103,190 8,264,157 Information technology 8,691,404 - - - 4,555,364 - - - - 3,208 13,249,976 Human resources 9,160,752 - - - - - - - - 4,806 9,165,558 Public safety:
Police 70,200,864 - - - - - - - - 3,962,949 74,163,813 Fire - 39,440,940 - - - - - - - 1,733,419 41,174,359 Public works 14,807,433 - - - 6,018,724 1,595,098 - 4,634,322 - 27,716,051 54,771,628 Community development 6,997,587 - - - - - - - - 89,182 7,086,769 Community services 11,414,027 - - - - - - - - 3,421,447 14,835,474 Engineering 3,925,533 - - 7,200 1,400 - - 17,868,715 817,447 14,790,605 37,410,900 Debt Service:
Principal 2,474 - - - - - - - - 1,300,000 1,302,474 Interest 192 439,375 - - - - - - - 1,607,799 2,047,366 Issuance costs - - - - - - - - - 477,600 477,600 - - - - - - - - - 5,089,012 5,089,012 Total expenditures 135,397,026 39,880,315 536,475 257,551 10,575,869 1,595,098 - 22,503,037 817,447 64,673,074 276,235,892 Excess (deficiency) of revenues
over (under) expenditures 455,142 10,669,972 (822,490) 98,202 (10,826,042) (1,835,637) (526,718) (762,655) 7,928,782 (1,903,304) 2,475,252 Other Financing Sources (Uses):
15,945,288 11,774,100 - - 6,201,797 - 2,628 - - 18,422,051 52,345,864 (9,555,877) (5,187,800) (47,600) - (283,529) (453,400) (260,815) - (181,500) (33,546,673) (49,517,194) - - - - - - - - - 23,125,000 23,125,000 Premium (discount) on bonds issued - - - - - - - - - 3,920,250 3,920,250 Leases 108,141 - - - - - - - - - 108,141 Sale of capital assets 52,830 - - - 156,944 - - - - - 209,774 Total other financing sources (uses) 6,550,382 6,586,300 (47,600) - 6,075,212 (453,400) (258,187) - (181,500) 11,920,628 30,191,835 Net change in fund balances 7,005,524 17,256,272 (870,090) 98,202 (4,750,830) (2,289,037) (784,905) (762,655) 7,747,282 10,017,324 32,667,087 Fund Balances:
Beginning of fiscal year, as restated 117,055,912 21,207,511 87,030,035 17,198 19,894,892 44,960,536 1,148,122 31,019,752 7,696,915 196,614,806 526,645,679 End of fiscal year 124,061,436$ 38,463,783$ 86,159,945$ 115,400$ 15,144,062$ 42,671,499$ 363,217$ 30,257,097$ 15,444,197$ 206,632,130$ 559,312,766$ See accompanying notes to financial statements
Payment to refunded bond escrow agent
CITY OF FONTANA
Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds
Year Ended June 30, 2022
Special Revenue Capital Projects
Transfers in
Transfers out
Proceeds of refunding bonds
25 Exhibit F
Net change in fund balances - total governmental funds 32,667,087 $ Amounts reported for governmental activities in the Statement of Activities are different because:
Governmental funds report capital outlay as expenditures. However, in the Statement of Activities, the cost of those assets is allocated over 45,034,976 their estimated useful lives as depreciation expense. This is the amount of capital assets recorded in the current period.
In the Statement of Activities, only the gain/loss on the sale of capital assets is reported. However, in the governmental funds, the proceeds from the sale increase financial resources. Thus, the change in net position differs from the change in fund balance by the cost of the capital assets sold. (83,855) Depreciation expense on capital assets is reported in the Statement of Activities, but they do not require the use of current financial resources. (36,650,025) Therefore, depreciation expense is not reported as expenditures in governmental funds.
Revenues in the Statement of Activities that do not provide current financial resources are not reported as unavailable revenues in the funds. 3,451,416 The issuance of long-term debt provides current financial resources to governmental funds, but issuing debt increases long-term liabilities in the Statement of Net Position. Repayment of bond principal is an expenditure in governmental funds, but the repayment reduces long-term liabilities in the Statement of Net Position. (20,262,306) The recognition of lease payables and the net change in lease payables are not recognized in the funds (106,709) Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures (7,535,125) in governmental funds.
The Internal Service Fund is used by management to charge the costs of fleet management to individual funds. The net gain of the Internal Service 2,035,678 Fund is reported with governmental activities.
Adjustments made to the OPEB liability do not use current financial resources and, therefore, are not recognized in the funds. (786,699) Adjustments made to the Net Pension Liability do not use current financial resources and, therefore, are not recognized in the funds. 7,826,680 Change in net position of governmental activities 25,591,118 $ See accompanying notes to financial statements
CITY OF FONTANA
Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities
Year Ended June 30, 2022
26 Exhibit G
Variance with
Actual Final Budget -
Original Final Amounts Positive (Negative)
Revenues:
Taxes 93,331,550 $ 96,048,931 $ 108,183,439$ 12,134,508 $ Licenses and permits 6,715,900 7,235,900 7,218,687 (17,213) Intergovernmental 1,390,500 6,533,473 2,780,614 (3,752,859) Charges for services 13,374,070 13,598,012 15,407,066 1,809,054 Fines and forfeitures 465,500 616,000 696,245 80,245 Investment earnings (loss) 3,420,540 3,420,540 (1,966,368) (5,386,908) Contribution from other governments 400,300 400,300 400,300 - Other revenue 3,820,830 4,364,190 3,132,185 (1,232,005) Total revenues 122,919,190 132,217,346 135,852,168 3,634,822 Expenditures:
Current:
General government:
City council and commissions 1,229,100 1,331,244 1,194,130 137,114 City administration 2,953,200 8,557,767 5,628,870 2,928,897 Management services 3,184,230 3,689,556 3,373,760 315,796 Information technology 8,811,410 15,280,919 8,691,404 6,589,515 Human resources 10,630,580 12,538,253 9,160,752 3,377,501 Public safety:
Police 68,526,230 71,860,905 70,200,864 1,660,041 Public works 13,895,200 14,895,079 14,807,433 87,646 Community development 6,408,560 7,752,621 6,997,587 755,034 Community services 13,295,340 13,513,081 11,414,027 2,099,054 Engineering 3,837,470 4,525,396 3,925,533 599,863 Debt Service:
Principal - 276,120 2,474 273,646 Interest - - 192 (192) Total expenditures 132,771,320 154,220,941 135,397,026 18,823,915 Excess (deficit) of
revenues over expenditures (9,852,130) (22,003,595) 455,142 22,458,737 Other Financing Sources (Uses):
Transfers in 31,292,270 33,248,654 15,945,288 (17,303,366) Transfers out (20,982,390) (26,959,304) (9,555,877) 17,403,427 Leases - - 108,141 108,141 Sale of capital assets 1,500 1,500 52,830 51,330 Total other financing sources (uses) 10,311,380 6,290,850 6,550,382 259,532 Net change in fund balances 459,250 (15,712,745) 7,005,524 22,718,269 Fund balances - beginning 117,055,912 117,055,912 117,055,912 - Fund balances - ending 117,515,162 $ 101,343,167 $ 124,061,436 $ 22,718,269 $ See accompanying notes to financial statements
Budget Amounts
CITY OF FONTANA
General Fund
Year Ended June 30, 2022
Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual 27 Exhibit G
Variance with
Actual Final Budget -
Original Final Amounts Positive (Negative)
Revenues:
Taxes 49,440,000 $ 49,440,000 $ 50,763,828$ 1,323,828 $ Licenses and permits 890,000 890,000 940,074 50,074 Investment earnings 109,000 109,000 (1,155,615) (1,264,615) Other revenue - - 2,000 2,000 Total revenues 50,439,000 50,439,000 50,550,287 111,287 Expenditures:
Public safety:
Fire 39,613,458 39,226,670 39,440,940 (214,270) Debt Service:
Interest - 439,375 439,375 - Total expenditures 39,613,458 39,666,045 39,880,315 (214,270) Excess (deficit) of
revenues over expenditures 10,825,542 10,772,955 10,669,972 (102,983) Other Financing Sources (Uses):
Transfers in 1,284,100 11,774,100 11,774,100 - Transfers out (6,986,800) (12,136,800) (5,187,800) 6,949,000 Total other financing sources (uses) (5,702,700) (362,700) 6,586,300 6,949,000 Net change in fund balances 5,122,842 10,410,255 17,256,272 6,846,017 Fund balances - beginning 21,207,511 21,207,511 21,207,511 - Fund balances - ending 26,330,353 $ 31,617,766 $ 38,463,783 $ 6,846,017 $
CITY OF FONTANA
Fire Protection District - Special Revenue
Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2022
Budget Amounts
See accompanying notes to financial statements
28 Exhibit G
Variance with
Actual Final Budget -
Original Final Amounts Positive (Negative)
Revenues:
Investment earnings (loss) 399,000 $ 399,000 $ (413,973)$ (812,973) $ Other revenue 196,000 196,000 127,958 (68,042) Total revenues 595,000 595,000 (286,015) (881,015) Expenditures:
Current:
General government:
Management services 321,710 4,569,546 536,475 4,033,071 Total expenditures 321,710 4,569,546 536,475 4,033,071 Excess (deficit) of
revenues over expenditures 273,290 (3,974,546) (822,490) 3,152,056 Other Financing Sources (Uses):
Transfers out (56,600) (47,600) (47,600) - Total other financing sources (uses) (56,600) (47,600) (47,600) - Net change in fund balances 216,690 (4,022,146) (870,090) 3,152,056 Fund balances - beginning, as restated 87,030,035 87,030,035 87,030,035 - Fund balances - ending 87,246,725 $ 83,007,889 $ 86,159,945 $ 3,152,056 $ Budget Amounts
See accompanying notes to financial statements
CITY OF FONTANA
Housing Authority Low/Mod Housing Fund - Special Revenue Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2022
29 Exhibit G
Variance with
Actual Final Budget -
Original Final Amounts Positive (Negative)
Revenues:
Intergovernmental $ - 50,257,113$ 257,551 $ (49,999,562) $ Investment earnings - - 98,202 98,202 Total revenues - 50,257,113 355,753 (49,901,360) Expenditures:
Current:
General government:
Management services - 34,876,721 250,351 34,626,370 Police - 3,000,000 - 3,000,000 Public works - 12,334,892 - 12,334,892 Engineering - 45,500 7,200 38,300 Total expenditures - 50,257,113 257,551 49,999,562 Excess (deficit) of
revenues over expenditures - - 98,202 98,202 Fund balances - beginning 17,198 17,198 17,198 - Fund balances - ending 17,198 $ 17,198 $ 115,400 $ 98,202 $ See accompanying notes to financial statements
CITY OF FONTANA
Economic Stimulus - Special Revenue
Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2022
Budget Amounts
30 Exhibit H
Governmental
Activities
Non-Major Internal Service
Enterprise Fund - Fund -
Sewer Water Fleet
Operations Operations Totals Operations
Assets:
Current Assets:
Cash and investments 23,520,005$ 685,298 24,205,303 12,157,626 Accounts receivables 1,429,132 - 1,429,132 109,977 Interest receivable 49,142 1,541 50,683 24,855 Loans receivable 2,980,990 1,219,947 4,200,937 - Loans to Successor Agency 3,305,829 - 3,305,829 - Allowance for doubtful accounts (3,305,829) - (3,305,829) - Due from other governments 12,903 - 12,903 - Inventories 52,372 - 52,372 102,036 Total current assets 28,044,544 1,906,786 29,951,330 12,394,494 Noncurrent Assets:
Capital assets, not being depreciated 477,105 - 477,105 806,121 Capital assets, net of depreciation 58,847,219 - 58,847,219 7,606,230 Total noncurrent assets 59,324,324 - 59,324,324 8,412,351 Total assets 87,368,868 1,906,786 89,275,654 20,806,845 Deferred Outflows of Resources:
Deferred outflows of resources - pension related 678,954 - 678,954 - Deferred outflows of resources - OPEB related 435,467 - 435,467 - Total deferred outflows of resources 1,114,421 - 1,114,421 - Liabilities:
Current Liabilities:
Accounts payable 3,610,686 - 3,610,686 1,002,907 Deposits payable 792,169 - 792,169 - Interest payable 35,224 - 35,224 - Compensated absences payable - current 241,713 - 241,713 - Loans payable - current 878,670 - 878,670 - Total current liabilities 5,558,462 - 5,558,462 1,002,907 Noncurrent Liabilities:
Loans payable 4,842,202 - 4,842,202 - Net pension liability 2,674,376 - 2,674,376 - Net OPEB liability 2,325,151 - 2,325,151 - Total noncurrent liabilities 9,841,729 - 9,841,729 - Total liabilities 15,400,191 - 15,400,191 1,002,907 Deferred Inflows of Resources:
Deferred inflows of resources - pension related 1,517,726 - 1,517,726 - Deferred inflows of resources - OPEB related 326,796 - 326,796 - Total deferred inflows of resources 1,844,522 - 1,844,522 - Net Position:
Net investment in capital assets 53,603,452 - 53,603,452 8,412,351 Unrestricted 17,635,124 1,906,786 19,541,910 11,391,587 Total net position 71,238,576 $ 1,906,786 $ 73,145,362 $ 19,803,938 $ Reconciliation of Net Position to the Statement of Net Position Net Position per Statement of Net Position - Proprietary Funds 73,145,362 1,750,465
Net position per Statement of Net Position 74,895,827 $ See accompanying notes to financial statements
June 30, 2022
CITY OF FONTANA
Business-type Activities
Enterprise Funds
Statement of Net Position
Proprietary Funds
Accumulated adjustment to reflect the consolidation of internal service fund activities related to enterprise funds
31 Exhibit I
Governmental
Activities
Non-Major Internal Service
Enterprise Fund - Fund -
Sewer Water Fleet
Operations Operations Totals Operations
Operating Revenues:
Charges for services 26,737,162$ - 26,737,162 8,216,785 Total revenues 26,737,162 - 26,737,162 8,216,785 Operating Expenses:
Personnel costs 2,047,819 - 2,047,819 1,019,355 Operating costs 1,315,478 - 1,315,478 2,227,710 Contractual 18,345,329 - 18,345,329 1,213,789 Depreciation 2,832,985 - 2,832,985 1,782,888 Total operating expenses 24,541,611 - 24,541,611 6,243,742 Operating income (loss) 2,195,551 - 2,195,551 1,973,043 Non-Operating Revenues (Expenses):
Investment earnings (727,446) (21,348) (748,794) (378,212) Interest payments (112,532) - (112,532) - Other revenue (expenses) (176,562) - (176,562) 36,178 Gain (loss) on sale of capital assets - - - 366,146 Total non-operating revenues (expenses) (1,016,540) (21,348) (1,037,888) 24,112 Income (loss) before contributions
and transfers 1,179,011 (21,348) 1,157,663 1,997,155 Capital contributions - connection fees 336,864 - 336,864 - Transfers in 502,240 - 502,240 329,680 Transfers out (3,451,440) - (3,451,440) (209,150) Change in net position (1,433,325) (21,348) (1,454,673) 2,117,685 Net Position:
Beginning of fiscal year 72,671,901 1,928,134 74,600,035 17,686,253 Net position at end of year 71,238,576 $ 1,906,786 73,145,362 19,803,938 Reconciliation of Changes in Net Position to the Statement of Activities:
(1,454,673)
Adjustment to reflect the consolidation of internal service activities related to enterprise funds 82,007 Changes in Net Position of Business-Type Activities per Statement of Activities (1,372,666)$ Changes in Net Position, per the Statement of Revenues, Expenses and Changes in Fund Net Position - Proprietary Funds
See accompanying notes to financial statements
CITY OF FONTANA
Statement of Revenues, Expenses and Changes in Fund Net Position Proprietary Funds
Year Ended June 30, 2022
Business-type Activities
Enterprise Funds
32 Exhibit J
Governmental
Activities
Non-Major Internal Service
Enterprise Fund - Fund -
Sewer Water Fleet
Operations Operations Totals Operations
Cash Flow from Operating Activities:
Cash received from customers 26,668,274 $ - 26,668,274 8,150,276 Cash payments to suppliers of goods and services (18,262,551) - (18,262,551) (2,586,740) Cash payments to employees for services (3,128,112) - (3,128,112) (1,019,355) Net cash provided by (used for) operating activities 5,277,611 - 5,277,611 4,544,181 Cash Flows from Noncapital Financing Activities:
Transfers received 502,240 (16,538) 485,702 396,680 Transfers paid (2,949,200) - (2,949,200) (209,150) Net cash provided by (used for) noncapital financing activities (2,446,960) (16,538) (2,463,498) 187,530 Cash Flows from Capital and Related Financing Activities:
Payments for debt service - principal payments (863,155) - (863,155) - Payments for debt service - interest payments (121,665) - (121,665) - Capital contributions 336,864 - 336,864 - Acquisition and construction of capital assets (40,285) - (40,285) (2,025,252) Net cash provided by (used for) capital and related financing activities (688,241) - (688,241) (2,025,252) Cash Flows from Investing Activities:
Investment earnings (461,322) 57,644 (403,678) (393,219) Net cash provided by investing activities (461,322) 57,644 (403,678) (393,219) Net increase (decrease) in cash and cash equivalents 1,681,088 41,106 1,722,194 2,313,240 Cash and cash equivalents - beginning of year 21,838,917 644,192 22,483,109 9,844,386 Cash and cash equivalents - end of year 23,520,005$ 685,298 24,205,303 12,157,626 Reconciliation of Operating Income to Net Cash Provided by (Used for) Operating Activities:
Operating Income (Loss) 2,195,551 $ - 2,195,551 1,973,043 Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities:
Depreciation 2,832,985 - 2,832,985 1,782,888 Other revenue (expenses) (176,562) - (176,562) 36,178 Changes in Assets and Liabilities:
Accounts receivable (42,319) - (42,319) (102,687) Due from other governments 149,993 - 149,993 - Inventories (7,393) - (7,393) 106,813 Deferred outflows - pension related 291,186 - 291,186 - Deferred outflows - OPEB related (102,481) - (102,481) - Accounts payable 1,386,375 - 1,386,375 747,946 Deposits payable 19,274 - 19,274 - Accrued compensated absences (103,736) - (103,736) - Deferred inflows - pension related 1,495,647 - 1,495,647 - Deferred inflows - OPEB related 216,173 - 216,173 - Net pension liability (2,772,378) - (2,772,378) - Net OPEB liability (104,704) - (104,704) - Net cash provided by (used for) operating activities 5,277,611 $ - 5,277,611 4,544,181 There were no non-cash investing, capital or financing activities for the year ended June 30, 2022.
See accompanying notes to financial statements
CITY OF FONTANA
Statement of Cash Flows
Proprietary Funds
Year Ended June 30, 2022
Business-type Activities
Enterprise Funds
33 Exhibit K
Private Purpose
Trust Fund
Custodial Successor Agency
Funds of the Former RDA
Assets:
Cash and investments 11,181,839$ 509,841
Receivables (net):
Assessments 554,452 -
Interest - 1,141,911
Loans receivable - 2,537,912 Allowance for doubtful accounts - (1,971,279) Restricted assets:
Cash and investments 21,956,169 19,022,971 Total assets 33,692,460 21,241,356
Liabilities:
Interest payable - 2,232,722 Due to other governments 33,680 - Long-term liabilities:
Due in one year - 15,944,833 Due in more than one year - 434,638,316 Total liabilities 33,680 452,815,871 Net Position:
Held for other organizations 6,694,734 - Restricted for debt service 26,964,046 (431,574,515) Total Net Position 33,658,780$ (431,574,515)$ See accompanying notes to financial statements
CITY OF FONTANA
Statement of Fiduciary Net Position
Fiduciary Funds
June 30, 2022
34 Exhibit L
Private Purpose
Trust Fund
Custodial Successor Agency
Funds of the Former RDA
Additions:
Contributions from property owners 13,965,074$ 35,445,029$ Interest and change in fair value of investments 1,853 (35,755) Other revenue 17,008,654 654,691
Total additions 30,975,581 36,063,965 Deductions:
Contractual services - 431,547 Administrative expense 758,517 6,000 Interest expense 5,028,894 17,467,023 Contributions to other governments - 400,300 Principal payments 25,126,729 -
Total deductions 30,914,140 18,304,870 Changes in net position 61,441 17,759,095 Net Position (deficit) - Beginning of the Year 33,597,339 (449,333,610) Net Position - End of the Year 33,658,780 $ (431,574,515)$
CITY OF FONTANA
Statement of Changes in Fiduciary Net Position
Fiduciary Funds
Year Ended June 30, 2022
See accompanying notes to financial statements
35 CITY OF FONTANA
Notes to the Financial Statements
Note 1. Organization and Summary of Significant Accounting Policies
a. Description of the Reporting Entity
The City of Fontana was incorporated on June 25, 1952, under the laws of the State of California and enjoys all the rights and privileges applicable to a General Law City. It is governed by an elected five-member board. As required by generally accepted accounting principles, these financial statements present the City of Fontana (the primary government) and its component units. The City operates under a Council-Manager form of government, and currently provides a wide variety of services to its citizens, including police, public services, community development, general administrative and other services.
The inclusion of an organization within the scope of the reporting entity of the City of Fontana is based on the provisions of GASB Statement No. 14 and amended with GASB Statement No. 61. The blended component units discussed below, although legally separate entities, are in substance part of the government operation and so data from these component units has been combined herein. The following criteria were used in the determination of the blended component unit:
1. The members of the City Council also act as the governing body of the Fontana Industrial Development Authority, the Fontana Public Financing Authority, the Fontana Housing Authority (Housing Authority), the Fontana Community Foundation, the Fontana Fire Protection District (Fire District) and the Fontana Public Facilities Financing Authority.
2. The Fontana Industrial Development Authority, the Fontana Public Financing Authority, the Fontana Housing Authority, the Fontana Community Foundation, the Fontana Fire Protection District and the Fontana Public Facilities Financing Authority are managed by employees of the City. A portion of the City’s general overhead costs is allocated to the Fire District and the Housing Authority.
3. The City, the Fontana Industrial Development Authority, the Fontana Public Financing Authority, the Housing Authority, the Fontana Community Foundation, the Fire District and the Fontana Public Facilities Financing Authority are financially interdependent. They provide financial benefit/burden to the City.
Blended Component Units:
The Fontana Industrial Development Authority was established February 3, 1981, pursuant to Government Code Section 91500 of the State of California for the purpose of encouraging and financing industrial development within areas of the City of Fontana. There was no activity for the year being reported therefore the Fontana Industrial Development Authority is not presented in this report.
The Fontana Public Financing Authority was established on May 2, 1989, pursuant to Government Code Section 6500 of the State of California (Joint Exercise of Powers). Its purpose is to assist in the financing of capital improvements and working capital requirements of the City, the Former Redevelopment Agency and any other eligible local agencies. Separate financial statements are not available for the Authority.
36 CITY OF FONTANA
Notes to the Financial Statements
The Fontana Housing Authority was established May 3, 1994, pursuant to Government Code Section 34240 of the State of California for the purpose of rehabilitating and increasing the low- and moderate-income housing stock in the City of Fontana. Separate financials statements are not available for the Authority.
The Fontana Community Foundation was established on April 27, 2005, pursuant to Section 501(c)(3) of the Internal Revenue Code of 1986 for the purpose of aiding and assisting in the implementation, improvement and maintenance of public services that preserve and promote the health and welfare and education of local citizenry of the City of Fontana. Separate financials statements are not available for the Foundation.
The Fontana Fire Protection District was established on July 1, 2008 pursuant to the State of California Health and Safety Code Section 13800 for the purpose of providing fire suppression, emergency medical, fire prevention and education services within the city limits and the unincorporated area within the District’s Sphere of Influence. Separate financials statements are not available for the District.
The Fontana Public Facilities Financing Authority was established on September 9, 2014, pursuant to Government Code Section 6500 of the State of California (Joint Exercise of Powers). Its purpose is to assist in the financing of capital improvements and working capital requirements of the City, the Fontana Fire Protection District and any other eligible local agencies. Separate financial statements are not available for the Authority.
b. Government-Wide and Fund Financial Statements
The government-wide financial statements include a statement of net position and a statement of activities. These statements present summaries of governmental and business-type activities for the City accompanied by a total column. Fiduciary activities of the City are not included in these statements. For the most part, the effect of interfund activities has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support.
The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues.
Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues.
Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements.
37 CITY OF FONTANA
Notes to the Financial Statements
c. Measurement Focus, Basis of Accounting and Financial Statement Presentation
The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period or 180 days for certain intergovernmental revenues. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due.
The City’s fiduciary funds consist of custodial funds and a private purpose trust fund. Custodial funds account for assets held by the City for other governments or individuals. Fiduciary funds are accounted for using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred.
Property taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenue of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the City.
The City reports the following major governmental funds:
The General Fund is the general operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund.
The Fire Protection District Special Revenue Fund accounts for revenues received as part of property taxes, permits, and fees, that are to be used for fire suppression, emergency medical, fire prevention and education services incurred by the District within the City’s Sphere of Influence.
The Housing Authority Special Revenue Fund accounts for the assets and activities transferred from the Former Fontana Redevelopment Agency that will be monies to be used to increase and improve the community's supply of low and moderate income housing.
The Economic Stimulus Fund accounts for federal funds received due to COVID-19 to assist in the economic recovery of the City.
The Capital Reinvestment Fund accounts for discretionary infrastructure projects.
38 CITY OF FONTANA
Notes to the Financial Statements
The Future Capital Projects Fund accounts for capital improvement reimbursements from the San Bernardino County Transportation Authority (SBCTA) that is used for general infrastructure improvements throughout the City.
The Sewer Expansion Fund accounts for revenues received from development impact fees which, in turn, are reported to the Inland Empire Utilities Agency (IEUA) for capital expansion.
The Community Facilities Districts Funds account for activities related to the maintenance of City landscaped areas.
The Traffic Mitigation Capital Project Fund accounts for the revenues received from development impact fees which, in turn, are expended for traffic studies, planning and construction of traffic flow improvements.
The City reports the following major proprietary fund:
The Sewer Operations Fund is used to account for the operation of the City’s sewer utility system, a self-supporting activity which renders services on a user charge basis to residences and businesses located in the City.
Additionally, the City reports the following fund types:
Governmental Fund Types
Special Revenue Funds – to account for the proceeds of specific revenue resources (other than major capital projects) that are legally restricted to expenditures for specific purposes.
Debt Service Funds – to account for the accumulation of resources for, and the payment of, long-term debt obligation principal, interest and related costs.
Capital Project Funds – to account for financial resources to be used for the acquisition or construction of major capital facilities.
Proprietary Fund Types
Enterprise Funds – to account for operations that are financed and operated in a manner similar to private business enterprises, where the intent of the City Council is that the costs (including depreciation) of providing goods and services to the general public on a continuing basis be financed or recovered primarily through user charges.
39 CITY OF FONTANA
Notes to the Financial Statements
Internal Service Fund – to account for financial transactions related to replacement of City-owned vehicles and equipment. These services are provided to other departments or agencies of the City, on a cost reimbursement basis.
Fiduciary Fund Types
Custodial Funds – to account for assets held by the City for other governments or individuals. These funds include debt service transactions on Community Facilities Districts bonds for which the City is not obligated.
Private Purpose Trust Fund - accounts for the assets and liabilities of the former redevelopment agency and is allocated revenue to pay estimated installment payments of enforceable obligations until obligations of the former redevelopment agency are paid in full and assets have been liquidated.
As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges between the City’s sewer function and various other functions of the City. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned.
Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the enterprise funds and the internal service fund are charges to customers for sales and services. Operating expenses for enterprise funds and internal service fund 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 non-operating revenues and expenses.
When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, then unrestricted resources as they are needed.
d. Assets, Liabilities and Net Position or Fund Balance
Deposits and Investments
The City’s cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition.
Investments for the City are reported at fair value. The City’s policy is generally to hold investments until maturity or until fair value equal or exceed cost. The State Treasurer’s Investment Pool operates in accordance with appropriate State laws and regulations. The reported value of the pool is the same as the fair value of the pool shares.
40 CITY OF FONTANA
Notes to the Financial Statements
Fair Value Measurements
Certain assets and liabilities are required to be reported at fair value. The fair value framework provides a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of fair value hierarchy are described as follows:
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly and fair value is determined through the use of models or other valuation methodologies including:
Quoted prices for similar assets or liabilities in active markets; Quoted prices for identical or similar assets or liabilities in markets that are inactive; Inputs other than quoted prices that are observable for the asset or liability; Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement. These unobservable inputs reflect the City’s own assumptions about the inputs market participants would use in pricing the asset or liability (including assumptions about risk).
These unobservable inputs are developed based on the best information available in the circumstances and may include the City’s own data.
Receivables and Payables
Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” (current portion of interfund loans) or “advances to/from other funds” (the non-current portion of interfund loans). All other outstanding balances between funds are reported as “due to/from other funds.” Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances”.
Advances between funds, as reported in the fund financial statements, are offset by a non-spendable fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources.
The City has elected, by ordinance, that the duties of assessing and collecting property taxes be performed by the San Bernardino County Assessor and Tax Collector, respectively. Tax levies cover the period from July 1 to June 30 of each year. All tax liens attach annually on January 1 preceding the fiscal year for which the taxes are levied. Taxes are levied on both real and personal property as of January 1. Secured property taxes are levied against real property and are due and payable in two equal installments. The first installment is due on November 1 and becomes delinquent if not paid by December 10. The second installment is due on February 1 and becomes delinquent if not paid by April 10.
Unsecured personal property taxes are due on July 1 each year and become delinquent if not paid by August 31.
41 CITY OF FONTANA
Notes to the Financial Statements
Functional Classifications
Expenditures of the Governmental funds are classified by function. Functional classifications are defined as follows:
General Government includes legislative activities which have a primary objective of providing legal and policy guidelines for the City. Also included in this classification are those activities which provide management or support services across more than one functional area.
Public Safety includes those activities which involve the protection of people and property.
Public Works includes those activities which involve the maintenance and improvement of City streets, roads and park department development and maintenance.
Community Development includes those activities which enhance the general quality of life and for protective inspections except those related to fire.
Community Services includes those activities which provide all cultural and recreational programs and facilities.
Engineering includes those activities which provide specialized skills and knowledge in support of the operation of government.
Inventories, Prepaids and Land Held for Resale
All inventories are valued at cost using the first-in, first-out (FIFO) method. Inventories consist of expendable supplies held for consumption.
Inventory costs are recorded as expenditures when used.
The General Fund inventory is accounted for using the consumption method and is offset by a reservation of fund balance in the fund-level statements, which indicates that it does not constitute “available spendable resources.”
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaids in both the government-wide and fund financial statements.
Land purchased for resale is capitalized as inventory at acquisition cost or net realizable value, if lower.
Leases
For the year ended June 30, 2022, the financial statements include the adoption of GASB Statement No. 87, Leases. The primary objective of this statement is to enhance the relevance and consistency of information about governments' leasing activities. This statement establishes a single model for lease accounting based on the principle that leases are financings of the right to use an underlying asset. Under this statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources. For additional information, refer to the disclosures in Footnote 4.
42 CITY OF FONTANA
Notes to the Financial Statements
Key estimates and judgments include how the City determines the discount rate it uses to discount the expected lease receipts to present value, lease term and lease receipts.
The City used the estimated incremental borrowing rate as the discount rate for leases. The lease term includes the noncancellable period of the lease. Lease receipts included the measurement of the lease receivable is composed of fixed payments from the lessee.
The City monitors changes in circumstances that would require a remeasurement of its leases and will remeasure the lease receivable and deferred inflows of resources if certain changes occur that are expected to significantly affect the amount of the lease receivable.
Restricted Assets
Restricted assets represent unexpended bond proceeds, interest earnings thereon and reserve amounts of certificates of participation, tax allocation bonds, and special assessment bonds. Under the related resolutions and indentures, the remaining proceeds are restricted for the use of future construction of improvements to the respective projects, for debt service or for reserve requirements. The majority of these assets are held by trustees and fiscal agents.
Capital Assets
Capital assets, which include property, plant, equipment and infrastructure assets (e.g., roads, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of more than $5,000 ($50,000 for intangibles and $100,000 for infrastructure) and an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at acquisition value at the date of donation.
In accordance with GASB 34, the City has reported general infrastructure assets acquired in prior and current years. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed.
Property, plant and equipment of the primary government is depreciated using the straight-line method over the following estimated useful lives:
Asset Years
Buildings and improvements 40-55 years
Machinery and equipment 3-20 years
Vehicles 5-20 years
Infrastructure 20-30 years
Right to use asset 5 years
43 CITY OF FONTANA
Notes to the Financial Statements
Deferred Outflows/Inflows of Resources
In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, are transactions that represent a consumption of net assets that applies to a future period(s) and are not considered assets. The government has two items that qualify for reporting in this category, deferred outflows related to pensions and OPEB.
In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net assets that applies to a future period(s) and are not considered to be liabilities. The government has four items that qualify for reporting in this category:
1. Unavailable revenue is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues for revenues that are measurable but are not collected within 60 days of the end of the current fiscal period or 180 days for certain intergovernmental revenues. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available.
2. Pension related deferred inflows, is reported only on the Statement of Net Position. The government reports deferred inflows of resources related to pensions arising from certain changes in the collective net pension liability.
3. OPEB related deferred inflows, is reported only on the Statement of Net Position. The government reports deferred inflows of resources related to pensions arising from certain changes in the collective OPEB liability.
4. Lease related deferred inflows, is reported on the governmental balance sheet and the Statement of Net Position. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available.
Compensated Absences
It is the City’s policy to permit employees to accumulate earned but unused personal leave which includes both vacation and sick pay benefits. All personal leave is accrued when incurred in the government-wide, proprietary, and fiduciary fund financial statements. The General Fund and the Sewer Operations Fund are typically used to liquidate these obligations. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements.
Long-Term Obligations
In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount.
44 CITY OF FONTANA
Notes to the Financial Statements
In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financial sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.
The City is subject to a legal bonded indebtedness limit of 15 percent of the assessed value of all real and personal property in the City, excluding any bonded indebtedness of the Successor Agency. At June 30, 2022, the City had bonded indebtedness of $53,015,000 against its debt limit of $3,603,855,162, which is 1.47 percent of the total limit.
Pensions
For purposes of measuring the net pension liability, deferred outflows and inflows of resources related to pensions, pension expense, information about the fiduciary net position and additions to/deductions from the fiduciary net position have been determined on the same basis as they are reported by City of Fontana. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.
Generally accepted accounting principles requires that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used:
Valuation Date (VD) June 30, 2020
Measurement Date (MD) June 30, 2021
Measurement Period (MP) July 1, 2020 to June 30, 2021
Other Postemployment Benefits (OPEB)
For purposes of measuring the total OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the OPEB plan (OPEB Plan), and additions to/deductions from the OPEB Plan have been determined by an independent actuary. For this purpose, benefit payments are recognized when currently due and payable in accordance with the benefit terms.
Generally accepted accounting principles require that the reported results must pertain to liability information within certain defined timeframes.
For this report, the following timeframes are used:
Valuation Date (VD) June 30, 2021
Measurement Date (MD) June 30, 2021
Measurement Period (MP) July 1, 2020 to June 30, 2021
45 CITY OF FONTANA
Notes to the Financial Statements
Net position flow assumption
Sometimes the government will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted – net position and unrestricted – net position in the government-wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the government’s policy to consider restricted – net position to have been depleted before unrestricted – net position is applied.
Fund balance flow assumptions
Sometimes the government will fund outlays for a particular purpose from both restricted and unrestricted resources (the total of committed, assigned, and unassigned fund balance). In order to calculate the amounts to report as restricted, committed, assigned, and unassigned fund balance in the governmental fund financial statements a flow assumption must be made about the order in which the resources are considered to be applied. It is the government’s policy to consider restricted fund balance to have been depleted before using any of the components of unrestricted fund balance. Further, when the components of unrestricted fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned fund balance. Unassigned fund balance is applied last.
e. Reconciliation of Government-Wide and Fund Financial Statements
Explanation of Certain Differences Between the Governmental Fund Balance Sheet and the Government-Wide Statement of Net Position The governmental fund balance sheet includes a reconciliation between fund balance of governmental funds and net position of governmental activities as reported in the government-wide statement of net position. One element of that reconciliation explains that “long-term liabilities, including net pension liability, are not due and payable in the current period and, therefore, is not recognized in the funds.” The detail of this $278,868,020 long-term liabilities difference is as follows:
53,015,000$
Loan payables 2,851,815
20,654,000
Compensated absences 11,099,392
Lease liability 106,709
Other post employment benefits liability 66,533,882
Net pension liability 118,172,369
6,434,853
funds to arrive at net position of governmental activities 278,868,020$ Net adjustment to reduce fund balances of governmental
Lease revenue bonds payable
Claims and judgments
Bond premium to be amortized
46 CITY OF FONTANA
Notes to the Financial Statements
Explanation of Certain Differences Between the Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balances and the Government-Wide Statement of Activities
The governmental fund statement of revenues, expenditures, and changes in fund balances includes a reconciliation between net changes in fund balances – total governmental funds and changes in net position of governmental activities as reported in the government-wide statement of activities. One element of that reconciliation states that “the issuance of long-term debt provides current financial resources to governmental funds, but the issuing debt increases long-term liabilities in the statement of net position.” Repayment of bond principal is an expenditure in governmental funds, but the repayment reduces long-term liabilities in the statement of net position.” The detail of this $20,262,306 difference are as follows:
Another element of that reconciliation states that “some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds.” The details of this $7,535,125 are as follows:
Note 2. Stewardship, Compliance and Accountability
Budgetary Information
Annual budgets for governmental funds are adopted on a basis consistent with generally accepted accounting principles (GAAP).
Issuance of Lease Revenue Bonds 23,125,000 $
(1,302,474)
(5,089,012)
sub-total (6,391,486)
Net change in premium 3,528,792
20,262,306$
Debt issued or incurred:
Payment to bond escrow agent
Net adjustment to increase net changes in fund balances of governmental funds to arrive at changes in net position of governmental activities
Principal repayments:
Lease revenue bonds
6,670,965
Compensated absences 779,160
Accrued interest 85,000
7,535,125$
of governmental funds to arrive at changes in net position of governmental activities
Claims and judgments
Net adjustment to increase net changes in fund balances 47 CITY OF FONTANA
Notes to the Financial Statements
The City uses the following procedures in establishing the budgetary data reflected in the financial statements. After January 1, department heads prepare estimates for required appropriations for the fiscal year commencing the following July 1. The proposed budget includes estimated expenditures and forecasted revenues for the fiscal year. The data is presented to the City Manager for review. Prior to June 1, the City Manager submits to the City Council a proposed operating budget for the upcoming fiscal year. The operating budget includes a summary of the proposed expenditures and financial resources of the City, as well as historical data for the preceding five fiscal periods. Public meetings are conducted at the civic center to obtain taxpayer comments. The City Council adopts the budget by June 30 through passage of an adopting resolution.
Budgets were legally adopted for the General, special revenue, debt service and all capital project funds during the fiscal year ended June 30, 2022. This appropriated budget covers substantially all City expenditures. All appropriated amounts shown are as originally adopted or as amended by the City Council. During the year, supplementary appropriations in the Governmental Funds were approved in the amount of $276,996,290. Additionally, amounts representing projects that were not completed were unappropriated at the end of the year, and reappropriated in the following year. Unexpended appropriations lapse at the year end.
The legal level of control is at the department level. Department heads are authorized to transfer budgeted amounts within their departments, within the same funds, with the approval of the City Manager. Transfers of appropriations between departments and between funds may be made only by authority of the City Council. Formal budgetary integration is employed as a management control device during the fiscal year for all governmental funds.
Encumbrance accounting is employed in governmental funds. Encumbrances (e.g., purchase orders, contracts) outstanding at year end do not constitute expenditures or liabilities because the commitments will be reappropriated and honored during the subsequent year. There were excess expenditures over appropriations in certain funds at the department level. However, this did not result in a negative fund balance of the individual funds because of the expenditure savings from other departments in the fund and/or adequate revenues or sources in the fund to offset expenditures. Excess of expenditures over appropriations in the individual major funds at the department level are as follows:
All funds with expenditures exceeding appropriations are reviewed by the City as part of its regular quarterly budget report to ensure that adequate revenues and/or other sources are available to cover these expenditures. In the event that revenues and other sources are not sufficient to fund the following year’s planned expenditures, the budget for the following fiscal year may be adjusted to ensure that there are no fund balance deficits in any funds. Excess of expenditures over appropriations at the fund level for the fiscal year ending June 30, 2022 are as follows:
Expenditures Appropriations Excess
Fire Protection District
Public safety
Fire 39,440,940 $ 39,226,670 $ 214,270 $
Expenditures Appropriations Excess
Special Revenue Funds
Fire Protection District Grants 66,239 $ - $ 66,239 $ Capital Project Funds
Community Facilities District 22,503,037 21,611,912 891,125 San Sevaine Flood Control 96,862 95,413 1,449 48 CITY OF FONTANA
Notes to the Financial Statements
A budgetary comparison schedule not presented for the Down Payment Assistance and TDA special revenue funds as it did not have a legally adopted annual budget. Budgetary schedules for all other governmental funds are presented in the fund financial statements or the combining and individual fund statements and schedules.
Deficit Fund Balance
As of June 30, 2022, the following funds had deficit fund balances:
These deficit fund balances will be addressed through future year revenues and transfers.
Note 3. Cash and Investments
The City follows the practice of pooling cash and investments of all funds except for restricted funds generally held by outside custodians and funds in its employees’ deferred compensation plans. Each fund’s portion of total cash and investments is summarized by fund type in the combined balance sheet as equity in pooled cash and investments. Amounts in the City’s deferred compensation plan are no longer reported on the City’s balance sheet as they are held in trust.
Interest income earned on pooled cash and investments is allocated to those funds which are required by law, local ordinance, administrative action or agreements to receive interest. Such allocation is made annually, at a minimum, based on the weighted average cash balances in each fund receiving interest. Interest income from cash and investments, which are restricted, is credited directly to the related fund.
Special Revenue Funds:
Grants 722,092 $
TDA 8,977
Housing and Community Development Block Grant 49,356
Federal Law Enforcement Block Grant 58,124
Community Services Reimbursements 153,297
ASES ELO-P 201,755
Permanent Local Housing Allocation 339,768
Fiduciary Funds:
Successor Agency 431,572,003
49 CITY OF FONTANA
Notes to the Financial Statements
Investments and Interest Receivable – Restricted
Restricted assets represent unexpended financing proceeds, interest earnings thereon and reserved amounts of certificates of participation, tax allocation bonds, and special assessment bonds. Under the related resolutions and indentures, the remaining proceeds are restricted for the use of future construction or improvement to the respective projects, for debt service or for reserve requirements. The majority of these assets are held by trustees and fiscal agents.
Authorized Investments
Under the provisions of the City’s investment policy and in accordance with Section 53601 of the California Government Code, the City may invest in the following types of investments:
State Treasurer’s Local Agency Investment Fund (LAIF) Mortgage Pass-Through Securities (FHLMC or FNMA only) Corporate Obligations (medium-term notes and bonds) Commercial Paper U.S. Government Securities Certificates of Deposit Mutual Funds Negotiable Certificates of Deposit
Bankers’ Acceptances Investment Contracts
It is the City’s policy not to invest in Small Business Administration Obligations (SBAs), Repurchase Agreements, Reverse Repurchase Agreements, or Financial Futures and Financial Option Contracts even though such investments are authorized under the California Government Code. All investments present at June 30, 2022 and during the fiscal year conform to the City’s investment policy.
Local Agency Investment Fund (LAIF)
The LAIF is a special fund of the California State Treasury, secured by the full faith and credit of the State of California, through which local governments may pool investments. Each city may invest up to $75,000,000 in LAIF for each entity. Investments in LAIF are highly liquid as deposits can be converted to cash within twenty-four (24) hours without loss of interest earned to such date.
Restricted Assets
Cash and Cash with
Investments Fiscal Agent Total
Governmental activities 440,652,514 $ 92,562,793 $ 533,215,307 $ Business-type activities 24,205,303 - 24,205,303 Fiduciary funds 11,691,680 40,979,140 52,670,820 476,549,497$ 133,541,933 $ 610,091,430 $
50 CITY OF FONTANA
Notes to the Financial Statements
LAIF is overseen by the Local Agency Investment Advisory Board, which consists of five members, in accordance with State statute. The State Treasurer’s Office audits the fund annually. The fair value of the position in the State pool is the same as the value of the pool shares.
Deposits
At June 30, 2022, the carrying amount of the City’s deposits was $111,163,573 and the bank balance was $112,848,115. The $1,684,542 difference represents outstanding checks and other reconciling items.
The California Government Code requires California banks and savings and loan associations to secure an Entity’s deposits by pledging government securities with a value of 110% of an Entity’s deposits. California law also allows financial institutions to secure Entity deposits by pledging first trust deed mortgage notes having a value of 150% of an Entity’s total deposits. The City Treasurer may waive the collateral requirement for deposits which are fully insured up to $250,000 by the FDIC. The collateral for deposits in federal and state-chartered banks is held in safekeeping by an authorized Agent of Depository recognized by the State of California Department of Banking. The collateral for deposits with savings and loan associations is generally held in safekeeping by the Federal Home Loan Bank in San Francisco, California, as an Agent of Depository. These securities are physically held in an undivided pool for all California public agency depositors. Under Government Code Section 53655, the placement of securities by a bank or savings and loan association with an “Agent of Depository” has the effect of perfecting the security interest in the name of the local governmental agency. Accordingly, all collateral held by California Agents of Depository are considered to be held for, and in the name of, the local government agency.
Credit Risk
The City’s investment policy limits investments in medium term notes (MTNs) and federal securities to those in a rating category of “A” or its equivalent or better by Moody’s or Standard and Poor’s rating service. As of June 30, 2022, the City’s investment in medium term notes, federal securities and money market funds consisted of the following:
As of June 30, 2022, the City’s investment in external investment pools were unrated.
Custodial Credit Risk
The custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of investment or collateral securities that are in the possession of an outside party. The City does not have a policy for custodial credit risk associated with deposits or investments.
Moody's Moody's
Federal Securities Rating Money Market Funds Rating
Federal Home Loan Bank Note Aaa US Bank Aaa
Federal Home Loan Mortgage Corporation Aaa First American Treasury Aaa Federal National Mortgage Association Aaa Wells Fargo Treasury Plus Aaa 51 CITY OF FONTANA
Notes to the Financial Statements
Concentration of Credit Risk
The City’s investment policy imposes restrictions for certain types of investments with any one issuer.
With respect to concentration risk, as of June 30, 2022, the City is in compliance with the restrictions of the investment policy.
Investments guaranteed by the U.S. Government and investments in mutual funds and external investment pools are excluded from this requirement.
Interest Rate Risk
The City’s investment policy limits investment maturity as a means of managing its exposure to fair value losses arising from increasing interest rates. The City’s investment policy states that at least 10% of the City’s portfolio shall mature in one year or less. The only exception to this maturity limit shall be the investment of the gross proceeds of tax-exempt bonds. The City has elected to use the segmented time distribution method of disclosure for its interest rate risk.
As of June 30, 2022, the City had the following investments and maturities:
6 months 6 months 1 to 3 3 to 5 Fair
or less to 1 year years years Value
U.S Government Securities - $ - $ 5,337,315 $ 0 901,992$ 6,239,307 $ Corporate Obligations - 1,565,428 82,997,281 4,926,119 89,488,828 State Investment Pool 77,464,878 - - - 77,464,878 Treasury Notes - - 141,046,643 - 141,046,643 Municipal Bonds 444,559 146,447 74,725 - 665,731 Asset-Backed Securities - - 6,575,877 24,258,502 30,834,379 Certificates of Deposit 7,584,854 1,497,912 - - 9,082,766 Money Market Mutual Funds 101,601,292 - - - 101,601,292 187,095,583$ 3,209,787$ 236,031,841$ 30,086,613$ 456,423,824$ Investment Maturities
State Investment Pool (LAIF) $75 million /account
U.S. Government Securities 100%
Bankers Acceptances 40%
Commercial Paper 10%
Negotiable Certificates of Deposit 30%
Corporate Obligations 30%
Mutual Funds 10%
Mortgage Pass-Through Securities 20%
Certificates of Deposits 100%
Percentage of Pool
Allowed Investment Type
52 CITY OF FONTANA
Notes to the Financial Statements
Fair Value Measurement
The City categorizes its fair value investments within the fair value hierarchy established by generally accepted accounting principles. The City has the following recurring fair value measurements as of June 30, 2022:
Note 4. Leases
The City is a lessor in a noncancellable leases for use of City property for cell towers. The leases range from 5 years are required to make fixed monthly payments per month. The leases interest rates range from .31% to 1.70%. The City is a lessor in a 55-year noncancellable lease for an apartment unit complex with fixed monthly rent payments starting at $1,667 per month with annual increase of 2%. The City recognized $127,490 in lease revenue and $11,115 in interest revenue during the current fiscal year related to these agreements. As of June 30, 2022, the lease receivable is $17,689,158 and deferred inflows of resources is $17,254,696.
The City is a lessee in a noncancellable lease for the City’s use of vehicles. For further information on the City’s lease liability see Footnote 8.
Investments Measured at Fair Value
Level 1 Level 2 Level 3 Total Fair Value
U.S Government Securities $ - $ 6,239,307 $ - $ 6,239,307 Corporate Obligations - 89,488,828 - 89,488,828 Treasury Notes 141,046,643 - - 141,046,643 Municipal Bonds - 665,731 - 665,731 Asset-Backed Securities - 30,834,379 - 30,834,379 Certificates of Deposit - 9,082,766 - 9,082,766 Total investments measured at fair value $ 141,046,643 $ 136,311,011 $ - 277,357,654 Investments Not Reported in Fair Value Hierarchy
Money Market Mutual Funds $ 101,601,292
State Investment Pool (LAIF) 77,464,878
Total investments not reported in fair value hierarchy 179,066,170 Total investments held 456,423,824$
Fair Value Hierarchy
Net Asset Value
53 CITY OF FONTANA
Notes to the Financial Statements
Note 5. Receivables
Receivables as of June 30, 2022, for the City’s individual major funds and non-major, proprietary major and non-major, and fiduciary funds in the aggregate, including the applicable allowances for uncollectible accounts, are as follows:
Note: The allowance for doubtful accounts for non-major governmental funds is equal to 100% of the delinquent special assessments receivable at June 30, 2022.
Due to the uncollectability of the loans to the Successor Agency, an allowance for doubtful accounts has been recorded at June 30, 2022 for the loans that are pending approval by the State Department of Finance as enforceable obligations. An allowance has been recorded for these loans in the amount $3,305,829 in Sewer Operations funds. This allowance will remain in place until the State Department of Finance makes further determinations regarding the probability of collection on the loan balances. Several loans have been approved by the State Department of Finance; thus an allowance has not been recorded for the loans in the amounts of $24,978,218 in the General Fund.
Community Nonmajor
Fire Protection Housing Capital Future Capital Sewer Facilities Traffic Governmental General District Authority Reinvestment Projects Expansion Districts Mitigation Funds 3,610,035$ 28,755 $ - $ 3,940 $ - $ 17,934 $ - $ 566 $ 102,434 $ - - - - - - - - 862,452 177,025 49,223 3,559,813 - 19,668 - 65 86,217 1,180,715 - - 71,819,475 71,128 - - - - 10,691,029 24,978,218 - - - - - - - - 28,765,278$ 77,978 $ 75,379,288 $ 75,068 $ 19,668 $ 17,934 $ 65 $ 86,783 $ 12,836,630 $ 207,433 - - - - - - - 151,265 28,557,845$ 77,978 $ 75,379,288 $ 75,068 $ 19,668 $ 17,934 $ 65 $ 86,783 $ 12,685,365 $ Loans to Successor Agency
Less allowance for
doubtful accounts
Accounts
Assessments
Interest
Loans
Special Revenue Capital Projects
Nonmajor Internal
Sewer Proprietary Service Fiduciary
Operations Funds Funds Funds Total
1,429,132$ - $ 109,977 $ - $ 5,302,773 $ - - - 554,452 1,416,904 49,142 1,541 24,855 1,141,911 6,290,175 2,980,990 1,219,947 - 2,537,912 89,320,481 3,305,829 - - - 28,284,047 7,765,093$ 1,221,488 $ 134,832 $ 4,234,275 $ 130,614,380 $ 3,305,829 - - 1,971,279 5,635,806 4,459,264$ 1,221,488 $ 134,832 $ 2,262,996 $ 124,978,574 $ Less allowance for
doubtful accounts
Accounts
Assessments
Interest
Loans
Loans to Successor Agency
54 CITY OF FONTANA
Notes to the Financial Statements
Note 6. Capital Assets
Capital asset activity for the year ended June 30, 2022, was as follows:
Beginning
Balance Balance
June 30, 2021 Transfers Increases Decreases June 30, 2022 Governmental activities:
Capital assets, not being depreciated
Land 156,533,210 $ - $ 4,844,074 $ (15,000) $ 161,362,284 $ Construction in progress 33,693,678 (14,887,149) 33,576,430 - 52,382,959 Easements 4,996,141 - - - 4,996,141 Total capital assets, not being depreciated 195,223,029 (14,887,149) 38,420,504 (15,000) 218,741,384 Capital assets, being depreciated
Buildings and improvements 298,156,101 14,843,716 3,414,166 - 316,413,983 Machinery and equipment 26,543,936 - 346,379 - 26,890,315 Vehicles 34,062,359 43,433 3,992,104 (1,346,295) 36,751,601 Right to use assets 108,141 - - - 108,141 Infrastructure 860,897,019 - - - 860,897,019 Intangibles 5,384,870 - - - 5,384,870 1,225,152,426 14,887,149 7,752,649 (1,346,295) 1,246,445,929 Less accumulated depreciation for:
Buildings and improvements (142,161,885) - (11,961,561) - (154,123,446) Machinery and equipment (21,158,420) - (1,484,371) - (22,642,791) Vehicles (21,565,379) - (2,480,337) 1,262,442 (22,783,274) Right to use assets - - (1,825) - (1,825) Infrastructure (526,327,126) - (21,272,455) - (547,599,581) Intangibles (2,383,391) - (72,284) - (2,455,675) (713,596,201) - (37,272,833) 1,262,442 (749,606,592) Total capital assets, being depreciated, net 511,556,225 14,887,149 (29,520,184) (83,853) 496,839,337 Governmental activities capital assets, net 706,779,254 $ - $ 8,900,320 $ (98,853) $ 715,580,721 $ 55 CITY OF FONTANA
Notes to the Financial Statements
Depreciation expense was charged to functions/programs of the primary government as follows:
Beginning
Balance Balance
June 30, 2021 Transfers Increases Decreases June 30, 2022 Business-type activities:
Capital assets, not being depreciated
Construction in progress 436,820 $ - $ 40,285 $ - $ 477,105 $ Total capital assets, not being depreciated 436,820 - 40,285 - 477,105 Capital assets, being depreciated
Buildings and improvements 1,798,150 - - - 1,798,150 Machinery and equipment 603,611 - - - 603,611 Infrastructure 116,035,868 - - - 116,035,868 Intangibles 64,698 - - - 64,698 118,502,327 - - - 118,502,327 Less accumulated depreciation for:
Buildings and improvements (645,903) - (46,244) - (692,147) Machinery and equipment (592,933) - (4,039) - (596,972) Infrastructure (55,518,589) - (2,782,702) - (58,301,291) Intangibles (64,698) - - - (64,698) (56,822,123) - (2,832,985) - (59,655,108) Total capital assets, being depreciated, net 61,680,204 - (2,832,985) - 58,847,219 Business-type activities capital assets, net 62,117,024 $ - $ (2,792,700) $ - $ 59,324,324 $ Governmental activities:
General government 3,321,940 $ Business-type activities:
Public safety 3,009,303 Sewer Operations 2,832,985$ Public works 6,986,095
Community development 1,284,657
Community services 906,060
Engineering 19,981,890
Total Depreciation charged to functions 35,489,945
Charged to Internal Service Fund 1,782,888
Total Governmental Activities 37,272,833$
56 CITY OF FONTANA
Notes to the Financial Statements
The following material construction commitments existed at June 30, 2022:
Note 7. Interfund Receivables, Payables and Transfers
The composition of interfund balances as of June 30, 2022, is as follows:
Due to/from other funds:
The amounts due to the General Fund are the result of negative cash balances at the end of the year.
Project Name Contract Amount
Expenditures
to date as of
June 30, 2022
Remaining
Commitments
South Fontana Sports Park 11,808,890 $ 5,102,667 $ 6,706,223 $ Fire Station No. 81 8,218,007 738,979 7,479,028 Foothill: Hemlock-Almeria Arterial 1,847,098 321,694 1,525,404 Valley Blvd at Almond Ave TS 1,092,802 590,083 502,719 Valley Blvd at Oleander Ave TS 1,211,588 698,878 512,710 Receivable Fund Payable Fund Amount
General Fund Major Governmental Funds
Community Facilities Districts 7,471,787
Non-major Governmental Funds
Traffic Congestion Relief 572,235
Permanent Local Housing Allocation 321,498
TDA 1,913
Fontana Fire District Grants 66,239
Federal Law Enforcement Block Grant 94,492
Housing and Community Development Block Grant 1,032,316 Community Services Reimbursements 926,280
ASES ELO-P 201,758
Community Facilities Districts General Fund 1,177
Total 10,689,695 $
57 CITY OF FONTANA
Notes to the Financial Statements
Advances to/from other funds:
The advances from Future Capital Projects to the Capital Improvements fund are representative of a cooperative agreement entered into with the City of Ontario for the Etiwanda Avenue and Slover Avenue / Airport Drive Intersection Project. The City has agreed to pay for the City of Ontario’s DIF share of the project. The City of Ontario will reimburse the City three years after the project construction has been accepted.
The advances from Future Capital Projects to the Storm Drain fund are representative of the cost of the Duncan Storm Drain / I-15 Freeway to Citrus Avenue project. The City is expected to be reimbursed a portion of the costs from developer, Lewis Homes.
The advances from Future Capital Projects to the Traffic Mitigation fund are representative of cooperative agreements entered into with San Bernardino Associated Governments (SANBAG) for various transportation projects throughout the City. SANBAG will repay the amounts owed to the Measure I 2010-2040 fund over a thirty-year period, as Measure I funds are collected. As part of the cooperative agreement, the City was required to fund a certain percentage of each project with Development Impact Fees (DIF) collected in the Traffic Mitigation fund. In order to complete these projects now rather than over a thirty-year period, various funds advanced the SANBAG share and DIF share of each project.
There is no repayment schedule for these advances as the amounts will be repaid as collections are received.
Receivable Fund Payable Fund Amount
Future Capital Projects Capital Improvements 1,717,369 $ Storm Drain 2,295,000
Traffic Mitigation 26,691,542
Total 30,703,911 $
58 CITY OF FONTANA
Notes to the Financial Statements
Interfund transfers:
Interfund transfers primarily consist of allocation of administrative costs, transfer of funding to capital project funds, and transfer of funding to general debt service fund.
Fire Nonmajor
Protection Capital Sewer Governmental Sewer Internal
General District Reinvestment Expansion Funds Operations Service Fund Total Transfer out:
General - $ 278,000 $ 6,201,797 $ 2,628 $ 2,743,772 $ - $ 329,680 $ 9,555,877 $ Fire Protection District 3,686,800 - - - 1,501,000 - - 5,187,800 Housing Authority 47,600 - - - - - - 47,600 Capital Reinvestment 283,529 - - - - - - 283,529 Future Capital Improvements 453,400 - - - - - - 453,400 Sewer Expansion 260,815 - - - - - - 260,815 Traffic Mitigation 181,500 - - - - - - 181,500 Nonmajor Governmental Funds 7,873,294 11,496,100 - - 14,177,279 - - 33,546,673 Sewer Operations 2,949,200 - - - - 502,240 - 3,451,440 Internal Service Fund 209,150 - - - - - - 209,150 15,945,288$ 11,774,100 $ 6,201,797 $ 2,628 $ 18,422,051 $ 502,240 $ 329,680 $ 53,177,784 $ Transfers In:
59 CITY OF FONTANA
Notes to the Financial Statements
Principal Interest Total
2023 1,280,000 $ 1,333,550 $ 2,613,550 $
2024 1,345,000 1,267,925 2,612,925
2025 1,410,000 1,199,050 2,609,050
2026 1,480,000 1,126,800 2,606,800
2027 1,555,000 1,050,925 2,605,925
2028-2032 8,980,000 4,019,125 12,999,125 2033-2037 11,300,000 1,685,350 12,985,350 2038 2,540,000 50,800 2,590,800
Totals 29,890,000 $ 11,733,525 $ 41,623,525 $
2014 Lease Revenue Bonds
Note 8. Long-Term Debt
Long-term debt activity for the year ended June 30, 2022, was as follows:
Lease Revenue Bonds
2014 Lease Revenue Bonds
In November 2014, the Fontana Public Facilities Financing Authority issued $37,675,000 of Lease Revenue Bonds. The proceeds of the issue were used to refinance 2007 Lease Revenue Bonds with an outstanding balance of $29,890,000. The bonds pay interest semi- annually at rates ranging from 3.875% to 5.00% and mature from September 2015 through September 2037. Principal and interest payments are made from the lease income for certain real property and the improvements thereon.
Beginning Ending Amounts Amounts
Balance Balance Due Within Due in More
June 30, 2021 Additions Retirements June 30, 2022 One Year Than One Year Governmental Activities:
Lease Revenue Bonds 36,185,000$ 23,125,000$ 6,295,000$ 53,015,000$ 1,760,000$ 51,255,000$ Claims and judgments 13,983,035 9,104,329 2,433,364 20,654,000 3,686,139 16,967,861 Compensated absences 10,320,232 7,961,288 7,182,128 11,099,392 7,182,128 3,917,264 Loan payable - SANBAG 3,259,217 - 407,402 2,851,815 407,402 2,444,413 Lease liability - 108,534 1,825 106,709 22,945 83,764 Total Long-Term Debt - City 63,747,484 $ 40,299,151 $ 16,319,719 $ 87,726,916 $ 13,058,614 $ 74,668,302 $ Total Governmental Activity Long-Term Debt 63,747,484 $ 40,299,151 $ 16,319,719 $ 87,726,916 $ 13,058,614 $ 74,668,302 $ Unamortized bond premium 6,434,853 6,434,853
94,161,769$ 81,103,155$
Business-Type Activities:
Compensated absences 345,449 $ 175,419 $ 279,155 $ 241,713 $ 241,713 $ - $ Loans payable 6,584,027 - 863,155 5,720,872 878,670 4,842,202 Total Business-Type Activity Long-Term Debt 6,929,476 $ 175,419 $ 1,142,310 $ 5,962,585 $ 1,120,383 $ 4,842,202 $ 60 CITY OF FONTANA
Notes to the Financial Statements
Principal Interest Total
2023 480,000 $ 901,875 $ 1,381,875 $
2024 485,000 905,800 1,390,800
2025 505,000 886,400 1,391,400
2026 525,000 866,200 1,391,200
2027 545,000 845,200 1,390,200
2028-2032 3,065,000 3,881,400 6,946,400 2033-2037 3,720,000 3,218,400 6,938,400 2038-2042 4,535,000 2,411,800 6,946,800 2043-2047 4,330,000 1,497,600 5,827,600 2048 4,935,000 607,600 5,542,600
Totals 23,125,000 $ 16,022,275 $ 39,147,275 $
2021 Lease Revenue Bonds
2021 Lease Revenue Bonds
In November 2021, the Fontana Public Facilities Financing Authority issued $23,125,000 of Lease Revenue Bonds. The proceeds of the issue were used to refinance 2010 Lease Revenue Bonds with an outstanding balance of $5,075,000, finance the acquisition, construction and installation of certain public capital improvements and pay the costs of issuing the Lease Revenue bonds Series 2021A Bonds. The bonds pay interest semi-annually at rates of 4.00% and mature from November 2022 through November 2048. Principal and interest payments are made from the lease income for certain real property and the improvements thereon.
SANBAG Loan Payable
The City entered into an agreement with San Bernardino Associated Governments “SANBAG” for the I-15 Duncan Canyon Interchange Project.
Under the agreements, SANBAG contributed $12.0 million of State Proposition 1B Corridor Mobility Improvement funds to the project. A portion of the SANBAG funding public share to the project needs to be paid back, totaling $4,074,021. The City has seven years to pay back the amount without interest. The outstanding balance as of June 30, 2022 is $2,851,815.
Fiscal Year
Ending Principal Interest Total
2023 407,402$ -$ 407,402$ 2024 407,402 - 407,402 2025 407,402 - 407,402 2026 407,402 - 407,402 2027 407,402 - 407,402 2028-2029 814,805 - 814,805 Totals 2,851,815$ -$ 2,851,815$
SANDBAG
61 CITY OF FONTANA
Notes to the Financial Statements
Principal Interest Total
2023 22,945 $ 1,567 $ 24,512 $
2024 22,945 1,226 24,171
2025 22,945 879 23,824 2026 22,945 525 23,470 2027 14,929 165 15,094 Totals 106,709 $ 4,362 $ 111,071 $ Lease Liability
Lease Liability
The City is a lessee in a noncancellable lease for the City’s use of vehicles. The lease terms are in 5 year terms. The leases are required to make a fixed monthly payments ranging between $682 - $752 per month. The City recognized $1,825 in principal lease payments and $104 in interest paid during the current fiscal year related to these agreements. As of June 30, 2022, the lease liability is $106,709.
Future principal and interest payments on the lease liability is as follows:
San Bernardino Trunk Sewer Loans
In March 2007, the City received approval from the State of California Water Resources Control Board for the San Bernardino Trunk Sewer Project. The Project was being funded by the State Revolving Fund on a reimbursement basis for construction costs incurred in relation to the project. The project was done in three phases, with each of the three phases being funded by a separate loan from the State Revolving Fund.
The loans will be repaid in twenty annual installments, payments commenced in the fiscal year ended June 30, 2009.
Fiscal Year
Ending Principal Interest Principal Interest Principal Interest Principal Interest Total 2023 450,317 $ 51,923 $ 186,485 $ 26,692 $ 241,868 $ 27,533 $ 878,670 $ 106,148 $ 984,818 $ 2024 458,583 43,658 189,627 23,547 246,253 23,148 894,463 90,353 984,816 2025 466,999 35,241 192,827 20,350 250,718 18,683 910,544 74,274 984,818 2026 475,571 26,670 196,078 17,098 255,264 14,138 926,913 57,906 984,819 2027 484,300 17,941 199,385 13,792 259,892 9,510 943,577 41,243 984,820 2028 - 2029 493,187 9,053 408,913 17,441 264,605 4,798 1,166,705 31,292 1,197,997 Totals 2,828,957 $ 184,486 $ 1,373,315 $ 118,920 $ 1,518,600 $ 97,810 $ 5,720,872 $ 401,216 $ 6,122,088 $ San Bernardino Trunk Sewer - State Revolving Fund Loans Trunk Sewer Phase Lift Station Phase Force Main Phase Combined Loans 62 CITY OF FONTANA
Notes to the Financial Statements
Mello-Roos Community Facilities Districts
Between 1988 and 2022, eighteen Community Facilities Districts have issued Special Tax Bonds. The bonds are authorized pursuant to the Mello-Roos Community Facilities Act of 1982 and are secured by and payable solely from the revenues of an annual special assessment tax levied against land within the Districts. The bonds are not backed by the full faith and credit or taxing power of the City and do not constitute indebtedness of the City. The City is not liable for the bonds, but acts as an agent for the bondholders in collecting the assessments from property owners, forwarding the collections to bondholders and initiating foreclosure proceedings if necessary.
The transactions occurring as a result of the City acting in an agent capacity are being accounted for in an agency fund. As the bonds are financing the construction and installation of certain public improvements, the transactions relating to the construction of the improvements are being accounted for in capital project funds. The bonds are not reflected as an indebtedness of the City at June 30, 2022.
Special Tax Bonds Date of Issue
Original Issue
Amount
Outstanding
Amount at June
30, 2022
CFD # 7 (County Club Estates) July 2005 3,985,000 $ 1,445,000 $ CFD # 11 (Heritage West End) November 2011 8,800,000 2,995,000 CFD # 12 (Sierra Lakes) July 2005 26,920,000 9,950,000 CFD # 22 (Sierra Hills South) June 2014 31,260,000 23,235,000 CFD # 31 (Citrus Heights North) July 2018 18,485,000 16,290,000 CFD # 31 (Citrus Heights North) October 2021 8,025,000 8,025,000 CFD # 37 (Montelago) September 2005 4,590,000 2,135,000 CFD # 70 (Avellino) July 2013 2,750,000 1,975,000 CFD # 71 (Sierra Crest) July 2016 5,915,000 5,170,000 CFD #74B (Citrus/Summit) June 2019 4,045,000 3,885,000 CFD # 80 (Bella Strada) August 2017 11,125,000 10,295,000 CFD # 81 (Gabriella) March 2018 7,180,000 6,740,000 CFD #86 (Etiwanda Ridge) February 2020 5,025,000 4,820,000 CFD #85 (The Meadows) October 2020 22,460,000 22,090,000 CFD #88 (Sierra Crest II) October 2020 6,510,000 6,510,000 CFD #89 (Belrose) November 2020 5,725,000 5,540,000 CFD #90 (Summit @ Rosena I) June 2021 22,260,000 22,260,000 CFD #87 (El Paseo) July 2021 5,325,000 5,325,000 CFD #95 (Summit @ Rosena 2) May 2022 9,305,000 9,305,000 Total Special Tax Bonds 209,690,000$ 167,990,000$
63 CITY OF FONTANA
Notes to the Financial Statements
Note 9. Risk Management
The City established risk management programs for workers’ compensation in 1978-79 and for general liability in 1983-84, which are accounted for in the City’s General Fund. The programs are supported by contributions from the other principal City funds and intra-fund transfers.
Effective with an excess coverage insurance policy on July 1, 1992, the workers’ compensation program provides for self-insurance up to a maximum of $1,000,000 per incident. The claims which exceed the limit are insured up to a maximum per incident of $45,000,000.
Under the City’s excess insurance policy for general liability, all claims incurred after October 1, 1992, are self-insured up to a maximum of $1,000,000 per incident. The claims which exceed the limit are insured up to maximum per incident of $25,000,000. The City is self-insured for general liability claims incurred prior to October 1, 1992.
There have been no significant changes in insurance coverage in the last four years. The amount of settlements has not exceeded the amount of insurance coverage for each of the past four fiscal years.
Liabilities under the City’s self-insurance programs are accrued and charged to expenses when claims are reasonably determinable and when the existence of the City’s liability is probable. The accrued liabilities for general liability include an estimate of incurred but not reported claims.
The following is a summary of the changes in the claims liability over the past two fiscal years:
There are several other legal actions pending against the City which management considers incidental to normal operations. These actions are not covered by insurance. All liabilities to be accrued are included in the claims and judgments amount stated above.
Note 10. Litigation
The City of Fontana has been named as a defendant in numerous lawsuits and claims arising in the course of operations. In the aggregate, these claims seek monetary damages in significant amounts. To the extent the outcome of such litigation has been determined to result in probable financial loss to the City, such loss has been accrued in the accompanying financial statements.
Claims payable, June 30, 2020 14,868,907$
Claims incurred (including IBNRs) 3,033,796
Claims paid/dismissed (3,919,668)
Claims payable, June 30, 2021 13,983,035$
Claims incurred (including IBNRs) 10,590,633
Claims paid/dismissed (3,919,668)
Claims payable, June 30, 2022 20,654,000$
64 CITY OF FONTANA
Notes to the Financial Statements
Note 11. Jointly Governed Organization
I.R.N.E.T.
The City of Fontana is a member of Inland Regional Narcotics Enforcement Team (I.R.N.E.T.), a joint powers authority of the police departments of 10 cities in San Bernardino and Riverside Counties, and participating county, federal and state law enforcement agencies. The organization was formed September 18, 1989, with the mission to promote coordinated law enforcement efforts and to address emerging criminal justice issues, mainly in the areas of drug trafficking and money laundering. The executive council consists of police chiefs of the cities and resident agents in charge of the federal and state law enforcement agencies. All financial decisions were made by the executive council. The members received monetary distributions from the asset seizures based on their respective contribution to the effort. Financial information for I.R.N.E.T. is not available.
Note 12. Other Post-Employment Benefits Liability
Plan Description
In addition to the pension benefits described in Note 12, the City provides post-retirement health care benefits (OPEB Plan) in accordance with City Council approval to all employees who retire from the City on or after reaching age 50 or over with at least five years of PERS-credited service. The post-retirement health care benefits are provided to eligible retirees by the City, as a single-employer plan. Additional requirements are set forth in the individual contracts for executive positions or in the Memorandum of Understanding (MOUs) for the five bargaining units operating within the City. The amount the City provides on the behalf of retirees is dictated in the contracts or MOUs.
Employees Covered
As of the June 30, 2021 measurement date, the following current and former employees were covered by the benefit terms under the OPEB Plan:
Contributions
The required contribution is based on projected pay-as-you-go financing requirements. For the fiscal year ending June 30, 2022, the City’s cash contributions were $2,593,965 in the form of current premiums, which is funded through the General Fund, and the estimated implied subsidy was $753,456 resulting in total payments of $3,114,653.
Active employees 577
Inactive employees or beneficiaries currently receiving benefits 239 Inactive employees entitled to, but not yet receiving benefits 0 Total 816
65 CITY OF FONTANA
Notes to the Financial Statements
OPEB Liability
The City’s OPEB liability was measured as of June 30, 2021 and was determined by an actuarial valuation dated June 30, 2021, based on the following actuarial methods and assumptions:
Discount Rate
The discount rate used to measure the total OPEB liability was 2.19 percent. The discount rate is the average, rounded to 5 basis points, of the range of 3-20 year municipal bond rate indices: S&P Municipal Bond 20 Year High Grade Rate Index, Bond Buyer 20-Bond GO index, Fidelity GO AA 20 Year Bond Index. Sensitivity analysis showing a 1% increase and decrease in the discount rate is also provided.
Changes in the OPEB Liability
The changes in the OPEB liability for the OPEB Plan are as follows:
Actuarial Cost Method: Entry Age Normal
Actuarial Assumptions:
Discount Rate 2.19%
Inflation 2.50%
Salary Increases 2.80% per annum, in aggregate
Mortality Rate Derived using CalPERS’ Membership Data
for all funds
Pre-Retirement Turnover Derived using CalPERS’ Membership Data for all funds
Healthcare Trend Rate
Based on 2021 Getzen model that reflects
actual premium increases from 2021 to 2022
followed by 5.75% non-Medicare/ 5.4%
Medicare, gradually increasing to an ulitmate
rate of 4.04% in 2075.
66 CITY OF FONTANA
Notes to the Financial Statements
Sensitivity of the Total OPEB Liability to Changes in the Discount Rate
The following presents the OPEB liability of the City if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate, for measurement period ended June 30, 2021:
Sensitivity of the Total OPEB Liability to Changes in the Health Care Cost Trend Rates
The following presents the net OPEB liability of the City if it were calculated using health care cost trend rates that are one percentage point lower or one percentage point higher than the current rate, for measurement period ended June 30, 2021:
Total OPEB
Liability
Balance at June 30, 2021
(Measurement Date June 30, 2021) 71,376,998$
Changes recognized for the measurement period:
Service cost 1,973,739
Interest 1,909,977
Differences between expected and actual experience (7,638,248) Changes of assumptions 4,351,220
Benefit payments (3,114,653)
Net Changes (2,517,965)
Balance at June 30, 2022
(Measurement Date June 30, 2021) 68,859,033$
Increase (Decrease)
1% Decrease
(1.19%)
Current Discount
Rate (2.19%)
1% Increase
(3.19%)
OPEB Liability $79,748,711 68,859,033 $ $60,130,303 1% Decrease
(4.75% decreasing
to 3.04%)
Current Healthcare
Cost Trend Rates
(5.75% decreasing to
4.04%)
1% Increase
(6.75% decreasing
to 5.04%)
OPEB Liability $59,983,743 68,859,033 $ $79,803,585 67 CITY OF FONTANA
Notes to the Financial Statements
OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB
For the fiscal year ended June 30, 2022, the City recognized OPEB expense of $3,928,925. As of fiscal year ended June 30, 2022, the City reported deferred outflows of resources related to OPEB from the following sources:
The $2,856,591 reported as deferred outflows of resources related to contributions subsequent to the June 30, 2021 measurement date will be recognized as a reduction of the net OPEB liability during the fiscal year ending June 30, 2023.
Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as OPEB expense as follows:
Note 13. Pensions
Plan Description
All qualified permanent and probationary employees are eligible to participate in the Local Government’s separate Safety (police and fire) and Miscellaneous (all other) Plans, an agent multiple-employer defined benefit pension plan administered by the California Public Employees’ Retirement System (CalPERS). A full description of the pension plan regarding number of employees covered, benefit provisions, assumptions Deferred Outflows Deferred Inflows
of Resources of Resources
OPEB contributions subsequent to measurement date 2,856,591 $ - $ Changes of assumptions 10,039,710 -
Differences between expected and actual experience - 9,678,046 Total 12,896,301 $ 9,678,046 $
Measurement
period Ended
June 30:
Deferred
Outflows/(Inflows)
of Resources
2022 $ 45,209
2023 45,209
2024 45,209
2025 45,209
2026 45,209
Thereafter 135,619
68 CITY OF FONTANA
Notes to the Financial Statements
(for funding, but not accounting purposes), and membership information are listed in the Plan’s June 30, 2020 Annual Actuarial Valuation Report (funding valuation). Details of the benefits provided can be obtained in Appendix B of the actuarial valuation report. This report and CalPERS’ audited financial statements are publicly available reports that can be obtained at CalPERS’ website.
Benefits Provided
CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. The Plans’ provisions and benefits in effect at June 30, 2022, are summarized as follows:
Employees Covered
As of the June 30, 2021 measurement date, the following employees were covered by the benefit terms for each Plan:
Contribution Description
Section 20814(c) of the California Public Employees’ Retirement Law (PERL) requires that the employer contribution rates for all public employers are 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 Tier I Tier II Tier III
Prior to On or after After Prior to On or after
Hire Date Hire Date July 1, 2011 July 1, 2011 January 1, 2013 July 1, 2011 July 1, 2011 Benefit formula Benefit Formula 3% @ 50 3% @ 55 2.7% @ 57 2.5% @ 55 2% @ 62 Final Average Compensation Period Final Average Compensation Period Highest 1-year salary Final 3-year average Final 3-year average Highest 1-year salary Final 3-year average Benefit vesting schedule Benefit Vesting Schedule 5 yrs credited service 5 yrs credited service 5 yrs credited service 5 yrs credited service 5 yrs credited service Benefit payments Benefit Payments Monthly Monthly Monthly Monthly Monthly Retirement age Retirement Age 50 and above 50 and above 50 and above 55 and above 55 and above Monthly benefit basis Monthly Benefit Basis Benefit factor, years of service and final
compensation
Benefit factor, years of
service and final
compensation
Benefit factor, years of
service and final
compensation
Benefit factor, years of
service and final
compensation
Benefit factor, years of
service and final
compensation
Safety Miscellaneous
Safety Miscellaneous
192 496
68 962
Active employees 183 515
Total 443 1,973
Inactive employees or beneficiaries
currently receiving benefits
Inactive employees entitled to but
not yet receiving benefits
69 CITY OF FONTANA
Notes to the Financial Statements
contributions are determined through CalPERS’ annual actuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees.
Employer contribution rates may change if plan contracts are amended. Payments made by the employer to satisfy contribution requirements that are identified by the pension plan terms as plan member contribution requirements are classified as plan member contributions; payments made by the employer are paid from the General Fund of the City.
Actuarial Methods and Assumptions used to determine Total Pension Liability
The June 30, 2020 valuation was rolled forward to determine the June 30, 2021 total pension liability, based on the following actuarial methods and assumptions:
Actuarial Cost Method Entry Age Normal in accordance with the requirements of GASB Statement No. 68
Actuarial Assumptions
Discount Rate 7.15%
Inflation 2.50%
Salary Increases Varies by Entry Age and Service
Mortality Rate Table1
Post Retirement Benefit Increase
Derived using CalPERS’ Membership Data for all funds
The lesser of contract COLA or 2.50% until Purchasing
Power Protection
Allowance floor on purchasing power applies, 2.50% thereafter
1 The mortality table used was developed based on CalPERS’ specific data. The probabilities of mortality are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015. Pre-retirement and Post-retirement mortality rates include 15 years of projected mortality improvement using 90% of Scale MP-2016 published by the Society of Actuaries. For more details on this table, please refer to the CalPERS Experience Study and Review of Actuarial Assumptions report from December 2017. The Experience Study report may be accessed on the CalPERS website at www.calpers.ca.gov under Forms and Publications.
Change of Assumptions
There were no changes of assumptions.
Discount Rate
The discount rate used to measure the total pension liability was 7.15 percent. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at statutorily required 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. 70 CITY OF FONTANA
Notes to the Financial Statements
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 as well as the expected pension fund cash flows. Using historical returns of all of the funds’ asset classes expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11+ years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equal to the single equivalent rate calculated above and adjusted to account for assumed administrative expenses.
The table below reflects long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. The target allocation shown was adopted by the Board effective on July 1, 2017.
Asset Class 1 New Strategic
Allocation
Real Return
Years 1 – 102
Real Return
Years 11+3
Public Equity 50.0% 4.8% 5.98%
Global Fixed Income 28.0 1.00 2.62
Inflation Sensitive 0.0 0.77 1.81
Private Equity 8.0 6.30 7.23
Real Estate 13.0 3.75 4.93
Liquidity 1.0 0.00 (0.92)
1 In the System’s ACFR, Fixed Income is included in Global Debt Securities; Liquidity is included in Short-term Investments; Inflation Assets are included in both Global Equity Securities and Global Debt Securities.
2An expected inflation of 2.0% used for this period.
3An expected inflation of 2.92% used for this period.
Pension Plan Fiduciary Net Position
The plan fiduciary net position (assets) disclosed in the GASB report may differ from the plan assets reported in the actuarial valuation report due to several reasons. First, CalPERS must keep Reserves for Deficiencies and Fiduciary Self Insurance. These amounts are excluded for rate setting purposes in the actuarial valuation report while required to be included for GASB reporting purposes. In addition, differences may result from early CAFR closing and final reconciled reserves.
71 CITY OF FONTANA
Notes to the Financial Statements
Detailed information about each pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports. These reports are publicly available reports that can be obtained at https://www.calpers.ca.gov/page/investments/about-investment-office/investment-financial- reports.
Liability, Expense and Deferred Outflows/Inflows
The components of the net pension liability at June 30, 2022 are as follows:
Pension expense
At June 30, 2022, the City recognized pension expense for CalPERs of $10,337,507.
Deferred Outflows/Inflows
At June 30, 2022, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:
Total Pension Liability $561,439,944
Plan's Fiduciary Net Position 440,593,199
Net Pension Liability $120,846,745
Plan Fiduciary Net Position as a
Percentage of Total Pension Liability 78.48%
Deferred Outflows of
Resources
Deferred Inflows of
Resources
Pension contributions subsequent to measurement date $ 21,252,597 $ - Differences between Expected and Actual Experience 9,084,476 (625,571) Changes of Assumptions 2,079,385 (127,276) Net Difference between Projected and Actual Earnings
on Pension Plan Investments - (41,038,211) Total $ 32,416,458 $ (41,791,058) 72 CITY OF FONTANA
Notes to the Financial Statements
Changes in Net Pension Liability
The following table shows the changes in net pension liability recognized over the measurement period for the Safety plan:
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability
(a) (b) (c) = (a) - (b)
Balance at: 6/30/2020 (VD) $301,863,631 $187,544,710 $114,318,921 Changes Recognized for the Measurement Period:
Service Cost 6,559,973 6,559,973
Interest on the Total Pension Liability 21,409,558 21,409,558 Changes of Benefit Terms - - Differences between Expected and Actual Experience 1,072,506 1,072,506 Changes of Assumptions - - Net Plan to Plan Resource Movement - - Contributions from the Employer 11,820,068 (11,820,068) Contributions from Employees 2,877,842 (2,877,842) Net Investment Income 43,154,767 (43,154,767)
Benefit Payments, including Refunds of Employee Contributions (13,563,503) (13,563,503) - Administrative Expense (187,346) 187,346
Other Miscellaneous Income/(Expense) -
Net Changes during 2020-21 15,478,534 44,101,828 (28,623,294) Balance at: 6/30/2021 (MD) $317,342,165 $231,646,538 $85,695,627 Increase (Decrease)
73 CITY OF FONTANA
Notes to the Financial Statements
The following table shows the changes in net pension liability recognized over the measurement period for the Miscellaneous plan:
Sensitivity of the Net Pension Liability to Changes in the Discount Rate
The following presents the net pension liability of the Plan as of the Measurement Date, calculated using the discount rate of 7.15 percent, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower (6.15 percent) or 1 percentage- point higher (8.15 percent) than the current rate:
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability
(a) (b) (c) = (a) - (b)
Balance at: 6/30/2020 (VD) $233,650,124 $170,754,585 $62,895,539 Changes Recognized for the Measurement Period:
Service Cost 4,943,305 4,943,305
Interest on the Total Pension Liability 16,462,337 16,462,337 Changes of Benefit Terms - - Differences between Expected and Actual Experience (800,611) (800,611) Changes of Assumptions - - Net Plan to Plan Resource Movement - - Contributions from the Employer 7,329,666 (7,329,666) Contributions from Employees 2,383,713 (2,383,713) Net Investment Income 38,806,647 (38,806,647)
Benefit Payments, including Refunds of Employee Contributions (10,157,377) (10,157,377) - Administrative Expense (170,573) 170,573
Other Miscellaneous Income/(Expense) -
Net Changes during 2020-21 10,447,654 38,192,076 (27,744,422) Balance at: 6/30/2021 (MD) $244,097,778 $208,946,661 $35,151,117 Increase (Decrease)
74 CITY OF FONTANA
Notes to the Financial Statements
Discount Rate – 1%
(6.15%)
Current Discount Rate
(7.15%)
Discount Rate + 1%
(8.15%)
Plan’s Net Pension Liability
Safety $131,487,888 $85,695,627 $48,328,256
Plan’s Net Pension Liability
Misc. $69,915,339 $35,151,117 $6,716,911
Amortization of Deferred Outflows and Deferred Inflows of Resources
Under GASB 68, 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 inflows and deferred outflows to be recognized in future pension expense.
The amortization period differs depending on the source of the gain or loss:
Difference between projected and actual earnings 5 year straight-line amortization
All other amounts Straight-line amortization 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).
The EARSL for the Safety Plan for the measurement period ending June 30, 2021 was 5.1 years, which was obtained by dividing the total service years of 2,267 (the sum of remaining service lifetimes of the active employees) by 443 (the total number of participants). 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.
The EARSL for the Miscellaneous Plan for the measurement period ending June 30, 2021 was 3.2 years, which was obtained by dividing the total service years of 6,236 (the sum of remaining service lifetimes of the active employees) by 1,973 (the total number of participants). 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.
75 CITY OF FONTANA
Notes to the Financial Statements
Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions
For the measurement period ending June 30, 2021 (the measurement date), the City of Fontana recognized a pension expense of $8,870,152 for the Safety Plan.
As of June 30, 2022, the City of Fontana reports other amounts for the Safety Plan as deferred outflow and deferred inflow of resources related to pensions as follows:
Employer contributions of $7,920,425 were made after the measurement date of the net pension liability but before the end of the fiscal year; these contributions are reported as deferred outflows of resources and will be recognized as a reduction of the net pension liability in the fiscal year ended June 30, 2023.
Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:
Deferred Outflows of
Resources
Deferred Inflows of
Resources
Pension contributions subsequent to
measurement date $ 7,920,425 $ - Differences between Expected and Actual
Experience 8,080,954 (75,151) Changes of Assumptions 2,079,385 (127,276) Net Difference between Projected and
Actual Earnings on Pension Plan
Investments
- (21,640,151)
Total $ 18,080,764 $ (21,842,578) Measurement period
Ended June 30:
Deferred
Outflows/(Inflows) of
Resources
2022 $ (797,310)
2023 (2,415,801)
2024 (3,229,584)
2025 (5,260,575)
2026 21,031
Thereafter -
76 CITY OF FONTANA
Notes to the Financial Statements
For the measurement period ending June 30, 2021 (the measurement date), the City of Fontana recognized a pension expense of $1,557,355 for the Miscellaneous Plan.
As of June 30, 2022, the City of Fontana reports other amounts for the Miscellaneous Plan as deferred outflow and deferred inflow of resources related to pensions as follows:
Employer contributions of $13,332,172, were made after the measurement date of the net pension liability but before the end of the fiscal year; these contributions are reported as deferred outflows of resources and will be recognized as a reduction of the net pension liability in the year ended June 30, 2023.
Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:
Deferred Outflows of
Resources
Deferred Inflows of
Resources
Pension contributions subsequent to
measurement date $ 13,332,172 $ - Differences between Expected and Actual
Experience 1,003,522 (550,420) Changes of Assumptions - - Net Difference between Projected and
Actual Earnings on Pension Plan
Investments
- (19,398,059)
Total $ 14,335,694 $ (19,948,479) Measurement period
Ended June 30:
Deferred
Outflows/(Inflows) of
Resources
2022 $ (4,223,393)
2023 (4,682,987)
2024 (4,710,841)
2025 (5,327,736)
2026 -
Thereafter -
77 CITY OF FONTANA
Notes to the Financial Statements
Subsequent Events
On July 12, 2021, CalPERS reported a preliminary 21.3% net return on investments for fiscal year 2020-21. Based on the thresholds specified in CalPERS Funding Risk Mitigation policy, the excess return of 14.3% prescribes a reduction in investment volatility that corresponds to a reduction in the discount rate used for funding purposes of 0.20%, from 7.00% to 6.80%. Since CalPERS was in the final stages of the four-year Asset Liability Management (ALM) cycle, the board elected to defer any changes to the asset allocation until the ALM process concluded, and the board could make its final decision on the asset allocation in November 2021.
On November 17, 2021, the board adopted a new strategic asset allocation. The new asset allocation along with the new capital market assumptions, economic assumptions and administrative expense assumption support a discount rate of 6.90% (net of investment expense but without a reduction for administrative expense) for financial reporting purposes. This includes a reduction in the price inflation assumption from
2.50% to 2.30% as recommended in the November 2021 CalPERS Experience Study and Review of Actuarial Assumptions. This study also recommended modification to retirement rates, termination rates, mortality rates and rates of salary increases that were adopted by the board.
These new assumptions will be reflected in the GASB 68 accounting valuation reports for the June 30, 2022, measurement date.
Note 14. Public Agency Retirement Services
For some City employees (regular-part-time employees) that do not qualify for inclusion in the CalPERS pension plans administered by the City, the City offers an alternative plan, the Public Agency Retirement Services Alternate Retirement System Plan (PARS ARS). Employees are enrolled, on a voluntary basis, in this defined contribution plan; the plan requires a minimum contribution of 7.5% of the employee wages and are paid by the employees only. There is no annual expense to the City for this benefit.
Note 15. Classification of Fund Balances
In the fund financial statements, government funds report the following fund balance classification:
Nonspendable include amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact.
Restricted include amounts that are constrained on the use of resources by either (a) external creditors, grantors, contributors, or laws of regulations of other governments or (b) by law through constitutional provisions or enabling legislation.
Committed include amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government’s highest authority, City Council. The formal action that is required to be taken to establish, modify, or rescind a fund balance commitment is resolution.
Assigned include amounts that are constrained by the government’s intent to be used for specific purposes but are neither restricted nor committed. The Chief Finance Officer is authorized to assign amounts to a specific purpose, which was established by the governing body in Administrative Policy # 20-32.
78 CITY OF FONTANA
Notes to the Financial Statements
Fire Future Community Other
Protection Housing Economic Capital Capital Sewer Facilities Traffic Governmental General District Authority Stimulus Reinvestment Projects Expansion Districts Mitigation Funds Totals Fund balances:
Nonspendable
Deposits 7,877$ -$ -$ -$ -$ -$ -$ -$ -$ 11,323$ 19,200$ Inventories 375,878 - - - - - - - - 868,948 1,244,826 Land held for resale - - - - 5,650,178 4,379,694 - - - - 10,029,872 Loan receivables - - - - - - - - - 2,855,937 2,855,937 Restricted
Community facilities districts - - - - - - - 30,257,097 - 36,300,553 66,557,650 Community services - - - - - - - - - 66,491 66,491 Debt service reserve - - - - - - - - - 15,368 15,368 Government-access channel 1,510,351 - - - - - - - - - 1,510,351 Housing & community development - - 86,159,945 115,400 - - - - 15,444,197 4,204,856 105,924,398 Lighting and landscaping - - - - - - - - - 4,559,516 4,559,516 Municipal Services Impact - - - - - - - - - 21,722,426 21,722,426 Public safety - 38,463,783 - - - - - - - 6,308,710 44,772,493 Transportation - - - - - - - - - 23,568,892 23,568,892 Solid waste mitigation - - - - - - - - - 3,340,516 3,340,516 Committed
PERS reserve 10,886,393 - - - - - - - - - 10,886,393 Assigned
Capital projects 786,174 - - - 9,493,884 38,291,805 363,217 - - 104,408,453 153,343,533 Equipment replacement 6,797,649 - - - - - - - - - 6,797,649 Retiree benefits 26,360,583 - - - - - - - - - 26,360,583 Unassigned 77,336,531 - - - - - - - - (1,599,859) 75,736,672 Total fund balances 124,061,436$ 38,463,783$ 86,159,945$ 115,400$ 15,144,062$ 42,671,499$ 363,217$ 30,257,097$ 15,444,197$ 206,632,130$ 559,312,766$ Capital ProjectSpecial Revenue
Unassigned include the residual amounts that have not been restricted, committed, or assigned to specific purposes.
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. In governmental funds other than the General Fund, if expenditures incurred for specific purposes exceed the amounts that are restricted, committed, or assigned to those purposes, it may be necessary to report a negative unassigned fund balance in that fund.
An individual governmental fund could include nonspendable resources and amounts that are restricted or unrestricted (committed, assigned, or unassigned) or any combination of those classifications. Restricted amounts are to be considered spent when an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available and committed, assigned, then unassigned amounts are considered to have been spent when an expenditure is incurred for purposes for which amounts in any of those unrestricted fund balance classifications can be used.
The details of the fund balances as of June 30, 2022 are presented below:
Adequate reserve levels are a necessary component of the City’s overall financial management strategy and to provide for the orderly provision of services to the citizens of the City of Fontana. Those necessary components are as follows:
79 CITY OF FONTANA
Notes to the Financial Statements
Economic uncertainties, local disasters and other hardships or downturns in the local economy Contingencies for unforeseen operating or capital needs
The balance of these components as of June 30, 2022, is $25,974,586 and is included in the unassigned fund balance in the General Fund.
Note 16: Fontana Fire Protection District
The Fontana Fire Protection District (the District) was formed on July 1, 2008 pursuant to the State of California Health and Safety Code commencing with Section 13800, for the purpose of providing fire protection services. The District is a component unit of the City of Fontana; the City of Fontana has oversight responsibility of the District determined by criteria such as financial interdependency, selection of governing authority and designation of management, budget control, ability to significantly influence operations, etc.
The accounts of the District have been included within the scope of the basic financial statement of the City because the City Council has financial accountability over the operations of the District. The following information is relative only to the District as a component unit, which is an integral part of the total reporting entity.
The District reports the following governmental funds:
The Fire Protection District Special Revenue Fund accounts for the cost of fire suppression, emergency medical, fire prevention and education services incurred by the District within the City’s Sphere of Influence.
The Fire Protection District CFD Special Revenue Fund accounts for the special taxes levied on property developed after January 2, 2001 to finance fire protection and suppression services within the Community Facilities District.
The Fire Protection District Capital Project Fund accounts for the money expended on capital improvements and equipment replacement for the District.
a. Cash and investments
As of June 30, 2022, the District reported $46,935,406 as cash and investments.
The District’s funds are pooled with the City of Fontana’s cash and investments in order to generate optimum interest income. Each fund’s share of the pooled cash account is separately accounted for, and investment income is allocated to all participating funds based on the relationship of their average daily cash balances to the total of the pooled cash and investments. Information regarding the authorized types of deposits and investments, the type of risks (i.e. credit, interest rate, custodial, etc.) and other disclosures associated with the City’s pooled cash and investment is included in Note 3.
80 CITY OF FONTANA
Notes to the Financial Statements
b. Capital Assets
An analysis of capital assets as of June 30, 2022, follows:
Depreciation expense was charged to functions/programs of the primary government as follows:
Governmental Activities:
Public safety – fire protection $ 1,293,258
c. Long-Term Debt
The District does not have any outstanding debt as of June 30, 2022.
Balance Balance
June 30, 2021 Increases Decreases June 30, 2022
Capital assets, not being depreciated
1,122,000$ -$ -$ 1,122,000$ 1,122,000 - - 1,122,000 Capital assets, being depreciated
16,404,903 8,500 - 16,413,403 2,265,956 274,253 - 2,540,209 Vehicles 11,782,729 557,393 - 12,340,122 Infrastructure 1,012,418 - - 1,012,418 31,466,006 840,146 - 32,306,152 Less accumulated depreciation for:
(4,223,814) (468,507) - (4,692,321) (1,181,102) (221,050) - (1,402,152) (7,340,256) (569,878) - (7,910,134) (238,782) (33,823) - (272,605) (12,983,954) (1,293,258) - (14,277,212) 18,482,052 (453,112) - 18,028,940 19,604,052$ (453,112) $ - $ 19,150,940 $ Total Capital assets, net Buildings and improvements
Machinery and equipment
Vehicles
Infrastructure
Total capital assets, being depreciated, net
Land
Total capital assets, not being depreciated
Buildings and improvements
Machinery and equipment
81 CITY OF FONTANA
Notes to the Financial Statements
d. Fund Balance
The district reports fund balances in accordance with the classifications consistent with the City, see Note 15 for more information on the types and descriptions of the fund balance classifications. The details of the fund balances as of June 30, 2022 are presented below:
e. Fire Protection Services Agreement
The District entered into a fire protection services agreement with the San Bernardino County Fire Protection District (County) effective July 1, 2018 for a period of twenty (20) years. The agreement calls for the County to provide to the District fire prevention, fire investigation, fire suppression, advance life support services, ambulance transportation service, hazardous materials, and rescue services.
The District paid $37,436,425 to the County for these services during the fiscal year ending June 30, 2022. The County also provides various administrative duties including billing and collecting of advanced life support and ambulance transportation fees for the District.
The District leased its real property, furniture and fixtures, and fire apparatus and equipment to the County for one dollar for the life of the contract. The agreement calls for the County to maintain insurance for workers compensation, comprehensive general and automobile.
The details of the contract expenses for the fiscal year ending June 30, 2022 are as follows:
Fire Fire Fire
Protection Protection Protection
District District CFD District Totals
Fund balances:
Restricted
Public safety 38,463,783$ 4,328,880$ -$ 42,792,663$ Assigned
Equipment replacement - - 24,808,764 24,808,764 Total fund balances 38,463,783$ 4,328,880$ 24,808,764$ 67,601,427$ Special Revenue Capital Project
Salaries and benefits 30,695,113$
Services and supplies 3,508,675
Station expenses 1,280,860
Fire Prevention services 329,827
County contract management fee 1,622,250
Total contract expenses 37,436,725$
82 CITY OF FONTANA
Notes to the Financial Statements
Note 17. Successor Agency Trust for Assets of Former Redevelopment Agency
On December 29, 2011, the California Supreme Court upheld Assembly Bill 1X 26 (“the Bill”) that provided for the dissolution of all redevelopment agencies in the State of California. This action impacted the reporting entity of the City of Fontana that previously had reported a redevelopment agency within the reporting entity of the City as a blended component unit. In accordance with the timeline set forth in the Bill (as modified by the California Supreme Court on December 29, 2011) all redevelopment agencies in the State of California were dissolved and ceased to operate as a legal entity as of February 1, 2012.
The Bill provides that upon dissolution of a redevelopment agency, either the city or another unit of local government will agree to serve as the “successor agency” to hold the assets until they are distributed to other units of state and local government. On January 10, 2012, the City Council elected to become the Successor Agency for the former redevelopment agency in accordance with the Bill as part of City resolution number 2012- 001.
After enactment of the law, which occurred on June 28, 2011, redevelopment agencies in the State of California cannot enter into new projects, obligations or commitments. Subject to the control of a newly established oversight board, remaining assets can only be used to pay enforceable obligations in existence at the date of dissolution (including the completion of any unfinished projects that were subject to legally enforceable contractual commitments).
In future fiscal years, successor agencies will only be allocated revenue in the amount that is necessary to pay the estimated annual installment payments on enforceable obligations of the former redevelopment agency until all enforceable obligations of the prior redevelopment agency have been paid in full and all assets have been liquidated.
The Bill directs the State Controller of the State of California to review the propriety of any transfers of assets between redevelopment agencies and other public bodies that occurred after January 1, 2011. If the public body that received such transfers is not contractually committed to a third party for the expenditure or encumbrance of those assets, the State Controller is required to order the available assets to be transferred to the public body designated as the successor agency by the Bill. This review was completed October 2014 and identified $7,124,646 in unallowable transfers. The City has contended all unallowable transfers however the State Controller upholds its initial finding and has instructed the City to return the assets to the Successor Agency in a timely manner. As of June 30, 2022, the assets have not yet been returned to the State Controller.
Management believes, in consultation with legal counsel, that the obligations of the former redevelopment agency due to the City are valid enforceable obligations payable by the successor agency trust under the requirements of the Bill. The City’s position on this issue is not a position of settled law and there is considerable legal uncertainty regarding this issue. It is reasonably possible that a legal determination may be made at a later date by an appropriate judicial authority that would resolve this issue unfavorably to the City.
As of June 30, 2022, there is one obligation that has been denied by the State Department of Finance that is currently being contested through the California court system. The Jurupa Hills Owner Participation Agreement (OPA) has been disallowed due to insufficient documentation to support the outstanding obligation, inability to ever repay the entire debt and the opinion that the agreement appears contrary to public policy. In July 2016, the Courts ruled in favor of the Successor Agency; the State Department of Finance has filed an appeal to the ruling. 83 CITY OF FONTANA
Notes to the Financial Statements
After the date of dissolution, the assets and activities of the dissolved redevelopment agency are reported in a fiduciary fund (private-purpose trust fund) in the financial statements of the City.
a. Cash and investments
Cash and investments reported in the accompanying financial statements consisted of the following:
b. Loans Receivable
Loans receivable reported in the accompanying financial statements consist of the following:
1. A loan was issued for the Oleander Storm Drain on March 2003 in the amount of $850,429. The balance of the loan at June 30, 2022 was $850,429. The purpose of the loan was to assist the developer with infrastructure improvements. There is no set repayment schedule for this loan.
2. A loan was issued for the Chaffey College in February 2005 in the amount of $4,000,000. The balance of the loan at June 30, 2022 was $1,620,000. The purpose of the loan was to assist with the costs of expanding the campus located within the City of Fontana. This loan is scheduled to be repaid over a term of 30 years.
3. Various loans were issued for the San Gabriel Valley Water Company in 1988-1989 in the amount of $330,756. The balance at the loan at June 30, 2022 was $67,483. The loan represents the reimbursement of costs incurred by the Agency for construction of water infrastructure. This loan is scheduled to be repaid over a forty-year period.
Cash and investments pooled with the City 509,841 $
Cash and investments with fiscal agent 19,022,971
19,532,812$
84 CITY OF FONTANA
Notes to the Financial Statements
c. Long-Term Debt
A description of long-term debt outstanding (excluding defeased debt) of the Successor Agency as of June 30, 2022, follows:
Tax Allocation Bonds
The Former Fontana Redevelopment Agency has issued the following Tax Allocation Bonds which are special obligations of the Successor Agency secured by pledged property tax revenues. The bonds are not a debt of the City and are not payable out of any funds or properties other than those of the Successor Agency.
2017 Tax Allocation Refunding Bonds
$208,125,000 of 2017 Tax Allocation Refunding Bonds were issued in November 2017 . The bonds pay interest semi-annually at rates ranging from 1.50% to 3.00% and mature from October 2018 to October 2036. The proceeds were used to refinance various tax allocation bonds previously issued by the Former Redevelopment Agency of the City of Fontana.
Amounts Amounts
Balance Balance Due Within Due in More
Fiduciary Activities: June 30, 2021 Additions Retirements June 30, 2022 One Year Than One Year Tax Allocation Bonds and Notes:
2017 Tax Allocation Refunding Bonds 172,540,000$ $ - 11,300,000$ 161,240,000$ 11,240,000$ 150,000,000$ 2018 Tax Allocation Refunding Bonds 25,710,000 - 3,160,000 22,550,000 3,315,000 19,235,000 Other Redevelopment Agency:
Advances from City 29,514,822 - 1,230,775 28,284,047 1,389,833 26,894,214 Owner participation agreements 206,957,226 423,148 - 207,380,374 - 207,380,374 Total Redevelopment Agency 434,722,048$ 423,148$ 15,690,775$ 419,454,421$ 15,944,833$ 403,509,588$ Unamortized bond premium 31,126,203 31,126,203
450,580,624$ 434,635,791 $
Principal Interest Total
2023 11,240,000 $ 7,533,525 $ 18,773,525 $ 2024 11,770,000 6,979,725 18,749,725 2025 12,275,000 6,399,006 18,674,006 2026 12,755,000 5,793,138 18,548,138 2027 13,380,000 5,158,500 18,538,500 2028-2032 72,345,000 14,721,525 87,066,525 2033-2037 27,475,000 2,291,800 29,766,800 Totals 161,240,000 $ 48,877,219 $ 210,117,219 $ 2017 Tax Allocation Refunding Bonds
85 CITY OF FONTANA
Notes to the Financial Statements
2018 Tax Allocation Refunding Bonds
$31,580,000 of 2018 Tax Allocation Refunding Bonds were issued in July 2018. The bonds mature October 1, 2027, with an interest yield of 5.00 percent. The proceeds from the bonds will be used to refinance various tax allocation bonds previously issued by the Former Redevelopment Agency of the City of Fontana for the Jurupa Hills Project Area. The refinancing resulted in a difference between the reacquisition price and the net carrying amount of the old debt of $13.6 million.
The details of those issues are as follows:
The Successor Agency completed the refinancing to reduce its total debt service payments over the next 10 years by $14.0 million and to obtain an economic gain (difference between the present value of the old and new debt service payments of $6.5 million.
Long-Term Payables to the City of Fontana
The advances between the City and the Former Redevelopment Agency include the following:
1. A loan between the Agency and the City which resulted from the amendment to the 1991 Junior Lien Tax Allocation Bonds.
2. Advances between the City and the Agency for administrative and other costs.
Principal Interest Total
2023 3,315,000 $ 1,044,625 $ 4,359,625 $ 2024 3,480,000 874,750 4,354,750 2025 3,655,000 696,375 4,351,375 2026 3,840,000 509,000 4,349,000 2027 4,030,000 312,250 4,342,250 2028 4,230,000 105,750 4,335,750 Totals 22,550,000 $ 3,542,750 $ 26,092,750 $ 2018 Tax Allocation Refunding Bonds
38,800,000$ 1997 Series A Tax Allocation Bonds (Jurupa Hills) 6,375,000 1999 Series A Tax Allocation Bonds (Jurupa Hills) 45,175,000$
86 CITY OF FONTANA
Notes to the Financial Statements
Payable Under Jurupa Hills Owner Participation Agreement
The Agency has entered into an owner participation agreement (OPA) with Ten-Ninety, Ltd., a private land development partnership (the Participating Owner), relating to the Jurupa Hills Project Area. The OPA requires, among other things, the reimbursement by the Agency to the Participating Owner of costs incurred for certain infrastructure and other improvements. Costs advanced, which accrue interest at 15.5%, are reimbursed from, and limited to: (i) the tax increment revenue generated in the Southridge Village portion of the Jurupa Hills Project Area and (ii) certain fees and assessments collected from benefited property owners.
In January 1992, the City, Agency and Participating Owner entered into two agreements in further implementation of the development of Southridge Village; a Facilitation Agreement and an Amendment No. 3 to OPA and Composite OPA. On March 31, 1992, a judgment was entered by the San Bernardino County Superior Court validating the provisions of these two agreements and declaring them to be legally binding upon the parties.
The Facilitation Agreement provides for specific allocations of costs and responsibilities between the City and Participating Owner with respect to certain public works items and for the discharge of the Participating Owner’s obligations and responsibilities with respect to the infrastructure items for Phase I, II and III of Southridge Village.
Amendment No. 3 to OPA includes acknowledgment that the Participating Owner has completed its infrastructure obligations relating to the development of Southridge Village and provides for certain payments by the Participating Owner to the Agency and City, in order to mitigate certain negative fiscal impacts imposed by the development and continued existence of Southridge Village. As described in the agreements, the payments to the City and Agency will be in amounts equal to 35% of the residual tax increments and 50% of the assessments and other reimbursements to be paid to the Participating Owner as reimbursement for public infrastructure improvements installed by the Participating Owner.
The balance at June 30, 2022 does not include $767,554,448 of accumulated unpaid interest that is subject to the same limitations of reimbursement from tax increment revenue, fees and assessments as is the case for costs of construction advanced. The total reimbursement costs of the project are $206,342,956. This obligation has been disallowed by the State Department of Finance due to insufficient documentation to support the outstanding obligation, inability to ever repay the entire debt and the opinion that the agreement appears contrary to public policy.
This determination is currently being challenged in the California court system by the Successor Agency. A hearing was held in July 2016, in which the courts ruled in favor of the Successor Agency.
Pledged Revenue
The Successor Agency pledged, as security for bonds issued, either directly or through the Financing Authority, a portion of tax increment revenue (including Low and Moderate Income Housing set-aside and pass through allocations) that it receives. The bonds issued were to provide financing for various capital projects, accomplish Low and Moderate Income Housing projects and to defease previously issued bonds. Assembly Bill 1X 26 provided that upon dissolution of the Redevelopment Agency, property taxes allocated to redevelopment agencies no longer are deemed tax increment but rather property tax revenues and will be allocated first to successor agencies to make payments on the indebtedness incurred by the dissolved redevelopment agency. Total principal and interest remaining on the debt is $283,116,777 with annual debt service requirements as indicated above. For the current year, the total property tax revenue recognized by the Successor Agency for the payment of indebtedness incurred by the dissolved redevelopment agency was $35,445,029 and the debt service obligation on the bonds was $28,021,777. 87 CITY OF FONTANA
Notes to the Financial Statements
d. Insurance
The Successor Agency is covered under the City of Fontana’s insurance policies. Therefore, the limitation and self-insured retentions applicable to the City also apply to the Successor Agency. Additional information as to coverage and self-insured retentions can be found in Note 8.
e. Commitments and Contingencies
At June 30, 2022, the Successor Agency was involved as a defendant in several lawsuits arising out of the ordinary conduct of its affairs. It is the opinion of management that settlements of these lawsuits, including losses for claims that are incurred but not reported, if any, will not have a material effect on the financial position of the Successor Agency.
Note 18. Tax Abatement
The City occasionally enters into Operating Covenant Agreements (OCA) with local businesses as a mechanism to promote economic development in the City, retain business and create jobs. The City currently has one OCA in which the City is granting a portion of sales tax revenues generated back to the retailer as an incentive to continue operating their business in the City.
The OCA was entered into in December 2015 and has an initial term of 20 years. The City has agreed to share (50%-50%) the sales tax generated each quarter that exceeds the agreed upon base amount.
Note 19. Prior Period Adjustment
During the year ended June 30, 2022, the City made prior period adjustments as follows:
Governmental Housing Capital Other
Activities Authority Reinvestment Governmental
Net position at July 1, 2021, as previously reported 985,584,603 $ 87,708,994 $ 19,823,764 $ 196,624,004 $ Prior period adjustments:
To correct prior year unavailable revenue (678,959) (678,959) - - To correct loan receivable balance 71,128 - 71,128 - To establish the TDA fund (9,198) - - (9,198) Net position at July 1, 2021, as restated 984,967,574 $ 87,030,035 $ 19,894,892 $ 196,614,806 $ 88 Measurement Period 2021 2020 2019 2018 2017 2016 2015 2014
TOTAL PENSION LIABILITY
Service Cost 6,559,973 $ 6,574,765 $ 6,391,012 $ 6,252,517 $ 6,181,410 $ 5,464,647 $ 5,255,619 $ 5,261,265 $ Interest 21,409,558 20,347,932 18,942,663 17,568,272 16,583,112 15,674,983 14,718,880 13,833,230 Changes of Benefit Terms - - - - - - - - Difference between Expected and Actual Experience 1,072,506 6,367,568 6,274,697 1,250,890 (544,846) 773,988 463,048 - Changes of Assumptions - - - (445,464) 15,075,525 - (3,940,129) - Benefit Payments, Including Refunds of Employee Contributions (13,563,503) (12,716,297) (11,561,706) (10,323,275) (9,330,793) (8,666,808) (8,043,006) (7,265,033) Net Change in Total Pension Liability 15,478,534 20,573,968 20,046,666 14,302,940 27,964,408 13,246,810 8,454,412 11,829,462 Total Pension Liability – Beginning 301,863,631 281,289,663 261,242,997 246,940,057 218,975,649 205,728,839 197,274,427 185,444,965 Total Pension Liability – Ending (a) 317,342,165 $ 301,863,631 $ 281,289,663 $ 261,242,997 $ 246,940,057 $ 218,975,649 $ 205,728,839 $ 197,274,427 $
PLAN FIDUCIARY NET POSITION
Contributions – Employer 11,820,068 10,500,692 9,196,355 8,215,736 7,706,792 6,985,270 6,756,772 6,213,039 Contributions – Employee 2,877,842 2,720,062 2,639,928 2,577,060 2,509,352 2,505,888 2,177,122 1,764,545 Net Investment Income 43,154,767 8,990,686 11,157,517 13,214,512 15,449,532 710,225 2,956,715 19,674,310 Benefit Payments, Including Refunds of Employee Contributions (13,563,503) (12,716,297) (11,561,706) (10,323,275) (9,330,793) (8,666,808) (8,043,006) (7,265,033) Other Changes in Net Fiduciary Position (187,346) (251,361) (118,778) (696,076) (203,553) (83,139) (153,538) - Net Change in Fiduciary Net Position 44,101,828 9,243,782 11,313,316 12,987,957 16,131,330 1,451,436 3,694,065 20,386,861 Plan Fiduciary Net Position – Beginning 187,544,710 178,300,928 166,987,612 153,999,655 137,868,325 136,416,889 132,722,824 112,335,963 Plan Fiduciary Net Position – Ending (b) 231,646,538 187,544,710 178,300,928 166,987,612 153,999,655 137,868,325 136,416,889 132,722,824 Plan Net Pension Liability – Ending (a) - (b) 85,695,627 $ 114,318,921 $ 102,988,735 $ 94,255,385 $ 92,940,402 $ 81,107,324 $ 69,311,950 $ 64,551,603 $ Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 73.00% 62.13% 63.39% 63.92% 62.36% 62.96% 66.31% 67.28% Covered Payroll 23,795,599 23,158,734 22,436,218 21,782,736 21,411,929 21,176,697 20,121,052 19,360,681 Plan Net Pension Liability as a Percentage of Covered Payroll 360.13% 493.63% 459.03% 432.71% 434.06% 383.00% 344.47% 333.42% Notes to Schedule:
GASB 68 was implemented in FY 2014-15, therefore only eight years of information is being presented.
CITY OF FONTANA
Changes of Assumptions: In 2019, 2020 and 2021, there were no changes. In 2018, demographic assumptions and inflation rate were changed in accordance with the CalPERS Experience Study and Review of Actuarial Assumptions December 2017. There were no changes to the discount rate. In 2017, the accounting discount rate reduced from 7.65 percent to 7.15 percent. In 2016, there were no changes. In 2015, amounts reported reflect an adjustment of the discount rate from 7.5 percent (net of administrative expense) to 7.65 percent (without a reduction for pension plan administrative expense.) In 2014, amounts reported were based on the 7.5 percent discount rate.
Safety Plan
Schedule of Changes in Net Pension Liability and Related Ratios During the Measurement Period Benefit Changes: The figures above generally include any liability impact that may have resulted from voluntary benefit changes that occurred on or before the Measurement Date. However, offers of Two Years Additional Service Credit (a.k.a. Golden Handshakes) that occurred after the Valuation Date are not included in the figures above, unless the liability impact is deemed to be material by the plan actuary. 89 Measurement Period 2021 2020 2019 2018 2017 2016 2015 2014
TOTAL PENSION LIABILITY
Service Cost 4,943,305 $ 5,099,318 $ 5,057,352 $ 4,814,030 $ 4,788,249 $ 4,194,877 $ 4,254,965 $ 4,004,767 $ Interest 16,462,337 15,725,500 14,869,142 13,725,324 13,067,481 12,382,291 11,767,900 11,147,316 Changes of Benefit Terms - - - - - - - - Difference between Expected and Actual Experience (800,611) 629,230 5,210,993 (556,946) (1,186,594) (1,811,514) (1,027,499) - Changes of Assumptions - - - (972,809) 11,708,939 - (3,097,256) - Benefit Payments, Including Refunds of Employee Contributions (10,157,377) (9,124,186) (8,075,186) (7,673,900) (6,602,614) (6,385,882) (5,914,227) (5,994,855) Net Change in Total Pension Liability 10,447,654 12,329,862 17,062,301 9,335,699 21,775,461 8,379,772 5,983,883 9,157,228 Total Pension Liability – Beginning 233,650,124 221,320,262 204,257,961 194,922,262 173,146,801 164,767,029 158,783,146 149,625,918 Total Pension Liability – Ending (a) 244,097,778 $ 233,650,124 $ 221,320,262 $ 204,257,961 $ 194,922,262 $ 173,146,801 $ 164,767,029 $ 158,783,146 $
PLAN FIDUCIARY NET POSITION
Net Plan to Plan Resource Movement - - - (354) 13,206 - - - Contributions – Employer 7,329,666 6,606,745 5,841,667 5,081,435 4,478,806 4,452,429 3,868,104 3,657,678 Contributions – Employee 2,383,713 2,313,683 2,369,932 2,238,093 2,148,688 2,157,198 2,068,784 2,016,250 Net Investment Income 38,806,647 8,280,112 10,133,426 12,059,314 14,325,541 622,155 2,781,662 18,466,862 Benefit Payments, Including Refunds of Employee Contributions (10,157,377) (9,124,186) (8,075,186) (7,673,900) (6,602,614) (6,385,882) (5,914,227) (5,994,855) Other Changes in Net Fiduciary Position (170,573) (229,660) (108,649) (640,045) (188,255) (77,240) (142,590) - Net Change in Fiduciary Net Position 38,192,076 7,846,694 10,161,190 11,064,543 14,175,372 768,660 2,661,733 18,145,935 Plan Fiduciary Net Position – Beginning 170,754,585 162,907,891 152,746,701 141,682,158 127,506,786 126,738,126 124,076,393 105,930,458 Plan Fiduciary Net Position – Ending (b) 208,946,661 170,754,585 162,907,891 152,746,701 141,682,158 127,506,786 126,738,126 124,076,393 Plan Net Pension Liability – Ending (a) - (b) 35,151,117 $ 62,895,539 $ 58,412,371 $ 51,511,260 $ 53,240,104 $ 45,640,015 $ 38,028,903 $ 34,706,753 $ Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 85.60% 73.08% 73.61% 74.78% 72.69% 73.64% 76.92% 78.14% Covered Payroll 32,584,261 31,712,176 30,080,386 29,204,258 28,947,762 28,347,600 28,221,562 25,050,147 Plan Net Pension Liability as a Percentage of Covered Payroll 107.88% 198.33% 194.19% 176.38% 183.92% 161.00% 134.75% 138.55% Notes to Schedule:
GASB 68 was implemented in FY 2014-15, therefore only eight years of information is being presented.
Changes of Assumptions: In 2019, 2020 and 2021, there were no changes. In 2018, demographic assumptions and inflation rate were changed in accordance with the CalPERS Experience Study and Review of Actuarial Assumptions December 2017. There were no changes to the discount rate. In 2017, the accounting discount rate reduced from 7.65 percent to 7.15 percent. In 2016, there were no changes. In 2015, amounts reported reflect an adjustment of the discount rate from 7.5 percent (net of administrative expense) to 7.65 percent (without a reduction for pension plan administrative expense.) In 2014, amounts reported were based on the 7.5 percent discount rate.
CITY OF FONTANA
Miscellaneous Plan
Schedule of Changes in Net Pension Liability and Related Ratios During the Measurement Period Benefit Changes: The figures above generally include any liability impact that may have resulted from voluntary benefit changes that occurred on or before the Measurement Date. However, offers of Two Years Additional Service Credit (a.k.a. Golden Handshakes) that occurred after the Valuation Date are not included in the figures above, unless the liability impact is deemed to be material by the plan actuary. 90 Fiscal Year 2021-22 2020-21 2019-20 2018-19 2017-18 2016-17 2015-16 2014-15 2013-14 Actuarially Determined Contribution $ 13,332,172 $ 11,820,068 $ 10,500,692 $ 9,196,355 $ 8,215,736 $ 7,706,792 $ 6,985,270 $ 6,756,772 $ 6,213,039 Contributions in Relation to the
Actuarially Determined Contribution (13,332,172) (11,820,068) (10,500,692) (9,132,884) (8,215,736) (7,706,792) (6,985,270) (6,756,772) (6,213,039) Contribution Deficiency (Excess) $ - $ - $ - $ - $ - $ - $ - $ - $ - Covered Payroll $ 24,976,011 $ 23,795,599 $ 23,158,734 $ 22,436,218 $ 21,782,736 $ 21,411,929 $ 21,176,697 $ 20,121,052 $ 19,360,681 Contributions as a Percentage of
Covered Payroll 53.38% 49.67% 45.34% 40.99% 37.72% 35.99% 32.99% 33.58% 32.09% Notes to Schedule:
Actuarial Cost Method Entry Age Normal
Amortization Method/Period For details, see June 30, 2018 Funding Valuation Report Asset Valuation Method Actuarial Value of Assets. For details, see June 30, 2018 Funding Valuation Report.
Inflation 2.50%
Salary Increases Varies by Entry Age and Service
Payroll Growth 2.75%
Investment Rate of Return 7.00% Net of Pension Plan Investment Expenses, including Inflation.
Retirement Age
Mortality
CITY OF FONTANA
Schedule of Plan Contributions
Safety Plan
The probabilities of mortality are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015. Pre- retirement and Post-retirement mortality rates include 15 years of projected mortality using 90% of Scale MP-2016 published by the Society of Actuaries.
The probabilities of Retirement are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015.
GASB 68 was implemented in FY 2014-15, therefore only the eight most recent years of information is being presented.
The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2021-22 were from the June 30, 2019 public agency valuations. 91 Fiscal Year 2021-22 2020-21 2019-20 2018-19 2017-18 2016-17 2015-16 2014-15 2013-14 Actuarially Determined Contribution $ 7,920,425 $ 7,329,666 $ 6,606,745 $ 5,841,667 $ 5,081,435 $ 4,478,806 $ 4,452,429 $ 3,868,104 $ 3,657,678 Contributions in Relation to the
Actuarially Determined Contribution (7,920,425) (7,329,666) (6,606,745) (5,841,667) (5,081,435) (4,478,806) (4,452,429) (3,868,104) (3,657,678) Contribution Deficiency (Excess) $ - $ - $ - $ - $ - $ - $ - $ - $ - Covered Payroll $ 31,672,556 $ 32,584,261 $ 31,712,176 $ 30,080,386 $ 29,204,258 $ 28,947,762 $ 28,347,600 $ 28,221,562 $ 25,050,147 Contributions as a Percentage of
Covered Payroll 25.01% 22.49% 20.83% 19.42% 17.40% 15.47% 15.71% 13.71% 14.60% Notes to Schedule:
Actuarial Cost Method
Amortization Method/Period For details, see June 30, 2018 Funding Valuation Report Asset Valuation Method Actuarial Value of Assets. For details, see June 30, 2018 Funding Valuation Report.
Inflation 2.50%
Salary Increases Varies by Entry Age and Service
Payroll Growth 2.75%
Investment Rate of Return 7.00% Net of Pension Plan Investment Expenses, including Inflation.
Retirement Age
Mortality
GASB 68 was implemented in FY 2014-15, therefore only the eight most recent years of information is being presented.
The probabilities of Retirement are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015.
The probabilities of mortality are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015. Pre-retirement and Post-retirement mortality rates include 15 years of projected mortality using 90% of Scale MP-2016 published by the Society of Actuaries.
Entry Age Normal
CITY OF FONTANA
Miscellaneous Plan
Schedule of Plan Contributions
The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2020-21 were from the June 30, 2020 public agency valuations. 92 Measurement Period 2021 2020 2019 2018 2017
TOTAL OPEB LIABILITY
Service cost 1,973,739 $ 1,406,780 $ 1,114,136 $ 1,109,799 $ 1,073,307 $ Interest on the total OPEB liability 1,909,977 2,328,825 2,442,178 2,377,354 2,345,864 Actual and expected experience difference (7,638,248) (3,610,614) (1,274,244) - - Changes in assumptions 4,351,220 7,714,949 (3,295,758) (1,014,856) - Changes in benefit terms - - - - - Benefit payments (3,114,653) (2,784,909) (2,653,423) (2,591,180) (2,467,790) Net change in total OPEB liability (2,517,965) 5,055,031 (3,667,111) (118,883) 951,381 Total OPEB liability - beginning 71,376,998 66,321,967 69,989,078 70,107,961 69,156,580 Total OPEB liability - ending (a) 68,859,033$ 71,376,998 $ 66,321,967 $ 69,989,078 $ 70,107,961 $ Covered-employee payroll 50,801,314$ 54,870,910 $ 52,516,604 $ 50,986,994 $ 50,359,691 $ Net OPEB liability as a percentage of covered-employee payroll 135.55% 130.08% 126.29% 137.27% 139.21% Notes to Schedule:
Historical information is required only for measurement periods for which GASB 75 is applicable.
Future years' information will be displayed up to 10 years as information becomes available.
CITY OF FONTANA
Schedule of Changes in Total OPEB Liability and Related Ratios for the Measurement Periods Ended June 30,
93 Non-Major Governmental Funds
Special Revenue Funds
Special Revenue funds are used to account for specific revenues that are legally restricted to expenditures for particular purposes.
Gas Tax - To account for receipts and expenditures of money apportioned by the State and Highway Code §'s 2103, 2105, 2106, 2107 and 2107.5. Gas Tax moneys can only be used to construct and maintain streets and highways.
Traffic Congestion Relief – To account for the receipt of voter-approved (Measure I) tax revenue relating to the relief of traffic congestion through maintenance and upkeep of streets and highways.
Traffic Safety - To account for fines collected on vehicle code infractions and the use of expenditures for traffic safety purposes.
Prop 1B – To account for the receipts and expenditures of money allocated by the Highway Safety, Traffic Reduction, Air Quality and Port Security Bond Act of 2006, Local Street and Roads Improvement Allocation. Prop 1B moneys can only be used on street improvement projects.
Municipal Services Fiscal Impact - To account for moneys paid by developers of new development projects to mitigate their negative impact on the City's services and General Fund.
Solid Waste Mitigation - To account for moneys paid by the County of San Bernardino to mitigate the use of city infrastructure for refuse disposed at the landfill just outside of city limits.
Road Maintenance and Rehabilitation – the account for receipts and expenditures of money apportioned by the State under the Road Repair and Accountability Act of 2017 for road maintenance and rehabilitation projects for cities and counties.
Home Program - To account for the activity of improving the supply of high-quality multifamily properties which are also available to low income households at affordable rent levels.
Crime Prevention Seizure - To account for the receipt of 1% of Federal seizures from illegal narcotic activities, and the expenditure of such assets to fund crime prevention programs such as DARE.
State Seizure - To account for the receipt of seized assets from illegal narcotic activities obtained through cooperation with State agencies and the expenditure of such assets for local law enforcement purposes .
Federal Seizure - To account for the receipt of seized assets from illegal narcotic activities obtained through cooperation with Federal agencies and the expenditure of such assets for local law enforcement purposes. 94 Non-Major Governmental Funds
Special Revenue Funds (continued)
Grants - To account for miscellaneous Federal, State and County grants requiring segregated fund accounting.
TDA/ Article 3 – To account for bicycle and pedestrian projects. SBCTA oversees the disbursement of 2% of the Local Transportation Funds (LTF) made available to counties and cities for facilities geared towards the exclusive used of pedestrians and bicyclists.
Housing and Community Development Block Grant - To account for the receipts and expenditures of the City's entitlements under Federal Community Development Block Grant (CDBG) programs of the US Department of Housing and Urban Development (HUD).
Federal Law Enforcement Block Grant - To account for Federal block grant funds used to enhance policing services.
AB 3229 State COPS Program - To account for State grant funds used to enhance policing services.
Office of Traffic Safety - To account for a State grant, matched with local funding, to augment abandoned vehicle towing.
Air Quality Management District - To account for receipts from the South Coast Air Quality Management District used for the purpose of reducing air pollution from motor vehicles.
Down Payment Assistance – To track receipts and expenditures for the HUD first time homebuyer assistance program.
Community Services Reimbursements - To account for after school programs funded through Proposition 49.
ASES ELO-P – To account for funding pertaining to afterschool and summer school enrichment programs for kindergarten (which may include transitional kindergarten) through sixth grade as described in California Education Code (EC) Section 46120.
Fontana Community Foundation- To account for costs associated with the Fontana Community Foundation, a separate legal entity governed by Section 501(c)(3) of the Internal Revenue Code of 1986 for the purpose of aiding and assisting in the implementation, improvement and maintenance of public services that preserve and promote the health and welfare and education of local citizenry of the City of Fontana.
Housing Authority AB 1486 – To account for receipts and expenditures of surplus land disposition proceeds as required for affordable housing under AB-1486.
Permanent Local Housing Allocation – To account for receipts and expenditures of the State Permanent Local Housing Allocation fund that must be used for housing-related projects and programs that assist unmet housing needs in the City.
Fire Protection District CFD- To account for special taxes levied on property developed after January 2, 2001 to finance fire protection and suppression services within the Community Facilities District.
Fire Protection District Grants - to account for Federal, State, and County grants requiring segregated fund accounting.
Landscape Maintenance Districts - To account for special benefit assessments levied on property owners for landscape maintenance in various zones throughout the City.
95 Non-Major Governmental Funds
Special Revenue Funds (continued)
Lighting District #3 - Hunter's Ridge - To account for special assessments imposed on property owners in the Hunter's Ridge area to pay for street lighting.
Community Facilities Districts - To account for special taxes levied on property owners in the development for landscape maintenance, parks and street lighting in the City’s numerous special assessments districts.
Debt Service Funds
Debt Service funds are used to account for the accumulation of resources and the payment of general obligation bond principal and interest from governmental resources, and special assessment bond principal and interest from special assessment levies, when the government is obligated in some manner for the payment.
General Debt Service – To account for debt service payments on general City obligations.
Capital Project Funds
The Capital Project funds are used to account for the acquisition and construction of major capital facilities other than those financed by proprietary funds.
Storm Drain - To account for receipts from drainage fees imposed on developers, for the construction of storm drainage facilities within the City limits.
San Sevaine Flood Control - To account for flood control fees collected for the construction of flood control improvements in the San Sevaine Area.
Upper Etiwanda Flood Control- To account for flood control fees collected for the construction of flood control improvements.
Park Development- To account for receipts and expenditures from park development fees for new parks and renovation of existing parks.
Landscape Improvements - To account for landscaping improvement fees used to improve landscaping Citywide.
Library Capital Improvement - To account for developer impact fees used for the construction of library facilities.
Police Facility- To account for development impact fees to fund capital improvements of police facilities and equipment.
Capital Improvements- To account for moneys expended on miscellaneous capital improvements.
96 Non-Major Governmental Funds
Capital Project Funds (continued)
General Government Improvement - To account for developer impact fees used for the capital construction of City facilities.
Underground Utilities - To account for developer fees used for offsetting the cost of relocating electrical and cable lines underground to enhance the appearance and the safety of the community.
Fire Assessment - To account for revenues from special tax assessments and for expenditures relating to fire prevention and protection.
Affordable Housing Trust - to account inclusionary housing and affordable housing developer impact fees to be used to construct, rehabilitate or subsidize affordable housing that complies with the Affordable Housing Trust Fund regulations.
Fire Protection District - To account for moneys expended on capital improvements and equipment replacement for the Fontana Fire Protection District.
Fontana Housing Authority- To account for costs associated with the Housing Authority, a separate legal entity governed by California State Housing Authority law. The Housing Authority uses funds from the Fontana Redevelopment Agency's Low and Moderate Income Housing Fund and Federal Department of Housing and Urban Development Program Grants to actively improve and develop quality neighborhoods and housing opportunities throughout the City of Fontana.
97 CITY OF FONTANA
Combining Balance Sheet
Non-Major Governmental Funds
June 30, 2022
Schedule 1