Fountain Valley City Council
October 1, 2024

55695.00001\33485367.1
12 to the Party whose termination is proposed at least thirty (30) days prior to the regular Board meeting at which such matter shall first be discussed as an agenda item. The written notice of proposed termination shall specify the particular provisions of this Agreement that the Party has allegedly violated with supporting documentation. The Party subject to possible termination shall have the opportunity at the next regular Board meeting following the expiration of the thirty-day (30) day notice period to respond to any reasons and allegations that may be cited as a basis for termination. The Party’s response shall be evaluated at a public meeting prior to a vote regarding termination. A Party that has had its membership in the Authority terminated may be subject to certain continuing liabilities, as described in subsection 6.3. If the Board votes to terminate a Party’s membership in the Authority, the effective date of the termination shall be scheduled by the Board, in its reasonable discretion, to ensure adequate time for the transition of the terminated Party’s CCA Program customers to another electricity provider. The Parties expressly intend, agree and acknowledge that a Board action to terminate a Party’s membership in the Authority shall be upheld so long as it is not arbitrary and capricious, and is supported by substantial evidence.

6.3 Continuing Liability; Refund. Upon a withdrawal of a Party under subsection 6.1.2 or involuntary termination of a Party under subsection 6.2, the Party shall be responsible for any claims, demands, damages, or liabilities attributable to the Party through the effective date of its withdrawal or involuntary termination. Such Party also shall be responsible liable to the Authority for (a) any damages, losses, or costs incurred by the Authority which result directly from the Party’s withdrawal or termination, including, but not limited to, costs arising from the resale of capacity, electricity, or any attribute thereof no longer needed to serve such Party’s load, and removal of customers from the CCA Program resulting from the withdrawal or termination of the Party; and (b) any costs or obligations associated with the Party’s participation in any program in accordance with the program’s terms, provided such costs or obligations were incurred prior to the withdrawal of the Party. Except as otherwise specified, such Party shall not be responsible for any claims, demands, damages, or liabilities commencing or arising after the effective date of the Party’s withdrawal or involuntary termination. From and after the date a Party provides notice of its withdrawal or is terminated, the Authority shall reasonably and in good faith seek to mitigate any costs and obligations to be incurred by the withdrawing or terminated Party under this subsection through measures reasonable under the circumstances; provided, however, that this obligation to mitigate does not impose any obligation on the Authority to transfer any cost or obligation directly attributable to the membership and withdrawal or termination of the withdrawing or terminated Party to the ratepayers of the remaining Parties. Further the liability of the withdrawing or terminated Party shall be based on actual costs or damages incurred by the Authority and shall not include any penalties or punitive charges imposed by the Authority. The Authority may withhold funds otherwise owing to the Party or may require the Party to deposit sufficient funds with the Authority, as reasonably determined by the Authority, to cover the Party’s liability for the costs described above. The withdrawing or terminated Party agrees to pay any such deposit determined by the Authority in consultation with a third party audit firm. Any amount of the withdrawing or terminated Party’s funds held on deposit with the Authority above that which is required to pay any liabilities or obligations shall be returned to that Party. In the implementation of this subsection 6.3, the Parties intend, to the maximum extent possible, without compromising the viability of ongoing Authority operations, that any claims, demands, damages, or liabilities covered hereunder, be funded from the rates paid by CCA Program customers located within the

55695.00001\33485367.1
13 service territory of the withdrawing Party, and not from the general fund of the withdrawing Party itself. The liability of a withdrawing Party under this subsection shall be only to the Authority and not to any other Party.

6.4 Termination of Agreement. This Agreement may be terminated by vote of the Board in accordance with subsection 3.9.4.1, or by mutual agreement of all the Parties approved by majority votes of their respective governing bodies. provided, however, that this subsection shall not be construed as limiting the rights of a Party to withdraw in accordance with Section 6.

6.5 Disposition of Authority Assets Upon Termination of Agreement. Upon termination of this Agreement, any surplus money or assets in possession of the Authority for use under this Agreement, after payment of all liabilities, costs, expenses, and charges incurred by the Authority, shall be returned to the then-existing Parties in proportion to the contributions made by each.

SECTION 7: MISCELLANEOUS PROVISIONS

7.1 Dispute Resolution. The Parties and Authority shall make efforts to settle all disputes arising out of or in connection with this Agreement. Before exercising any remedy provided by law, a Party or Parties and the Authority shall engage in nonbinding mediation in the manner agreed to by the Party or Parties and the Authority. In the event that nonbinding mediation does not resolve a dispute within one hundred twenty (120) days after the demand for mediation is made, any Party or the Authority may pursue any all remedies provided by law.

7.2 Liability of Directors, Officers, and Employees. The Directors, officers, and employees of the Authority shall use ordinary care and reasonable diligence in the exercise of their powers and in the performance of their duties pursuant to this Agreement. No current or former Director, officer, or employee will be responsible for any act or omission by another Director, officer, or employee. The Authority shall defend, indemnify, and hold harmless the individual current and former Directors, officers, and employees for any acts or omissions in the scope of their employment or duties in the manner provided by California Government Code § 995 et seq.

Nothing in this subsection shall be construed to limit the defenses available under the law to the Parties, the Authority, or its Directors, officers, or employees.

7.3 Indemnification. The Authority shall acquire such insurance coverage as the Board deems necessary to protect the interests of the Authority, the Parties, and the Authority’s ratepayers. The Authority shall indemnify, defend, and hold harmless the Parties and each of their respective board members or council members, officers, agents, and employees, from any and all claims, losses, damages, costs, injuries, and liabilities of every kind to the extent arising directly or indirectly from the conduct, activities, operations, acts, and omissions of the Authority under this Agreement.

7.4 Assignment. The rights and duties of a Party may not be assigned or delegated without the advance written consent of all other Parties. Any attempt to assign or delegate such rights or duties without express written consent of all other Parties shall be null and void. This Agreement shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Parties. This subsection does not prohibit a Party from entering into an independent agreement

55695.00001\33485367.1
14 with another entity regarding the financing of that Party’s contributions to the Authority (if any), or the disposition of proceeds which that Party receives under this Agreement, so long as such independent agreement does not affect, or purport to affect, the rights and duties of the Authority or the Parties under this Agreement.

7.5 Severability. If any part of this Agreement is held, determined, or adjudicated to be illegal, void, or unenforceable by a court of competent jurisdiction, the remainder of this Agreement shall be given effect to the fullest extent reasonably possible.

7.6 Further Assurances. Each Party agrees to execute and deliver all further instruments and documents, and take any further action that may be reasonably necessary to effectuate the purposes of this Agreement.

7.7 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute but one and the same instrument.

7.8 Notices. Any notice authorized or required to be given pursuant to this Agreement shall be validly given if served in writing either personally, by deposit in the United States mail, first class postage prepaid with return receipt requested, or by a recognized courier service to the addresses specified on Exhibit A. Notices given (a) personally or by courier service shall be conclusively deemed received at the time of delivery and receipt and (b) by mail shall be conclusively deemed given 48 hours after the deposit thereof (excluding Saturdays, Sundays and holidays) if the sender receives the return receipt. All notices shall be addressed to the office of the clerk or secretary of the Authority or Party, as the case may be, or such other person designated in writing by the Authority or Party. Notices given to one Party shall be copied to all other Parties.

Notices given to the Authority shall be copied to all Parties. [Signature to Follow on Next Page]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as evidenced by the signatures below
MEMBER AGENCY:

CITY OF IRVINE
By: Itto,riamlut kartistuv4i..

Name: Marianna Marysheva
Title:Interim City Manager
11/20/2020 Dated: , 2020
Approved as to Form:
,may Attaikl
City Attorney
Approved as to Form:
baron.

Special Counsel

CITY OF FULLERTON
By:

Name:

Title:

Dated: , 2020
Approved as to Form:

City Attorney
CITY OT.B41 NA PARK
By:
ame: Aaron France
Title: Interim City Manager
Dated: December 15, 2020
Approved as to Form:

City Attorney
15 ATTEST:

ADRIA M. JIMENEZ, M

CITY CLERK
U 11
55695.0000103485367.1

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as evidenced by the signatures below
MEMBER AGENCY:

CITY OF IRVINE
By:

Name:

Title:

Dated: , 2020
Approved as to Form:

City Attorney
Approved as to Form:

Special Counsel
Name: ke.Ine,1-1.1 Omer
Title: C.,11. Wt 721
Dated: I , 2020
15 55695.00001 \33485367.1

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as evidenced by the signatures below
MEMBER AGENCY:

CITY OF IRVINE CITY OF HUNTINGTON BEACH
By:

Name:

Title:

Dated: , 2020
Approved as to Form:

City Attorney
Approved as to Form:

Special Counsel

CITY OF FULLERTON
By:

Name:

Title:

Dated: , 2020
Approved as to Form:

City Attorney
15 55695.00001\33485367.1
City Manager
Approves, as to Form
City Attorney

CITY OF LAKE FOREST

EXHIBIT A

LIST OF PARTIES
Founding Members:

City of Irvine City of Fullerton
1 Civic Center Plaza 303 W. Commonwealth Ave.

Irvine, CA 92606 Fullerton, CA 92832
City of Huntington Beach City of Buena Park
2000 Main Street 6650 Beach Blvd.

Huntington Beach, CA 92648 Buena Park, CA 90622
City of Lake Forest
25550 Commercentre Dr.

Suite 100
Lake Forest, CA 92630

EXHIBIT B

ANNUAL ENERGY USAGE BY JURISDICTION
2019
Annual
Load
GWh1
City of Buena Park2 450
City of Fullerton 676
City of Huntington Beach 1,046
City of Irvine 1,937
City of Lake Forest 459
Total 4,569

1. Annual energy usage is preliminary data and has not been validated by Southern California Edison (SCE) at the time of execution of the Agreement. This Exhibit will be updated without requiring an amendment of the Agreement upon SCE validation of the data.

2. City's 2019 annual load is an estimated value that may change pending preliminary and validated data from SCE.
55695.00001\33526896.1

EXHIBIT C

PARTY VOTING SHARES
Estimated
Voting
Share'
City of Buena Park 9.8%
City of Fullerton 14.8%
City of Huntington Beach 22.9%
City of Irvine 42.4%
City of Lake Forest 10.0%
Total 100.0%

1. Estimated Voting Share is based on Exhibit B (Annual Energy Usage by Jurisdiction). Annual energy usage is preliminary data and has not been validated by Southern California Edison (SCE) at the time of execution of the Agreement. This Exhibit will be updated without requiring an amendment of the Agreement upon SCE validation of the data. 55695.00001\33526896.1

DocuSign Envelope ID: E6953DE9-EDE5-471C-AC16-82834D472329

EXHIBIT D

FORM OF CAPITAL LOAN AGREEMENT

AGREEMENT BETWEEN THE CITY OF IRVINE AND THE ORANGE COUNTY

POWER AUTHORITY FOR THE ADVANCE OF FUNDS FOR IMPLEMENTATION

OF A COMMUNITY CHOICE ENERGY PROGRAM
This Agreement, effective ("Effective Date"), is by and between the CITY OF IRVINE, a municipal corporation and charter city ("City"), and the ORANGE COUNTY POWER AUTHORITY, a California joint powers authority ("Authority"), for the purpose of stating the terms for an advance of funds from the City to be repaid to City by the Authority as provided herein. City and Authority shall be referred to individually as a "Party" collectively as the "Parties."

RECITALS
A. On , the Authority was formed by participating Orange County cities, including the City, to administer a community choice aggregation ("CCA") program within the jurisdictional boundaries of its members in Orange County.

B. Prior to formation of the Authority, the City funded a feasibility study, peer review, and other activities necessary to evaluate the feasibility and implementation of a CCA program. The City also funded certain costs to form the Authority and implement the CCA program for itself and the Authority's founding members.

C. As expressly stated in that certain document entitled, Orange County Power Authority Joint Powers Agreement, at Section 5.5, which is incorporated herein by this reference, it was agreed upon by the parties thereto that the City would be reimbursed by the Authority for all costs regarding the feasibility and implementation of the CCA program, contingent upon the Authority's launch of the CCA program.

D. The City estimates that its costs to study, form and implement the Authority are $250,000, which include, but are not limited to, costs for its feasibility study, peer review, City staffing, legal costs, member and stakeholder outreach, and formation of the Authority ("Formation Costs").

E. The City estimates that the Authority will need approximately $2,500,000 for working capital to pay for implementation costs through a projected launch of the CCA program in 2022 ("Pre-Launch Costs").

F. The City further estimates that the Authority will need up to an additional $8,000,000 to $20,000,000 in the form of a credit facility for operational support and power procurement as well as other cash flow needs, and that any such credit facility may require cash collateral from an Authority member between $2,000,000 to $5,000,000 ("Launch Costs"). 19 55695.00001\33485367.1

DocuSign Envelope ID: E6953DE9-EDE5-471C-AC16-82834D472329 G. The Parties desire to enter into this Agreement to document the Authority's repayment obligations to the City for all such funds expended on behalf of, or in support of, the formation of the Authority and implementation of the CCA program.

AGREEMENT
NOW THEREFORE, in consideration of their mutual promises and obligations, the Parties hereby agree as follows:

1. City Loan to the Authority.

1.1. Formation Costs. The Authority acknowledges that the City has expended certain City funds toward Formation Costs and agrees to reimburse the City for such costs in an amount not to exceed $250,000 dollars, subject to the repayment provisions herein.

1.2. Pre-Launch Costs. The City agrees to loan the Authority Pre-Launch Costs in the amount of $2,500,000 by January 1, 2021, which shall be used by the Authority for working capital costs associated with the Authority's launch, anticipated in 2022.

1.3 Launch Costs. The City agrees to post the necessary cash collateral, not to exceed $5,000,000, in order for the Authority to secure a credit facility for its Launch Costs for additional working capital associated with power procurement and operational support ("Credit Agreement"). The City will also provide a loan for Launch Costs if needed by the Authority should a Credit Agreement be unavailable or insufficient to cover the Authority's working capital needs. The terms and conditions of any City loan to the Authority for Launch Costs (excluding the cash collateral requirement above) shall be negotiated and agreed upon in an amendment to this Agreement, subject to the reasonable approval of the Parties. The Authority shall provide the City with the Authority's pro forma demonstrating the amount needed for the aforementioned City loan.

1.4. City Loan Amount. Formation Costs, Pre-Launch Costs, and Launch Costs shall be collectively referred to herein as "City Loan Amount."

2. Repayment; Interest.

2.1 Repayment Date. The Authority shall repay the City Loan Amount to City, plus interest, no later than the repayment date, which shall be January 1, 2027. The Parties acknowledge that they may modify the Repayment Date for the Launch Costs in an amendment to this Agreement depending on the terms and conditions of the Credit Agreement.

2.2 Interest Rate. In accordance with subsection 2.3, interest shall be paid on all outstanding portions of the City Loan Amount that bear interest. The interest rate on any outstanding amount shall be calculated according to the sum of the following calculation of each respective quarter:
20 55695.00001133485367.1

DocuSign Envelope ID: E6953DE9-EDE5-471C-AC16-82834D472329 Principal x Quarterly Interest Rate x (No. of Days in Quarter/No. of Days in Year)
Where "Principal" is the relevant funding of the City Loan Amount as described herein; "Quarterly Interest Rate" is the gross earnings for the respective quarter as reported in the City of Irvine Treasurer's monthly investment report found on the Treasurer's website https://www.cityofirvine.org/administrative-services-department/investment-policies-and-reports "No. of Days in Quarter" is the sum of days of each month that make up each respective quarter; and "No. of Days in Year" is 365, except in leap years, in which the number of days in the year shall be 366.

The City Loan Amount shall bear interest as follows:
a. Formation Costs shall bear no interest whatsoever and shall be repaid to City as reimbursement for out-of-pocket expenses by the Repayment Date. b. Pre-Launch Costs shall bear interest beginning January 1, 2021 through the Repayment Date as estimated and set forth on Exhibit A, attached hereto. c. Launch Costs for the City's collateral associated with the Credit Agreement shall bear interest beginning on the effective date of the Credit Agreement. Launch Costs for amendment to this Agreement, as set forth in subsection 1.3, through the Repayment Date.

In the event the City Loan Amount, along with any and all interest owed pursuant to this Section 2, are not repaid by the Repayment Date, any such amounts that remain outstanding shall accrue interest at the rate specified by law for prejudgment interest.

3. City Liability; Hold Harmless; Indemnification.

3.1 City Liability. The Authority acknowledges and agrees that by lending said funds to the Authority, the City does not assume any debt, liability, obligation, or duty whatsoever with respect to the Authority's operations, liabilities, business, or transactions.

3.2. Hold Harmless/Indemnification. The Authority shall hold harmless, indemnify and defend the City, its elected officials, officers, employees, and agents from and against any and all claims, suits or actions of every kind which arise out of the performance or nonperformance of the Authority's covenants, responsibilities, and obligations under this Agreement, and which result from the negligent or wrongful acts of the Authority or its board members, officers, employees, or agents. City shall hold harmless, indemnify and defend the Authority, its board members, officers, employees and agents from and against any and all claims, suits or actions of any kind which arise out of the performance or non-performance of the City's covenants, responsibilities and obligations under this Agreement and which result from the negligent or wrongful acts of the City or its elected officials, officers, employees or agents.

In the event of concurrent negligence of the City, its officer or employees, and the Authority, its officers and employees, the liability for any and all claims for injuries or damages to persons 21 55695.00001 \ 33485367.1

DocuSign Envelope ID: E6953DE9-EDE5-471C-AC16-82834D472329 and/or property or any other loss or costs which arise out of the terms, conditions, covenants or responsibilities of this Agreement shall be apportioned according to the California theory of comparative negligence.

4. General Provisions.

4.1. Audit. Prior to January 1, 2023, the City may audit the Authority's expenditure of Pre-Launch Costs to confirm that such expenditures have been made consistent with the purposes of this Agreement.

4.2 Waiver. The waiver by City or Authority of any term, covenant, or condition herein contained shall not be deemed to a waiver of such term, covenant, or condition or any subsequent breach of the same or any other term, covenant, or condition herein contained.

4.2. Successors and Assigns/Assignment. The terms of this Agreement shall apply and bind the heirs, successors, executors, administrators and assigns of the Parties. No Party may assign this Agreement without the express written consent of the other Party, which shall not be unreasonably withheld.

4.3. Entirety/Amendment. This Agreement contains the entire understanding between the Parties relating to the obligations of the Parties described herein. No provision of this Agreement may be amended or added to except by an agreement in writing signed by the Parties or their respective successors in interest. This Agreement shall not be effective or binding until fully executed by both Parties.

4.4. Venue & Choice of Law. This Agreement shall be governed by and construed under the laws of the State of California. In the event of any legal action to enforce or interpret this Agreement, the sole and exclusive venue shall be a court of competent jurisdiction located in Orange County, California.

4.5. Independent Entities. This Agreement is by and between two independent entities and is not intended to and shall not be construed to create the relationship of agent, servant, employee, partnership, joint venture, joint employer, or association.

4.6. Authority to Execute Agreement. The Parties each warrant that they have the authority to execute this Agreement and that all actions have occurred, and all necessary approvals or consents have been obtained to allow each party to enter into this Agreement.

4.7. Notices. All notices provided for herein shall be in writing and shall be delivered to the appropriate parties as provided below:

For City: Attn: City Manager
City of Irvine
1 Civic Center Plaza
Irvine, CA 92606
22 55695.00001133485367.1

DocuSign Envelope ID: E6953DE9-EDE5-471C-AC16-82834D472329 For Authority: TBD
23 55695.00001'33485367.1

DocuSign Envelope ID: E6953DE9-EDE5-471C-AC16-82834D472329 IN WITNESS WHEREOF, Authority and City have executed this Agreement on the date set forth below.

CITY OF IRVINE
Date:
11/20/2020
By: at44114jitjA4 4144114"."
Title: Interim City Manager
Approved as to Form:

Yffrui Attitiut4
City Attorney

ORANGE COUNTY POWER AUTHORITY
Date:

By:

Title:

Approved as to Form:

General Counsel
24 55695.00001133485367.1

DocuSign Envelope ID: E6953DE9-EDE5-471C-AC16-82834D472329

EXHIBIT A

PRE-LAUNCH COSTS INTEREST SCHEDULE
Loan Borrower Orange County Power Authority
Loan Amount/Pre-Launch $2,500,000
Loan Start Date 1/1/2021
Loan Maturity Date 1/1/2027
Estimated Interest Rate 1.75% See Note on Interest Rate Period Interest Cumulative Interest
3/31/2021 10,787.67 $10,787.67
6/30/2021 10,907.53 21,695.21
9/30/2021 11,027.40 32,722.60
12/31/2021 11,027.40 43,750.00
3/31/2022 10,787.67 54,537.67
6/30/2022 10,907.53 65,445.21
9/30/2022 11,027.40 76,472.60
12/31/2022 11,027.40 87,500.00
3/31/2023 10,787.67 98,287.67
6/30/2023 10,907.53 109,195.21
9/30/2023 11,027.40 120,222.60
12/31/2023 11,027.40 131,250.00
3/31/2024 10,877.73 142,127.73
6/30/2024 10,877.73 153,005.46
9/30/2024 10,997.27 164,002.73
12/31/2024 10,997.27 175,000.00
3/31/2025 10,787.67 185,787.67
6/30/2025 10,907.53 196,695.21
9/30/2025 11,027.40 207,722.60
12/31/2025 11,027.40 218,750.00
3/31/2026 10,787.67 229,537.67
6/30/2026 10,907.53 240,445.21
9/30/2026 11,027.40 251,472.60
12/31/2026 11,027.40 $262,500.00
Pre-Launch Loan $2,500,000.00
Total Due 1/1/2027 $2,762,500.00
Note: Interest Rate is based on the average of last six months of interest earned on the City's investment
portfolio.
25 55695.00001133485367.1

First Amendment to
OCPA JPA Agreement

FIRST AMENDMENT TO THE

ORANGE COUNTY POWER AUTHORITY JOINT POWERS AGREEMENT
This First Amendment ("First Amendment") to that certain Orange County Power Authority Joint Powers Agreement ("Agreement") dated November 20, 2020, by and between the Parties set forth in Exhibit A to Agreement is effective as of February 9, 2021. Under the Agreement, the Parties are sometimes referenced individually as a "Founding Party" and collectively the "Founding Parties."

RECITALS
A. The Orange County Power Authority is a joint powers authority established on November 20, 2020 and organized under the Joint Exercise of Powers Act (Government Code § 6500 et seq.).

B. The Founding Parties desire to extend the right of a Founding Party under Section

6.1.1 of the Agreement to with withdraw without financial penalty until April 1, 2021.

AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions hereinafter set forth, it is agreed by and among the Parties as follows:

1. Right to Withdraw Prior to April 1, 2021. Section 6.1.1 of the Agreement is hereby deleted in its entirety and replaced with the following:
"6.1.1 Right to Withdraw Prior to April 1, 2021. Except for the City of Irvine, a Party may withdraw from the Authority for any reason and without liability or cost prior to April 1, 2021 upon providing the Authority fifteen (15) days advance written notice."

2. Right to Withdraw On or After April 1, 2021. Section 6.1.2 of the Agreement is hereby deleted in its entirety and replaced with the following:
"6.1.2 Right to Withdraw On or After April 1, 2021. Except for the withdrawal provided for in Section 6.1.1, a Party may withdraw its membership in the Authority on or after April 1, 2021, effective as of the beginning of the Authority's fiscal year, by giving no less than one hundred eighty (180) days advance written notice of its election to do so, which notice shall be given to the Authority and each Party. Withdrawal of a Party shall require an affirmative vote of the Party's governing board. A Party that withdraws from the Authority pursuant to this subsection may be subject to certain continuing liabilities as described in this Agreement. The withdrawing Party and the Authority shall execute and deliver all further instruments and documents, and take any further actions as may be reasonably necessary to effectuate the orderly withdrawal of such Party."

3. Definitions: Capitalized terms not defined herein shall have the meaning set forth in the Agreement.
1

4. Full Force: Except as expressly set forth herein, the Agreement remains unmodified and in full force and effect.
[SIGNATURE ON FOLLOWING PAGE]
2

IN WITNESS WHEREOF, the Parties hereby have made and executed this First Amendment as of the date first written above.

ORANGE COUNTY POWER AUTHORITY
By:

C it
\N.

Dated:

Approved as to Form:

By:

General Counsel
3

Second Amendment to
OCPA JPA Agreement

1 SECOND AMENDMENT TO THE

ORANGE COUNTY POWER AUTHORITY

JOINT POWERS AGREEMENT
This Second Amendment to that certain Orange County Power Authority Joint Powers Agreement, dated November 20, 2020, by and between the parties set forth in Exhibit A to the Agreement is effective as of October 25, 2022 (“Second Amendment”).

RECITALS
A. The Orange County Power Authority is a joint powers authority established on November 20, 2020 and organized under the Joint Exercise of Powers Act (Government Code section 6500 et seq.) as a separate public agency to collectively implement a community choice aggregation program and to exercise any powers common to the Authority’s members to further these purposes.

On February 9, 2021, the Board of Directors approved the First Amendment to the Agreement extending the right of a Founding Party to withdraw under Section 6.1.1 of the Agreement until April 1, 2021.

B. The Board of Directors desires to amend the Agreement as follows:

1. Requires that a regular or alternate Director be a current elected member of the governing body of the Party;

2. Changes the terms of office for a regular and alternate Director to two (2) years;

3. Clarifies that a regular or alternate Director serves at the pleasure of the governing body that appointed the Director and can be removed at any time, with or without cause;

4. Change the terms of office for the Chair and Vice-Chair to one (1) year with annual elections thereafter beginning in December 2022; and

5. Changes the maximum vacancy period for a Director to forty-five (45) days.

AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, covenants, and conditions hereinafter set forth, it is agreed by and among the Parties as follows:

1. Amendment to the Agreement.
(a) Appointment of Directors. Section 3.2 of the Agreement is hereby amended and replaced in its entirety as follows:
“3.2 Appointment of Directors. The governing body of each Party shall appoint and designate in writing the Director(s) who shall be authorized to act for and on behalf of the Party on matters within the powers of the Authority. The governing body of each Party shall also appoint and designate in writing an alternate Director(s) who may vote in matters when the regular Director is absent from a Board meeting. The governing bodies of the Founding Parties may, in their sole discretion, elect to appoint their respective Director(s) prior to the Effective Date, in which case such appointment(s) to the Board shall take effect on the

2 Effective Date. The persons appointed and designated as the regular Director and alternate Director shall be a current elected member of the governing body of the Party.” (b) Terms of Office. Section 3.3 of the Agreement is hereby amended and replaced in its entirety as follows:
“3.3 Terms of Office. Each regular or alternate Director shall serve a term of office of (2) years. A regular or alternate Director shall serve at the pleasure of the governing body of the Party that the regular or alternate Director represents and may be removed by such governing body at any time, with or without cause. If at any time a vacancy occurs on the Board, a replacement Director shall be appointed by the governing body to fill the position of the previous Director within forty-five (45) days of the date that such position becomes vacant. A replacement Director shall serve until the scheduled expiration of the term of office of the Director they replace.”
(c) Chair and Vice Chair. Section 3.10.1 is hereby amended and replaced in its entirety as follows:
“3.10.1 Chair and Vice-Chair. The Directors shall select from among themselves a Chair and a Vice-Chair. The Chair shall be the presiding officer of all Board meetings. The ViceChair shall serve in the absence of the Chair. Beginning at the first regular Board meeting in December 2022, the terms of office of the Chair and Vice-Chair shall be one-year with an election held annually. There shall be no limit on the number of terms held by the Chair and the Vice-Chair. The office of either the Chair or Vice-Chair shall be declared vacant and a new selection shall be made if: (i) the person serving dies, resigns, or becomes legally unable to fulfill his or her duties, or (b) the Party that appointed the Chair or Vice-Chair withdraws from the Authority pursuant to the provisions of this Agreement.”

2. Capitalized Terms. Any capitalized terms not defined herein shall have the meanings set forth in the Agreement.

3. Full Force. Except as expressly set forth herein, the Agreement shall remain unmodified and in full force and effect.
[SIGNATURE ON FOLLOWING PAGE]

IN WITNESS WHEREOF, the Parties have hereby approved and executed this Second Amendment as ofthe date first written above.

ORANGE COUNTY POWER AUTHORITY
By:

II, Chair
ge Cou ty Power Authority
Dated: /1 -(r- 9 gApproved as to Form:

By:

General Counsel
Orange County Power Authority
3

Third Amendment to
OCPA JPA Agreement

55735.00001\41074949.1
1 THIRD AMENDMENT TO THE

ORANGE COUNTY POWER AUTHORITY

JOINT POWERS AGREEMENT
This Third Amendment to that certain Orange County Power Authority Joint Powers Agreement, dated November 20, 2020, by and between the parties set forth in Exhibit A to the Agreement is effective as of May 17, 2023 (“Third Amendment”).

RECITALS
A. The Orange County Power Authority is a joint powers authority established on November 20, 2020, and organized under the Joint Exercise of Powers Act (Government Code section 6500 et seq.) as a separate public agency to collectively implement a community choice aggregation program and to exercise any powers common to the Authority’s members to further these purposes.

B. On February 9, 2021, the Board of Directors approved the First Amendment to the Agreement extending the right of a Founding Party to withdraw under Section 6.1.1 of the Agreement until April 1, 2021.

C. On October 25, 2022, the Board of Directors approved the Second Amendment to the Agreement, relating to the qualifications of Directors and alternate Directors, setting Directors’ and Alternates’ terms of office at two (2) years, establishing the terms of office for the Chair and Vice Chair, and related changes.

D. The Board of Directors desires to amend the Agreement as follows:

1. Establish that the terms of office for regular and alternate Directors is two (2) years or until a successor is appointed;

2. Establish that vacancies in the offices of Chair and Vice Chair shall be filled at the next regular meeting of the Board or as soon as practicable thereafter, and that the new Chair and Vice Chair will perform the duties of the office for the remainder of the office’s term; and

3. Establish that the Board of Directors will appoint a qualified person who is not on the Board to serve as Secretary, and that such office will not automatically be held by the Chief Executive Officer.

AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, covenants, and conditions hereinafter set forth, it is agreed by and among the Parties as follows:

1. Amendments to the Agreement.
(a) Terms of Office. Section 3.3 of the Agreement is hereby amended and replaced in its entirety as follows:

55735.00001\41074949.1
2 “3.3 Terms of Office. Each regular or alternate Director shall serve a term of office of (2) years or until a successor is appointed. A regular or alternate Director shall serve at the pleasure of the governing body of the Party that the regular or alternate Director represents and may be removed by such governing body at any time, with or without cause. If at any time a vacancy occurs on the Board, a replacement Director shall be appointed by the governing body to fill the position of the previous Director within forty-five (45) days of the date that such position becomes vacant. A replacement Director shall serve until the scheduled expiration of the term of office of the Director they replace.”
(b) Chair and Vice Chair. Section 3.10.1 is hereby amended to add the following sentences at the end of the section:
“Upon a vacancy in the office of Chair or Vice Chair, the position shall be filled at the next regular meeting of the Board held after such vacancy occurs or as soon as practicable thereafter. Succeeding officers shall perform the duties normal to said offices for the remainder of the respective term.”
(c) Secretary. Section 3.10.2 of the Agreement is hereby amended and replaced in its entirety as follows:
“3.10.2 Secretary. The Board shall appoint a qualified person who is not on the Board to serve as Secretary. The Secretary shall be responsible for keeping the minutes of all meetings of the Board and all other official records of the Authority.” (d) Chief Executive Officer. Section 3.12 of the Agreement is hereby amended and replaced in its entirety as follows:
“3.12 Chief Executive Officer. The Board shall appoint a Chief Executive Officer.

The Chief Executive Officer shall be the chief administrative officer of the Authority. The powers and duties of the Chief Executive Officer shall be those delegated and/or assigned to the Chief Executive Officer by duly adopted action of the Board.”

2. Capitalized Terms. Any capitalized terms not defined herein shall have the meanings set forth in the Agreement.

3. Full Force. Except as expressly set forth herein, the Agreement shall remain unmodified and in full force and effect.
[SIGNATURE ON FOLLOWING PAGE]

IN WITNESS WHEREOF, the Parties have hereby approved and executed this Third Amendment as of the date first written above.

ORANGE COUNTY POWER AUTHORITY
Fred Jung, Chair
Orange County Power Authority
Dated: 1/7
Approved as to Form:

By:

General Counsel
Orange County Power Authority
3 55735 00001\41074949 1

55735.00001\41074949.1
3 IN WITNESS WHEREOF, the Parties have hereby approved and executed this Third Amendment as of the date first written above.

ORANGE COUNTY POWER AUTHORITY
By: ______________________________
Fred Jung, Chair
Orange County Power Authority
Dated: ____________________
Approved as to Form:

By: ______________________________
General Counsel
Orange County Power Authority

CITY OF FOUNTAIN VALLEY

CITY COUNCIL

COUNCIL ACTION REQUEST
To: Honorable Mayor and Agenda Date: October 1, 2024
Members of the City Council
SUBJECT: Approve the City of Fountain Valley Fund Balance Reserve Policy Three-Year Strategic Goals
☐ Enhance the culture and environment of “A Nice Place to Live” ☒ Achieve fiscal stability by evaluating processes, and attract and retain revenue producing businesses/opportunities
☐ Attract and retain quality staff through best practices and trends ☐ Maintain, build, and modernize infrastructure to support growth and future needs of the City
☐ Not applicable
EXECUTIVE SUMMARY:

An important aspect of a financially stable organization is maintaining adequate reserve levels.

Strong reserves enable an organization to better navigate significant economic downturns, manage the impacts of external factors that might reduce revenue, and handle unforeseen emergencies, including natural disasters, man-made catastrophes, or substantial liabilities and legal judgments. The City’s reserve policy provides the framework for utilizing City resources to fulfill financial commitments and address unexpected events in a financially responsible way.

City staff is recommending approval of the City of Fountain Valley Fund Balance Reserve Policy.

DISCUSSION:

To make prudent decisions related to financial matters, it is critical to have sound financial policies in place. In an effort to evaluate and formalize the City’s Fund Balance Reserve Policy, City staff undertook a review of policies adopted by other cities. In addition, staff reviewed best practices as recommended by both the Government Finance Officers Association (GFOA) and the American Water Works Association (AWWA). The Reserve Policy documents the City’s approach to establishing and maintaining strong reserves across the range of City operations, including the General Fund, internal service funds, and enterprise operations. The attached Fund Balance Reserve Policy (Attachment 1) is divided into three (3) sections based on these different types of funds that are governed by the policy.

Fund Balance Reserve Policy
October 1, 2024

General Fund
The General Fund is the main operating fund for the City that pays for general services provided by the City, such as Police, Fire, and Public Works. The General Fund accounts for all general revenues of the City not specifically levied or collected for other City funds and for expenditures related to the delivery of the City’s general services. The Fund Balance Reserve Policy calls for five (5) separate reserve categories within the General Fund. Table 1 below summarizes the recommended General Fund reserve categories, their purpose, and the reserve target level.

Table 1 – General Fund Reserves
Category Purpose Reserve Target
Emergency Contingency
Reserve
To sustain General Fund operations in the
event of severe economic uncertainties
arising from a public emergency or shortterm fiscal crisis. 25% of total General Fund
expenditures
Economic Opportunity
Reserve
To provide strategic investment in
opportunities that stimulate economic
growth that may arise outside of the
standard budgeting processes.

2.5% of total General Fund
expenditures
Capital Projects Reserve To meet funding requirements for projects approved in prior fiscal years and which
are carried forward into the new fiscal year.

Equal to the City’s General
Fund portion of unpaid
obligations for projects at
year-end
Measure HH Reserve To account for, and report on, accumulated surplus Measure HH funds.

Equal to all accumulated
surplus Measure HH
Funds
Employee Benefits
Reserve
To meet General Fund liabilities
associated with compensated absences.

Equal to the City's yearend liability for
Compensated Absences.

Internal Service Funds
Internal Service Funds are used to report activities for which service charges or fees are charged to internal users. These funds account for the financing of goods or services provided by one department to another on a cost reimbursement basis. These functions include Information Technology, Government Buildings, Capital Equipment, Fleet, and Self-Insurance.

Table 2 on the following page summarizes the reserves for each internal service fund, its purpose, and the targeted minimum reserve level.

Table 2 – Internal Service Fund Reserves
Fund Purpose Minimum Reserve Target
Information
Technology
To ensure the timely replacement of
computer and network equipment and
software.
20% of the total amount on
the ten-year IT equipment
replacement schedule
Government Buildings To ensure proper maintenance of City owned facilities.

TBD with Facilities Condition
Assessment

Fund Balance Reserve Policy
October 1, 2024

Fleet Management To provide for the orderly maintenance, repair, and replacement of the City’s
vehicles.
20% of the total amount on
the ten-year Fleet
Management replacement
schedule
Capital Equipment To ensure the timely replacement of
essential equipment owned by the City.
20% of the total amount on
the ten-year Capital
Equipment replacement
schedule
Self-Insurance To provide set aside funding in the event claims expenses need to be paid above
what the City anticipated during the
annual budget process.

Equal to $1 Million for
Workers Compensation plus
3X General Liability SIR
Enterprise Funds
Enterprise funds are used to report activities for which service charges or fees are charged to external users in exchange transactions, similar to private businesses. These funds include the Water Utility and Sewer Assessment. One way to measure of the fiscal health of an enterprise fund is by taking the difference between current assets and current liabilities, which is referred to as Working Capital. Maintaining adequate operating working capital reserves enhances an enterprise system’s ability to manage potential risks, provides the ability to manage fluctuations in revenues or expenditures, and the ability to meet working capital needs.

The Enterprise Funds working capital reserves are separated into four (4) categories and will be measured based on a Minimum and Target reserve level. The Enterprise Funds will treat the minimum reserve levels as practical reserve floors and allow reserves to increase or decrease within the minimum and target level, as approved by the City Council during the City's budget process or as needed by the fund.

Reserve levels below the minimum targeted reserves would leave those Enterprise Funds exposed to significant operational risks. Should either Enterprise Fund draw down these reserves below the minimum targeted level, the Finance Department will implement plans to return reserves to their minimum targeted levels upon approval of the City Council.

Table 3 on the following page summarizes the recommended Enterprise Fund reserve category, their purpose, the reserve minimum, and reserve target level. These reserves will be applied to both the Water Utility Fund and the Sewer Assessment Fund.

Table 3 – Water and Sewer Enterprise Fund Working Capital Reserves Category Purpose
Reserve
Minimum Reserve Target
Operating Capital
Reserve
To ensure sufficient resources to pay
budgeted operating and maintenance
expenses and ensures that operations
can continue should there be significant
events that impact cash flows.
30% of the
annual operating
expenditures
65% of the
annual operating
expenditures

Fund Balance Reserve Policy
October 1, 2024

Debt Service
Reserve
To ensure availability of cash assets for
full and timely payment of debt
obligations in periods of reduced
revenue.
50% of the
annual debt
service payments
for the upcoming
fiscal year
100% of the
annual debt
service
payments for the
upcoming fiscal
year
Emergency
Capital &
Equipment
Reserve
To provide funds to ensure the ability to
repair the system or replace equipment
in the event of an unanticipated
breakdown, failure, or catastrophic
event.
10% of the total
depreciable
assets
30% of the total
depreciable
assets
Asset
Replacement
Reserve
To help smooth budgetary needs to
replace high valued assets on an
infrequent basis.
15% of the total
depreciable
assets
35% of the total
depreciable
assets
FISCAL REVIEW:

There would be no impact to city revenues or expenditures with the approval of the reserve policy. The policy provides a framework for how the city manages fund balances and utilizes City resources.

The General Fund currently has projected total
fund balance at fiscal year ended June 30, 2024
of $73.2 Million. Under current reserve
practices, $73 Million is either Restricted,
Committed, or Assigned, with just under $200k
in Unassigned General Fund balance. Under
the proposed General Fund reserve policy, the
General Fund would achieve the target reserve
amount for all five categories and shift about
$7.35 Million into the Unassigned General Fund
balance. The total projected Unassigned
General Fund balance would be $7.54 Million.

The majority of increased unassigned fund
balance is coming from Capital Project reserves
which currently has $9.9 Million assigned
without specific projects or uses identified.

The current projected fund balances in the internal services funds at fiscal year ended June 30th, 2024 are sufficient to meet the target levels for each fund. Table 4 below, shows the projected fund balance and target reserve level for each internal service fund.

Table 4 – Internal Service Fund Reserves
Internal Service Funds Projected Fund Balance Reserve Target Information Technology $ 2,042,961 $ 865,048
Government Buildings $ 5,154,469 TBD
Fleet Management $ 3,565,925 $ 1,761,140
Capital Equipment $ 1,403,012 $ 979,227
General Fund
Current
Practice New Policy Change

FUND BALANCES
Nonspendable
Prepaids/Advances $ - $ -
Restricted
Other Purposes 2,713,040 2,713,040
Pension 15,799,650 15,799,650
Committed
Emergencies 18,426,000 19,663,185 1,237,185
Economic Opportunities - 1,966,319 1,966,319
Assigned -
Economic Development 1,956,806 - (1,956,806)
Capital Projects 9,950,427 1,850,000 (8,100,427)
Measure HH 21,311,103 21,311,103 -
Employee Benefits 2,422,711 2,420,123 (2,588)
Contingency 500,000 (500,000)
Unassigned 184,850 7,541,167 7,356,318
73,264,587 73,264,587

Fund Balance Reserve Policy
October 1, 2024

Self-Insurance $ 3,553,355 $ 2,050,000
The Water Utility Fund has a projected ending Net Position on June 30th, 2024 of $34.25 million. The new reserve policy will set aside $24.4 million in reserves as identified in table 5 below.

The Sewer Assessment Fund has a projected ending Net Position on June 30th, 2024 of $15.16 million. The new reserve policy will set aside $5.7 million in reserves as identified in table 5 below.

Table 5 – Water & Sewer Enterprise Funds
Water Utility Fund
Minimum Target
Operating Capital Reserve $ 3,046,621 $ 6,601,013
Debt Service Reserve 494,591 989,181
Emergency Capital & Equipment Reserve 2,586,222 7,758,667 Asset Replacement Reserve 3,879,333 9,051,778
Reserved Fund Balance 10,006,767 24,400,638
Unreserved Fund Balance 9,849,353
Net Position $ 34,249,991
Sewer Assessment Fund
Minimum Target
Operating Capital Reserve $ 307,705 $ 666,695
Debt Service Reserve - -
Emergency Capital & Equipment Reserve 776,393 2,329,178 Asset Replacement Reserve 1,164,589 2,717,374
Reserved Fund Balance 2,248,687 5,713,247
Unreserved Fund Balance 9,444,840
Net Position $ 15,158,087
ATTORNEY REVIEW:

The Attorney for the City has reviewed the policy.

ALTERNATIVES:

Alternative No. 1: Approve the City of Fountain Valley Fund Balance Reserve Policy.

Alternative No. 2: Do not approve the City of Fountain Valley Fund Balance Reserve Policy and provide alternative direction.

RECOMMENDATION:

Fund Balance Reserve Policy
October 1, 2024

Approve the City of Fountain Valley Fund Balance Reserve Policy.

Prepared by: Ryan Smith, Finance Director
Reviewed by: Colin Burns, City Attorney
Approved by: Maggie Le, City Manager
Attachment 1: City of Fountain Valley Fund Balance Reserve Policy

1 Approved: XX/XX/2024
City of Fountain Valley
Fund Balance Reserve Policy
BACKGROUND:

An important aspect of a financially stable organization is maintaining adequate reserve levels. Strong reserves enable an organization to better navigate significant economic downturns, manage the impacts of external factors that might reduce revenue, and handle unforeseen emergencies, including natural disasters, human-made catastrophes, or substantial liabilities and legal judgments. The City’s Reserve Policy provides the framework for utilizing City resources to fulfill financial commitments and address unexpected events in a financially responsible way.

PURPOSE:

The City’s Reserve Policy documents the City’s approach to establishing and maintaining strong reserves across the range of City operations, including General Fund, internal service funds, and enterprise operations. The policy is designed to:
• Identify City operations and functions for which reserves should be established and maintained, considering risks to the operation from unexpected events and the availability of other resources to address such events, and the volatility of expenditures and revenues of the operation; • Establish target reserve levels and the methodology for calculating reserve levels; • Provide a time-frame for meeting reserve targets, using a phased approach where necessary so that reserve goals are balanced appropriately with current budget availability; and • Establish criteria for the use of reserves and the process to replenish reserves.

GENERAL FUND RESERVE POLICY:

The General Fund is the main operating fund for the City that pays for general services provided by the City, such as Police, Fire, and Public Works. The General Fund accounts for all general revenues of the City not specifically levied or collected for other City funds and for expenditures related to the delivery of the City’s general services.

The General Fund Balance in the City’s financial statements is comprised of five categories:
❖ Non-spendable Funds (non-cash items such as prepaid expenses and inventories) ❖ Restricted Funds (externally enforceable legal restrictions) ❖ Committed Funds (limitations imposed by the City Council) ❖ Assigned Funds (intended to provide a source of funds for various needs) ❖ Unassigned Funds (net resources in excess of what is classified in one of the other categories)

2 This policy incorporates General Fund reserves requirements of Governmental Accounting Standards Board (GASB) Statement No. 54. It will help guide current and future allocation levels to various reserve categories in the General Fund by setting out specific target amounts for the Committed and Assigned categories of the General Fund balance. • Emergency Contingency Reserve
The General Fund Emergency Contingency shall be maintained for the purpose of sustaining General Fund operations in the case of severe economic uncertainties arising from a public emergency such as a natural disaster or other unforeseen catastrophic event. The contingency shall be calculated as 25% of total General Fund expenditures, excluding capital outlay, based on the most recent audited �inancial statements. This reserve level represents sufficient capital to fund general city operations for three months. General Fund emergency contingencies shall only be appropriated with City Council approval for:

1. Emergencies (e.g., man-made or natural disasters such as fires, floods, earthquakes, pandemics, or other catastrophic events) that are nonrecurring expenditures.

2. Required to maintain essential services in a severe, short-term fiscal crisis when revenues are insufficient.

Formal approval of the appropriation of Emergency Contingency reserves shall include a plan to replenish the appropriated funds. This plan should include funding sources and timeline to replenish the reserve back to the 25% of General Fund expenditures target.
• Economic Opportunity Reserve
The Economic Opportunity Reserve shall be utilized by the City to support the Strategic Objective to “Achieve Fiscal Stability by Evaluating Processes, and Attract and Retain Revenue Producing Businesses/Opportunities”. The reserve will allow the city to provide strategic investment in opportunities that stimulate economic growth that are not typically supported through the traditional capital improvement process, joint venture/public private partnership approaches, or economic development programs. Use of the Economic Opportunity Reserve is intended to provide for opportunities that may arise outside of the standard budgeting processes and shall be calculated as 2.5% of total General Fund expenditures, excluding capital outlay, based on the most recent audited �inancial statements. Economic Opportunity Reserves shall only be appropriated with City Council approval. Formal approval of the appropriation of Economic Opportunity reserves shall include a plan to replenish the appropriated funds.

This plan should include funding sources and timeline to replenish the reserve back to the 2.5% of General Fund expenditures target.
• Capital Projects Reserve
The Capital Projects Reserve assigns fund balance sufficient to meet funding requirements for projects approved in prior fiscal years and which are carried forward into the new fiscal year. This reserve is established at the end of every fiscal year to reserve fund balance in the amount equal to the City’s unpaid obligations and unfinished projects at year-end.
• Measure HH Reserve
The Measure HH Reserve was created as a way for the City to account for, and report on, accumulated surplus Measure HH funds. The reserve amount is calculated at year end by adding the fiscal year net surplus or subtracting the fiscal year net deficit of Measure HH funds to the prior year Measure HH reserve. This assigned reserve is specifically earmarked for projects and services that align with the Measure HH ballot language and the City’s responsible spending pledge. To ensure transparency and accountability, the use of these funds issubject to annual review and approval by the City Council during the budget adoption process.

3 Any proposed expenditures shall align with the original intent of the Measure HH ballot language and the Responsible Spending Pledge.
• Employee Benefits Reserve
The Employee Benefits Reserve assigns fund balance sufficient to meet General Fund liabilities associated with compensated absences. This reserve is established at the end of every fiscal year to assign fund balance in the amount equal to the City’s governmental activities liability for compensated absences at June 30.

Governmental compensated absences are generally liquidated by the General Fund.

Table 1 – General Fund Reserves
Category Purpose Reserve Target
Emergency Contingency
Reserve
To sustain General Fund operations in the
case of severe economic uncertainties
arising from a public emergency or shortterm fiscal crisis. 25% of total General Fund
expenditures
Economic Opportunity
Reserve
To provide strategic investment in
opportunities that stimulate economic
growth that may arise outside of the
standard budgeting processes.

2.5% of total General Fund
expenditures
Capital Projects Reserve To meet funding requirements for projects approved in prior fiscal years and which
are carried forward into the new fiscal year.

Equal to the City’s General
Fund portion of unpaid
obligations for projects at
year-end
Measure HH Reserve To account for, and report on, accumulated surplus Measure HH funds.

Equal to all accumulated
surplus Measure HH
Funds
Employee Benefits
Reserve
To meet General Fund liabilities
associated with compensated absences.

Equal to the City's yearend liability for
Compensated Absences.

INTERNAL SERVICE FUND RESERVE POLICY:

Internal Service Funds are used to report activities for which service charges or fees are charged to internal users.

These funds account for the financing of goods or services provided by one department to another on a cost reimbursement basis. These functions include Information Technology, Government Buildings, Capital Equipment, Fleet, and Self-Insurance.
• Information Technology Fund
An Information Technology Reserve shall be maintained to ensure the timely replacement of computer and network equipment and software. Technology can change rapidly and often comes at a high cost. This reserve helps the City keep pace with changes in information technology and take advantage of improvement/efficiency opportunities in this area. The minimum reserve target level shall be calculated as 20% of the total amount on the ten-year IT equipment replacement schedule. • Government Buildings Fund
A Government Buildings Reserve shall be maintained to ensure proper maintenance of City owned facilities.

The reserve is intended to address any unforeseen maintenance and repairs or unplanned replacements

4 within City owned facilities. The reserve level shall be established during the City’s Facilities Condition Assessment.
• Fleet Management Fund
A Fleet Management Reserve shall be maintained to provide for the orderly maintenance, repair, and replacement of the City’s vehicles. The reserve will ensure the timely replacement of existing vehicles should they come to the end of their useful life or become inoperable prior to their scheduled replacement.

The minimum reserve target level shall be calculated as 20% of the total amount on the ten-year Fleet Management replacement schedule.
• Capital Equipment Fund
A Capital Equipment Reserve shall be maintained to ensure the timely replacement of essential equipment owned by the City. The reserve is intended to ensure the timely replacement of existing equipment should they come to the end of their useful life or become inoperable prior to their scheduled replacement. The minimum reserve target level shall be calculated as 20% of the total amount on the ten-year Capital Equipment replacement schedule.
• Self-Insurance Fund
The City will maintain a Reserve for Liability and Worker’s Compensation insurance claims. The City currently has a $350,000 Self-Insured Retention (SIR) for the general liability insurance program. This means, the City is responsible for the first $350,000 of all insurance claims, per claim, before the City’s insurance provider(s) will take on claim costs over the SIR. While the City does place into its annual budget some amounts for claims expenses, there is no way to predict if/when claims will be filed that incur costs beyond the City’s adopted budget. The Self-Insurance reserve will provide set aside funding in the event claims expenses need to be paid above what the City anticipated during the annual budget process. The minimum reserve target level shall be calculated as $1 Million for Workers Compensation claims plus an amount equal to 3 times the current general liability SIR amount.

Table 2 – Internal Service Fund Reserves
Fund Purpose Minimum Reserve Target
Information
Technology
To ensure the timely replacement of
computer and network equipment and
software.
20% of the total amount on
the ten-year IT equipment
replacement schedule
Government Buildings To ensure proper maintenance of City owned facilities.

TBD with Facilities Condition
Assessment
Fleet Management To provide for the orderly maintenance, repair, and replacement of the City’s
vehicles.
20% of the total amount on
the ten-year Fleet
Management replacement
schedule
Capital Equipment To ensure the timely replacement of
essential equipment owned by the City.
20% of the total amount on
the ten-year Capital
Equipment replacement
schedule
Self-Insurance To provide set aside funding in the event claims expenses need to be paid above
what the City anticipated during the
annual budget process.

Equal to $1 Million for
Workers Compensation plus
3X General Liability SIR

5 WATER AND SEWER ENTERPRISE FUNDS WORKING CAPITAL RESERVE POLICY:

Enterprise funds are used to report activities for which service charges or fees are charged to external users. These funds include the Water Utility and Sewer Assessment. The operations in these funds are financed and operated in a manner similar to private sector enterprises wherein the cost of providing the goods and services to the general public (Utility Customers) is paid through a user rate structure that is appropriate, fair and equitable based on the cost of the commodity. Goals of the Working Capital Reserve Policy include:
• Maintain short and long-term financial sustainability. • Ensure working capital availability for payment of bills. • Maintain stable rates for customers and ensure manageable rate increases. • Ensure cash assets for full and timely payment of debt obligations. • Provide a source of funds for emergency capital expenses. • Provide funding for the replacement of capital assets and equipment.

One way to measure of the fiscal health of an enterprise fund is by the difference between current assets and current liabilities, which is referred to as Working Capital. Maintaining adequate operating working capital reserves enhances an enterprise system’s ability to manage potential risks, provides the ability to manage fluctuations in revenues or expenditures, and the ability to meet working capital needs. Operating reserves are also important when facing fiscal emergencies that can result from emergency repairs, droughts, natural disasters, and unforeseen economic influences. The Enterprise Funds working capital reserves are separated into four categories and will be measured based on a Minimum and Target reserve level.
• Operating Capital Reserve
Operating Capital Reserve provides working capital to support the operation, maintenance, and administration of the utility system. Operating reserve reinforces the City’s cash �low needs during normal operations to ensure suf�icient resources to pay budgeted operating and maintenance expenses and ensures that operations can continue should there be signi�icant events that impact cash �lows. The target level of Operational Capital reserve shall be equal to 65% of the annual operating expenditures based on the most recent audited �inancial statements. The minimum reserve is equal to 30% of the annual operating expenditures based on the most recent audited �inancial statements. The Operating Capital reserves are intended to be used in response to temporary cash �low de�iciencies due to the timing of the payment of expenditures and receipt of revenues. • Debt Service Reserve
The Debt Service Reserve ensures availability of cash assets for full and timely payment of debt obligations in periods of reduced revenue. The target level of the Debt Service reserve shall be equal to 100% of the annual debt service payments for the upcoming �iscal year. The minimum reserve is equal to 50% of the annual debt service payments for the upcoming �iscal year. • Emergency Capital & Equipment Reserve
The Emergency Capital & Equipment reserve is intended to provide funds to ensure the ability to repair the system or replace equipment in the event of an unanticipated breakdown, failure, or catastrophic event.

The target level of the Emergency Capital & Equipment Reserve shall be equal to 30% of the total depreciable assets as reflected in the most recent audited financial statements. The minimum reserve is equal to 10% of the total depreciable assets as reflected in the most recent audited financial statements.

The Emergency Capital & Equipment Reserve funds are to be used in the event of an unexpected and unbudgeted capital replacement or repair.

6 • Asset Replacement Reserve
The Asset Replacement Reserve is intended to provide funds to replace assets that have reached the end of their useful life. This reserve helps smooth budgetary needs to replace high valued assets on an infrequent basis. The target level of the Asset Replacement Reserve is to maintain 35% of the total depreciable assets as reflected in the most recent audited financial statements. The minimum reserve level is to maintain 15% of the total depreciable assets as reflected in the most recent audited financial statements.

The Enterprise Funds will treat the minimum reserve levels as practical reserve floors and allow reserves to increase or decrease within the minimum and target level, as approved by the City Council during the City's budget process or as needed by the fund. To the extent that the Enterprise Fund total net position is above the target working capital reserve level, the City Council has the flexibility to direct staff to use those available funds to make improvements or improve services within the Enterprise Fund they reside. Reserve levels below the minimum targeted reserves would leave those Enterprise Funds exposed to significant operational risks. Should either Enterprise Fund draw down these reserves below the minimum targeted level, the Finance Department will implement plans to return reserves to their minimum targeted levels upon approval of the City Council.

Table 3 – Water and Sewer Enterprise Fund Working Capital Reserves Category Purpose
Reserve
Minimum Reserve Target
Operating Capital
Reserve
To ensure sufficient resources to pay
budgeted operating and maintenance
expenses and ensures that operations
can continue should there be significant
events that impact cash flows.
30% of the
annual operating
expenditures
65% of the annual
operating
expenditures
Debt Service
Reserve
To ensure availability of cash assets for
full and timely payment of debt
obligations in periods of reduced
revenue.
50% of the
annual debt
service payments
for the upcoming
fiscal year
100% of the
annual debt
service payments
for the upcoming
fiscal year
Emergency
Capital &
Equipment
Reserve
To provide funds to ensure the ability to
repair the system or replace equipment
in the event of an unanticipated
breakdown, failure, or catastrophic
event.
10% of the total
depreciable
assets
30% of the total
depreciable
assets
Asset
Replacement
Reserve
To help smooth budgetary needs to
replace high valued assets on an
infrequent basis.
15% of the total
depreciable
assets
35% of the total
depreciable
assets

CITY OF FOUNTAIN VALLEY

CITY COUNCIL

COUNCIL ACTION REQUEST
To: Honorable Mayor and Agenda Date: October 1, 2024
Members of the City Council
SUBJECT: Resolution in Support of Proposition 36, the Homelessness, Drug Addiction, and Theft Reduction Act on the November 5, 2024, General Election Ballot Three-Year Strategic Goals
☒ Enhance the culture and environment of “A Nice Place to Live” ☐ Achieve fiscal stability by evaluating processes, and attract and retain revenue producing businesses/opportunities
☐ Attract and retain quality staff through best practices and trends ☐ Maintain, build, and modernize infrastructure to support growth and future needs of the City
☐ Not applicable
EXECUTIVE SUMMARY:

In 2014, California voters approved Proposition 47 (Prop 47) Criminal Sentence, Misdemeanor Penalties, commonly referred to as the Safe Neighborhoods and Schools Act. Prop 47 reclassified certain non-violent offenses, such as drug possession and petty theft (theft under $950) from felonies to misdemeanors, aiming to reduce the state’s prison population and invest the savings generated toward support programs for mental health, drug treatment and education.

On November 5, 2024, California voters will consider Proposition 36 (Prop 36), known as the Homelessness, Drug Addiction and Retail Theft Act, which will primarily amend Prop 47. This summer the Cal Cities Board voted to support Proposition 36, which if passed by voters, would create a deterrent for repeat retail theft offenders, institute greater penalties for fentanyl trafficking, and redirect some people towards treatment rather than incarceration. One of Cal Cities top advocacy priorities this year is to advance solutions that help reduce crime and provide more support to people struggling with substance abuse while avoiding a return to the days of mass incarceration. Cal Cities is seeking its member cities’ support of Prop 36 by formally adopting the attached resolution.

The following Orange County cities in support of Prop 36 are: Brea, Newport Beach, Huntington Beach, Laguna Niguel, La Habra, Santa Ana, and Yorba Linda.

Resolution in Support of Proposition 36, the Homelessness, Drug Addiction, and Theft Reduction Act on the November 5, 2024, General Election Ballot October 1, 2024

The following Orange County cities are considering a resolution at their next scheduled meeting: Laguna Beach, Stanton and Westminster.

DISCUSSION:

Proposition 36 was reviewed and analyzed by the City’s Legislative Committee, consisting of Vice Mayor Ted Bui and Councilmember Jim Cunneen, and has given City staff direction to bring to City Council for consideration and support of Proposition 36. Prop 36 would amend Prop 47 by increasing penalties for trafficking of hard drugs, including fentanyl; increasing penalties for those who repeatedly engage in theft; adding new laws to address the problem of smash and grabs and organized retail thefts; and providing diversion programs for repeat offenders.

The fentanyl crisis has reached alarming levels and is now responsible for 20% of youth deaths in California. Prop 36 will define fentanyl as a hard drug, hold individuals convicted of trafficking fentanyl accountable, and grant judges’ greater discretion in sentencing drug traffickers.

Rampant retail theft is harming businesses and residents in California because those who commit these crimes know they’ll get away with it, even if caught. Prop 36 will hold repeat offenders accountable for the safety of our communities, rather than putting them back on the streets.

Breaking the cycle of repeat offenders means addressing the many root causes of retail theft.

Prop 36 provides critical mental health, drug treatment services, and job training within our justice system for people who are homeless and suffering from mental illness or struggling with substance abuse.

According to the ‘Yes on 36 Campaign’, Prop 36 will improve safety in every community and neighborhood in California – focusing on accountability measures for repeat offenders of theft and drug traffickers of serious drugs like fentanyl while encouraging more individuals participate in and complete drug treatment programs. City staff requests City Council adopt a Resolution supporting Proposition 36, which will appear on the November 5, 2024 ballot and propose changes to current laws to allow increased penalties for certain theft and drug crimes, as well as measures for rehabilitation and treatment for drug-related offences.

FISCAL REVIEW:

There is no fiscal impact related to this item.

PUBLIC NOTIFICATION:

Not applicable.

ENVIRONMENTAL IMPACT REVIEW:

Not applicable.

ATTORNEY REVIEW:

The Attorney for the City reviewed this item.

Resolution in Support of Proposition 36, the Homelessness, Drug Addiction, and Theft Reduction Act on the November 5, 2024, General Election Ballot October 1, 2024

ALTERNATIVES:

Alternative No. 1:

Alternative No. 2:

RECOMMENDATION:

Adopt a Resolution supporting Proposition 36, which will appear on the November 5, 2024 ballot and propose changes to current laws to allow increased penalties for certain theft and drug crimes, as well as measures for rehabilitation and treatment for drug-related offences.

Do not adopt a Resolution supporting Proposition 36, which will appear on the November 5, 2024 ballot and propose changes to current laws to allow increased penalties for certain theft and drug crimes, as well as measures for rehabilitation and treatment for drug-related offences.

This item is at the discretion of the City Council and staff is seeking City Council direction on whether or not to adopt the Resolution in support of Proposition 36, which will appear on the November 5, 2024, ballot and propose changes to current laws to allow increased penalties for certain theft and drug crimes, as well as measures for rehabilitation and treatment for drugrelated offenses.

Prepared by: Meghan Wishner, Management Analyst
Reviewed by: Maggie Le, City Manager
Approved by: Maggie Le, City Manager
Attachments:

1. Proposed Prop 36 Resolution

2. Retail Theft Package and Proposition 36 Comparison Chart.

League of California Cities

RESOLUTION NO. ____

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF FOUNTAINVALLEY, IN SUPPORT OF PROPOSITION 36, THE HOMELESSNESS, DRUG ADDICTION, AND THEFT REDUCTION ACT
WHEREAS, While Prop 47 achieved notable success in making California’s criminal justice system more equitable, Prop 47 has also led to unintended consequences over the past decade; and WHEREAS, Prop 47 has contributed to increases in repeat and often organized retail theft, the shuttering of local businesses, and difficulty convincing people to seek drug and mental health treatment; and
WHEREAS, These unintended consequences can only be corrected by the voters at the ballot box with modest amendments to Prop 47; and
WHEREAS, Prop 36, the Homelessness, Drug Addiction, and Theft Reduction Act is a bi-partisan measure that provides common sense, targeted reforms to Prop 47 that, with the recently adopted legislative Retail Theft Package, provide more tools to increase safety in our communities; and WHEREAS, Spikes in retail theft, violent smash-and-grab robberies, fentanyl deaths and illicit drug use, as well as strained social services, are creating challenges beyond the capacity of local governments; and
WHEREAS, Cities are partnering with the state to advance solutions that help reduce crime and provide more support to residents struggling with substance abuse, while avoiding a return to the days of mass incarceration; and
WHEREAS, Prop 36, the Homelessness, Drug Addiction, and Theft Reduction Act will define fentanyl as a hard drug, hold individuals convicted of trafficking fentanyl accountable, and grant judges greater discretion in sentencing drug traffickers; and WHEREAS, Breaking the cycle of repeat offenders means addressing the many root causes of retail theft; and
WHEREAS, Prop 36, the Homelessness, Drug Addiction, and Theft Reduction Act allows critical behavioral health services, drug treatment, and job training within our justice system for people who are homeless and suffering from mental illness or struggling with substance abuse; and WHEREAS, It’s time for meaningful and tailored reforms to our justice system to ensure the safety of our communities.

NOW, THEREFORE, BE IT RESOLVED by the City of Fountain Valley, that the City Council formally expresses support for Prop 36, the Homelessness, Drug Addiction, and Theft Reduction Act and the benefit that it provides for our community’s safety.

The foregoing Resolution was introduced at a regular meeting of the City Council of the City of Fountain Valley held on October 1, 2024, by the following vote:

AYES:

NOES:

ABSTAIN:

ABSENT:

PASSED, APPROVED AND ADOPTED by the City Council of the City of Fountain Valley on the ___ day of ___, 2024.

ATTEST:

City Clerk, Rick Miller Mayor, Glenn Grandis
APPROVED AS TO FORM:

HARPER & BURNS LLP
Attorneys for the City

Retail Theft Package
and Proposition 36
Recently, Gov. Gavin Newsom signed a 10-bill package addressing retail theft. The table below compares Proposition 36 — the ballot initiative sponsored by the District Attorneys that would make changes to Proposition 47 — with the retail theft package signed by the Governor.

PROVISION PROPOSITION 36 LEGISLATIVE PACKAGE
(NO AMENDMENTS TO
PROPOSITION 47)

RELEVANT BILL

NUMBERS
Fentanyl
Fentanyl
possession with
firearm
Adds to list of
crimes with
penalties of 2, 3, or
4 years in prison.

Not in package.

Fentanyl
increasing
penalties
Increases penalties
from 2 to 20 years
depending on the
amount.

Not in package.

Treatment
mandated
felony
Creates a new
crime for hard drug
possession with
tiered penalties up
to 25 years.

Not in package.

Retail Theft
Aggregation Provides that any
case involving one
or more acts of
theft or shoplifting
may be
aggregated into a
single count or
charge.

Not in package.

Auto theft Does not address
this issue.

Closes the loophole
under existing law
regarding locked cars.

SB 905 (Wiener)
Cargo theft Does not address
this issue.

Adds cargo theft to the
Regional Property Crime
Task Force operated by
the CHP.

AB 1972 (Alanis)
Fencing Does not address
this issue.

Expands existing law for
online marketplaces to
report high-volume sellers
to law enforcement.

SB 1144 (Skinner)
Fires Does not address
this issue.

Makes it a factor in
aggravation if an offense
SB 1242 (Min)

PROVISION PROPOSITION 36 LEGISLATIVE PACKAGE
(NO AMENDMENTS TO
PROPOSITION 47)

RELEVANT BILL

NUMBERS
was carried out in a
merchant’s premises to
commit retail theft.

Increased
penalties
Increases penalty
enhancements for
property crimes for
up to 4 years and
allows the court to
impose
enhancements
with another single
count.

Increases penalty
enhancements for resale
of property or stolen
property in the
commission of a felony for
up to 4 years and allows
the court to impose
enhancements with
another single count. No
changes to Proposition

47. AB 1960 (Rivas)*;
SB 1416
(Newman)
Multijurisdictional
offenses
Does not address
this issue.

Allows local jurisdictions to
file charges that deal with
offenses across county
lines.

AB 1779 (Irwin)
Organized retail
theft
Several provisions
related to acting in
concert and
increasing
penalties for
organized retail
theft. However, it
does not address
the sunset date of
the statute. (Does
not amend the
same code section
as the legislative
bills).

Removes the sunset
clause on the organized
retail theft statute.

AB 1802 (JonesSawyer);
SB 982 (Wahab)
Police ability to
arrest
Does not address
this issue.

Provides that under
certain circumstances
police can arrest without
a warrant.

AB 2943 (Zbur)
Probation Does not address
this issue.

Provides that the term of
probation for shoplifting
or petty theft would be
two years.

AB 2943 (Zbur)
Repeat
offenders
An offender with
two prior
convictions of
petty theft or
shoplifting can be
Creates a new crime for
shoplifting which can be
charged as a felony but
does not change the
threshold amount of $950.

AB 2943 (Zbur)

PROVISION PROPOSITION 36 LEGISLATIVE PACKAGE
(NO AMENDMENTS TO
PROPOSITION 47)

RELEVANT BILL

NUMBERS
charged with a
felony regardless of
value. Amends
Proposition 47.

Restraining
orders
Does not address
this issue.

Creates the Retail Theft
Restraining Order for
repeated attempts of
shoplifting which can be
requested by city
attorneys, retailers, or
district attorneys.

AB 3209
(Berman)
Retailers –
nuisance
action
Does not address
this issue.

Prohibits local
government and law
enforcement from
threatening or filing
nuisance complaints
against retailers for
reporting crime.

AB 2943 (Zbur)
*AB 1960 (Rivas) is currently pending on the Governor’s desk.