Fountain Valley City Council
January 20, 2026

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Other 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 the budgetary comparison schedules are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with GAAS. In our opinion, the accompanying supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole.

Other Information
Management is responsible for the other information included in the annual comprehensive financial report.

The other information comprises the introductory and statistical sections but does not include the basic financial statements and our auditor's report thereon. Our opinions on the basic 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 basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic 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 December 15, 2025, on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters.

The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.

San Bernardino, California
December 15, 2025

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City of Fountain Valley
Management’s Discussion and Analysis
For the Fiscal Year Ended June 30, 2025
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As management of the City of Fountain Valley (the City), we offer readers of the City’s financial statements this narrative overview and analysis of the financial activities of the City of Fountain Valley for the fiscal year ended June 30, 2025. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal and the accompanying basic financial statements.

Financial Highlights
During the fiscal year ended June 30, 2025, the City continued to maintain a stable financial position, enabling delivery of appropriate services to the community, and undertaking necessary economic development and infrastructure projects. The City’s fiscal policy continues to be guided by a 20-Year Financial Plan.

Long-term Economic Resource (Government-wide) Focus – Economic resources are differentiated from financial resources in that the economic measurement focus measures changes in net position as soon as the event occurs regardless of the timing of related cash flows.

Therefore, this measurement focus includes current spendable resources, fixed non-spendable assets plus deferred outflows of resources, and long-term claims against these assets plus deferred inflows of resources. The resulting net position utilizing this measurement focus provides one measure of the City’s overall long- term financial condition.

The City’s total net position – the difference between its assets and deferred outflows compared to its liabilities and deferred inflows of resources – was $222.6 million, an increase of $18.6 million, or 9.1%, compared to last fiscal year. The net position of governmental activities increased by $12.5 million, or 8.4%, while the net position of business-type activities increased by $6.1 million, or 10.9%.

Net position of $222.6 million consisted of: $148.9 million of net investment in capital assets; $48.6 million of resources that are subject to external restrictions on how they may be used; $36.6 million that may be used to meet the City’s obligations for its business-type activities; and an $11.5 million deficit related to its governmental activities.

Total city-wide governmental revenues for fiscal year 2025 were $125.3 million, an increase of $8.1 million, or 7.0%, compared to the previous year. Program revenues increased $5.6 million, or

11.7%, to $53.7 million. General revenues increased by $2.5 million, or 3.6%, to $71.5 million.

Expenses for governmental and business-type activities were $106.7 million, an increase of $11.0 million or 11.5%.

Short-term Financial Resource (Fund) Focus – The Financial Resources focus measures inflows of current spendable assets. The resulting net difference between current financial assets and current financial liabilities, otherwise known as fund balance (or net working capital in the private sector), is a measure of the City’s ability to finance activities in the near term.

The City’s governmental funds reported a combined ending fund balance of $116.3 million, an increase of $8.9 million compared to the previous fiscal year. Of this amount, $50.5 million (the sum of assigned and unassigned fund balances) may be spent at the City’s discretion.

The City adheres to a Reserve Policy governing committed and assigned fund balances. As of June 30, 2025, the Committed fund balance for the General Fund was $17.1 million, representing

52.1% of total sales tax revenue, inclusive of Measure HH. In the same period, the General Fund's Assigned and Unassigned fund balances were $27.9 million and $24.5 million, respectively. This signifies a $5.8 million reduction in Assigned and a $15.7 million increase in Unassigned fund balances from the previous fiscal year.

City of Fountain Valley
Management’s Discussion and Analysis
For the Fiscal Year Ended June 30, 2025
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Overview of the Financial Statements
This discussion and analysis are intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements and 3) notes to the financial statements. This report also contains other required supplementary information in addition 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, deferred outflows of resources, liabilities, and deferred inflows of resources with the difference between the two reported as net position. 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 to show 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 governmental activities of the City of Fountain Valley include general government, public safety, transportation, community development, community services, and interest on long-term debt. The business-type activities of the City are comprised of water, sewer, and solid waste funds.

The government-wide financial statements include not only the City itself (known as the primary government), but also the legally separate Fountain Valley Housing Authority, and the Fountain Valley Public Financing Authority that function as integral parts of the primary government and have been included in these financial statements.

The government-wide financial statements can be found immediately following this discussion and analysis.

Fund Financial Statements
Fund financial statements are designed to report information about groupings of related accounts 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 of the funds of the City can be divided into three categories:
governmental funds, proprietary funds, and fiduciary funds.

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

City of Fountain Valley
Management’s Discussion and Analysis
For the Fiscal Year Ended June 30, 2025
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Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

The City maintains thirteen individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund and Housing Authority, which are considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation.

Individual fund data for each of the non-major governmental funds is provided in the form of combining statements elsewhere in this report.

The City adopts an annual appropriated budget for its General Fund, Special Revenue Funds, Debt Service Funds and Capital Projects Funds. Budgetary comparison schedules have been provided to demonstrate compliance with these budgets elsewhere in this report.

The basic governmental fund financial statements can be found immediately following the government-wide financial statements.

Proprietary funds are generally used to account for services for which the City charges outside customers, or internal departments of the City. Proprietary funds provide the same type of information as shown in the government-wide statements, only in more detail. The City maintains three 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 water utility, sewer, and solid waste operations.

Internal service funds are used to report activities that provide internal services for the City. The City uses internal service funds to account for its government buildings, liability administration, equipment replacement and information systems. Because internal service funds predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. The internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements.

The basic proprietary fund financial statements can be found immediately following the governmental funds financial statements.

Fiduciary funds financial statements include a Statement of Fiduciary Net Position and a Statement of Changes in Fiduciary Net Position for the private-purpose trust funds and City’s fiduciary custodial funds.

The private-purpose trust funds account for the assets held by the City for the Successor Agency to the Fountain Valley Community Development. The City uses the custodial fund to account for the collection and disbursement of funds for fees assessed by other governments collected by the City on behalf of others.

Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the City’s own programs.

The basic fiduciary fund financial statements can be found immediately following the proprietary fund financial statements.

City of Fountain Valley
Management’s Discussion and Analysis
For the Fiscal Year Ended June 30, 2025
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Notes to the Basic 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 immediately following the fiduciary funds financial statements.

Other Information
In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City’s proportionate share of the net pension liability, contributions to the CalPERS pension plans, changes in the net OPEB liability and related ratios and budget to actual comparisons for major funds, and disclosure information pertaining to the use of the Modified Approach with infrastructure. Required supplementary information can be found immediately following the notes to the basic financial statements.

The combining statements referred to earlier in connection with non-major governmental funds are presented for all non-major Special Revenue Funds, non-major Capital Projects Funds, and all non-major Debt Service Funds. These combining and individual fund statements and schedules can be found immediately following the notes to the required supplementary information.

GOVERNMENT-WIDE FINANCIAL ANALYSIS
Analysis of Net Position
As noted earlier, net position may serve, over time, as a useful indicator of a government’s financial position. This analysis addresses the financial statements of the City as a whole.

City assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $222.6 million as of June 30, 2025. This is an increase of $18.7 million compared to the City’s net position at the end of last fiscal year, as shown in the condensed statement of net position below. 2025 2024 2025 2024 2025 2024
Assets:

Current and other assets $ 147,470,471 $ 138,103,055 $ 51,686,060 $ 47,014,452 $ 199,156,531 $ 185,117,507 Capital assets 134,807,868 135,260,166 34,827,340 34,141,559 169,635,208 169,401,725 Total assets 282,278,339 273,363,221 86,513,400 81,156,011 368,791,739 354,519,232 Deferred outflows of resources 41,303,803 52,874,675 4,826,465 6,201,499 46,130,268 59,076,174 Liabilities:

Other liabilities 4,938,705 6,838,892 5,462,864 5,031,517 10,401,569 11,870,409 Long-term liabilities:

Due in one year 4,616,263 4,974,519 911,040 881,044 5,527,303 5,855,563 Due in more than one year 134,258,578 142,123,580 19,957,769 21,605,752 154,216,347 163,729,332 Total liabilities 143,813,546 153,936,991 26,331,673 27,518,313 170,145,219 181,455,304 Deferred inflows of resources 19,714,757 24,707,808 2,483,248 3,482,600 22,198,005 28,190,408 Net position:

Net investment in capital assets 122,974,738 122,451,600 25,923,130 24,572,602 148,897,868 147,024,202 Restricted 48,610,978 46,854,171 - 48,610,978 - 46,854,171 Unrestricted (11,531,877) (21,712,674) 36,601,814 31,783,995 25,069,937 10,071,321 Total net position $ 160,053,839 $ 147,593,097 $ 62,524,944 $ 56,356,597 $ 222,578,783 $ 203,949,694 Governmental Activities Business-type Activities Total

City of Fountain Valley
Management’s Discussion and Analysis
For the Fiscal Year Ended June 30, 2025
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The City continued to report positive balances in two of the three categories of net position for the government as a whole, as well as for its separate governmental and business-type activities.

Net position – Restricted for governmental activities ($48.6 million or 30.4% of total net position) represents resources that are subject to external restrictions on how they may be used. This is an increase of $1.7 million or 3.7% compared to the previous fiscal year.

Net position – Net investment in capital assets represents the largest portion (76.8%) of the City’s net position for both governmental and business-type activities. The City’s investment of $148.8 million in capital assets is net of accumulated depreciation and any related outstanding debt used to acquire those assets. This is an overall increase of $1.9 million, or 1.3% from the prior year. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending.

Although the investment in capital assets is reported net of related debt, resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

Net position – Unrestricted for the government as a whole has a balance of $25.0 million as of June 30, 2025, an increase of $15 million or 151.5% compared to the prior year. The unrestricted net position for governmental activities has a deficit balance of $11.5 million as of June 30, 2025. This represents a decrease to the deficit balance of $12.3 million or 51.7% compared to the prior year. The deficit balance is the result of implementing Governmental Accounting Standards Board (GASB) statements related to pension and other post-employment benefits (OPEB) liabilities. The deficit reflects the extent to which the City must defer to future periods the financing of a portion of its pension and OPEB liabilities. Generally accepted accounting principles require financial statement recording when a liability is incurred. However, the City, like many other governments, raises and budgets resources needed to liquidate certain liabilities during the year in which the liability is incurred. In the case of the pension liability, the City will continue to fund this obligation on an actuarial basis, contributing the full amount of annual required contributions to the pension system every year. For the OPEB liability, the City pays this obligation on a pay-as-you-go basis. To assist with the paydown of these liabilities, the City set up two IRS Section 115 Trust Funds.

Funds deposited into these accounts are restricted and may only be used for the purpose of the trust.

Analysis of Activities
The Statement of Activities shows how the government’s net position changed during the fiscal year. As shown in the condensed Statement of Activities below, the City’s net position increased by $18.6 million in FY 2024-25.

City of Fountain Valley
Management’s Discussion and Analysis
For the Fiscal Year Ended June 30, 2025
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2025 2024 2025 2024 2025 2024
Revenues:

Charges for services $ 17,417,747 $ 13,502,365 $ 27,964,458 $ 26,556,950 $ 45,382,205 $ 40,059,315 Operating grants and contributions 8,368,537 6,762,548 - 8,368,537 - 6,762,548 Capital grants and contributions 1,268,710 - 17,387 24,175 17,387 1,292,885 General Revenues:

Taxes:

Property taxes 25,739,774 24,808,441 - 25,739,774 - 24,808,441 Sales taxes 15,613,919 15,638,648 - 15,613,919 - 15,638,648 Sales taxes - Measure HH 17,187,563 17,146,213 - 17,187,563 - 17,146,213 Franchise taxes 2,734,645 2,619,098 - 2,734,645 - 2,619,098 Other taxes 1,324,561 1,411,257 - 1,324,561 - 1,411,257 Investment income (loss) 5,538,858 5,172,048 2,268,059 1,470,543 7,806,917 6,642,591 Miscellaneous 892,456 558,720 256,566 214,521 1,149,022 773,241 Total revenues 94,818,060 88,888,048 30,506,470 28,266,189 125,324,530 117,154,237 Expenses:

General government 16,981,730 15,634,174 - 16,981,730 - 15,634,174 Public safety 42,805,933 37,647,876 - 42,805,933 - 37,647,876 Transportation 9,197,505 7,191,749 - 9,197,505 - 7,191,749 Community development 7,764,176 6,248,000 - 7,764,176 - 6,248,000 Community services 5,502,357 4,259,013 - 5,502,357 - 4,259,013 Interest charges 365,420 393,715 - - 365,420 393,715
Water - 17,443,766 - 17,616,366 17,443,766 17,616,366
Sewer - 1,448,605 - 1,839,256 1,448,605 1,839,256
Solid waste - 5,185,949 - 4,858,073 5,185,949 4,858,073 Total expenses 82,617,121 71,374,527 24,078,320 24,313,695 106,695,441 95,688,222 Transfers 259,803 293,693 (259,803) (293,693) - -
Change in net position 12,460,742 17,807,214 6,168,347 3,658,801 18,629,089 21,466,015 Net position - beginning of year, as restated 147,593,097 129,785,883 56,356,597 52,697,796 203,949,694 182,483,679 Net position - end of year $ 160,053,839 $ 147,593,097 $ 62,524,944 $ 56,356,597 $ 222,578,783 $ 203,949,694 Governmental Activities Business-type Activities Total

City of Fountain Valley
Management’s Discussion and Analysis
For the Fiscal Year Ended June 30, 2025
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Governmental activities increased the City’s net position by $12.5 million compared to fiscal year 2024.

Program revenues rose by $4.3 million, or 16.6%, to $25.7 million. This is primarily due to a 29.0% increase in Charges for Services ($3.9M) attributed to a rise in EMS revenue and parking fines within Public Safety and higher Community Development activity for building permits, plan checks, and CEQA fees. General revenues reached $68.0 million, reflecting a $1.5 million increase (2.5%) over the prior fiscal year, primarily driven by higher Property Tax collections ($931k) and increased Investment Income ($366k) amid a persistently elevated interest rate environment.

Expenses for governmental activities totaled $82.6 million, representing an increase of $11.2 million (15.2%) compared to 2024. This year-over-year variance is attributed to several factors: changes related to GASB 68 pension reporting across all programs; the introduction of an OPEB trust contribution within General Government; rising labor costs, employee benefits, and emergency medical services in Public Safety; and the reclassification of Capital Improvement Program (CIP) expenditures, which were previously reported as a major fund and are now reflected as a nonmajor fund under Transportation.

Business-type activities increased the City’s net position by $6.1 million. Program revenue was 5.3% higher than last fiscal year, at $27.9 million, while general revenue increased by $0.8 million due to investment income and an unrealized gain from the FMV adjustment. Expenses for the Water and Sewer Funds decreased slightly by $0.2 million (1%) and $0.4 million (21.2%), respectively, due to changes in pension and OPEB. Solid Waste Funds increased by $0.3 million (6.7%) due to a 5.33% CPI increase to residential and commercial trash collection rates that took effect in January 2025.

FINANCIAL ANALYSIS OF THE CITY’S FUNDS
As noted earlier, the City uses fund accounting to demonstrate and ensure compliance with finance-related legal requirements.

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, 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 close of Fiscal Year 2024-25, the City’s governmental funds reported a combined ending fund balance of $116.3 million, an increase of $8.9 million from the prior year balance. Approximately $0.15 million (0.1%) of this combined amount is not available for spending; $48.6 million (41.8%) is restricted; $17.0 million (14.7%) is committed; $28 million (24.1%) is assigned; and $27.5 million (19.3%) is unassigned.

As of June 30, 2025, the general fund’s total fund balance was $88.9 million, an increase of $8.8 million, or 11% from the 2024 fiscal year. The net increase is primarily attributed to increased revenues in investment income and charges for services, combined with a reduction in capital improvement expenditures.

There are two major funds within the governmental fund accounts. They include the General Fund and the Fountain Valley Housing Authority. The Fountain Valley Housing Authority was established in 2011 to preserve the ability to provide affordable housing uses and activities. At the end of the fiscal year, the fund balance in the Housing Authority Fund was $17.7 million, reflecting a trivial change since the previous fiscal year.

City of Fountain Valley
Management’s Discussion and Analysis
For the Fiscal Year Ended June 30, 2025
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The Capital Projects Fund was reported as a major fund in the fiscal year 2024 financial statements due to its critical role in financing and accounting for the City’s significant capital improvements and infrastructure development projects. However, for fiscal year 2024-25, the fund reported a $0 fund balance as all revenues and resources were fully utilized for project expenditures, and is currently classified as nonmajor.

As of June 30, 2025, combined nonmajor governmental fund balances totaled $9.8 million, an increase of $0.2 million compared to the 2024 fiscal year. The overall increase in fund balance is attributed to activity in the Road Maintenance and Rehab Program (SB1) Fund, Gas Tax Fund, and Criminal Activities Fund.

The Road Maintenance Fund balance increased by $0.6 million (54.5%) due to the Talbert and Euclid road rehabilitation project remaining incomplete at year-end, while the Gas Tax Fund balance decreased by $0.6 million (99.1%) following the completion of the quadrant C3 residential roadway rehabilitation. The Criminal Diversion fund balance increased by $0.3 million due to interest earnings and the recognition of state grants and asset seizure funds.

The City’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail.

Business-type activity funds: there are three (3) funds in this group: Water Utility, Sewer Utility, and Solid Waste.

Total net position for the Water Utility Fund increased by $4.5 million, to $43.2 million as of June 30, 2025.

Of this total, $24.9 million was unrestricted.

Total net position for the Sewer Utility Fund increased by $1.7 million, to $18.0 million as of June 30, 2025.

Of this total, $10.4 million was unrestricted.

Total net position for the Solid Waste Fund decreased by $26 thousand, to $1.3 million as of June 30, 2025.

The entire amount was unrestricted.

Water and Sewer rates have remained unchanged since July 2022, which was the final year for the Council approved five-year implementation that began July 1, 2018. Water and sewer revenue increased by 5.2% and 9.2%, respectively due to higher consumption. Solid Waste rates were raised in January 2025 which resulted in an 4.4% increase in revenues that were offset by a 6.7% increase in expenses.

Internal service funds: There are five (5) funds in this group: Information Technology Fund, Governement Buildings Fund, Fleet Management Fund, Capital Equipment Fund, and Self Insurance Fund. Total net position for the Internal Service Funds was $18.9 million as of June 30, 2025, representing a increase of $1.8 million, or 10.5%.

GENERAL FUND BUDGETARY HIGHLIGHTS
A detailed budgetary comparison schedule for the year ended June 30, 2025, is presented as required supplementary information following the notes to the financial statements. Revenues and transfers in were $88.6 million, or $5.1 million higher than the City’s final budget of $83.5 million. The significant revenue surplus was primarily driven by investment income, which exceeded the final budget by $4.3 million. This increase stemmed from elevated interest earnings and an unrealized gain resulting from the fair market value adjustment recorded as of June 30, 2025.

City of Fountain Valley
Management’s Discussion and Analysis
For the Fiscal Year Ended June 30, 2025
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Expenditures and transfers out were $79.8 million, or 11.5% lower than the final budget of $90.4 million.

General Government expenditures exceeded the budget by $6.1 million, primarily due to the presentation of the Employee Benefits Internal Service Fund (ISF) in the Annual Comprehensive Financial Report (ACFR) despite not meeting the technical criteria for an ISF classification. Consequently, although revenues and expenditures are consolidated into the General Fund for financial reporting purposes, the ISF budget is not incorporated during the year-end process, resulting in a perceived budget overage in General Government expenditures. It’s important to note that all expenditures were properly appropriated and approved by the City Council. To address this issue, City Staff will eliminate the Employee Benefits ISF in fiscal year 2026 and fully integrate its revenues and expenditures into the General Fund.

Differences between the original and final revenue budget reflect an increase of $3.2 million or 4.1%. The most notable adjustment was a budget increase of $2.3 million for a new Fire Department Emergency Medical Transportation funding program. Other revenue adjustments included $0.4 million for police revenue including parking fines and a School Resource Officer for the Garden Grove Unified School District cooperative agreement and $0.4 million for public works inspection fees and plan checks.

Differences between the original and final expenditures budget reflect an increase of $3.8 million or 5.5%.

The expenditure budget was increased at mid-year to include funding for the City’s OPEB trust, additional personnel costs, and expenditures for the new Fire Department Emergency Medical Transportation program.

The table below summarizes the General Fund’s original budget, final budget, and actual results for 2025 revenues, expenditures, and transfers:

Original Budget Final Budget Actual Amount
Variance with
Final Budget
Revenues $ 79,541,095 $ 82,814,523 $ 87,941,449 $ 5,126,926 Expenditures 70,320,810 74,175,530 76,629,111 (2,453,581) Other financing sources (uses) (16,272,895) (15,482,755) (2,559,183) 12,923,572 Net change in fund balance $ (7,052,610) $ (6,843,762) $ 8,753,155 $ 15,596,917

CAPITAL ASSETS AND LONG-TERM LIABILITIES
The city’s investment in capital assets for its governmental and business-type activities as of June 30, 2025, amounts to $169.6 million. This investment includes land, buildings, construction in progress, improvements other than buildings, vehicles, equipment, park facilities, roads, highways, sidewalks, curbs, and gutters.

The total increase in the city’s investment for the current fiscal year was $5.3 million. However, this increase was offset by $5.1 million in depreciation expenses, resulting in a net increase of $0.2 million, which corresponds to a 0.14% growth from the previous fiscal year. This net growth is mainly driven by the rise in construction in progress due to several ongoing capital projects, as well as investments in vehicles and equipment.

Additional information on the City’s capital assets can be found in Note 4 in the Notes to the Basic Financial Statements.

City of Fountain Valley
Management’s Discussion and Analysis
For the Fiscal Year Ended June 30, 2025
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2025 2024 2025 2024 2025 2024
Land $ 15,003,148 $ 15,003,148 $ 123,076 $ 123,076 $ 15,126,224 $ 15,126,224 Vehicles and equipment 6,054,464 6,212,448 1,574 (278,629) 6,056,038 5,933,819 Furniture and fixtures 344,306 169,507 - - 344,306 169,507 Buildings 7,427,738 7,877,411 18,775,480 18,708,282 26,203,218 26,585,693 Construction in progress 5,520,554 6,321,423 452,592 611,891 5,973,146 6,933,314 Improvements other than structures 6,918,056 5,517,236 15,474,618 14,976,939 22,392,674 20,494,175 Rights of way 17,948,464 17,948,464 - 17,948,464 - 17,948,464 Infrastructure 74,987,789 75,703,932 - 74,987,789 - 75,703,932 Subscription-based IT assets 603,349 506,597 - - 603,349 506,597 Net capital asests $ 134,807,868 $ 135,260,166 $ 34,827,340 $ 34,141,559 $ 154,508,984 $ 154,275,501 Governmental Activities Business-type Activities Total
The City elected to use the modified approach in reporting its street pavement infrastructure network. The condition of the City’s roadway pavement is measured using the Carte Graph Pavement Management System. The system uses a measurement scale that is based on a Pavement Condition Index (PCI) ranging from zero for a very poor pavement to 100 for a pavement in very good condition. The overall condition of the City’s pavement network, based on the most recently completed assessment performed in fiscal year 2024, was “Very Good” with a weighted average PCI of 84.7 based on the surface area of each segment.

This reflects a slight downtick due to not being able to pave as many residential quadrants as a result of increasing costs. There have been no significant changes in the assessed condition of the infrastructure assets from the last fiscal year. The current condition of these assets complies with the condition levels adopted by the City. Variances in budgeted versus actual expenditures is due to the timing of project completion.

At year-end, the city had $159.7 million in outstanding long-term debt, reflecting a net decrease of $9.8 million compared to the prior year. This decrease is primarily attributed to the following: a $5.1 million reduction in net pension liability, a $0.85 million decrease in net OPEB liability, a $1.7 million decrease in claims payable, and a $2.3 million reduction in bond liabilities due to scheduled principal repayments.

Additionally, there was a $0.014 million increase in the city’s lease liabilities, related to the present value of future subscription-based IT agreement payments, and a $0.1 million increase in compensated absences. 2025 2024 2025 2024 2025 2024
Revenue bonds $ - $ 8,814,390 - $ $ 9,514,059 $ 8,814,390 $ 9,514,059 Lease revenue bonds 11,074,610 11,801,452 - 11,074,610 - 11,801,452 Taxable pension obligation bonds 10,888,239 11,795,853 - 10,888,239 - 11,795,853 Compensated absences 2,728,847 2,644,100 251,983 230,459 2,980,830 2,874,559 Claims payable 2,317,770 3,997,800 - 2,317,770 - 3,997,800 Subscription liabilities 442,445 403,952 - - 442,445 403,952 Net OPEB liability 20,315,663 20,994,082 5,308,572 5,485,846 25,624,235 26,479,928 Net pension liability 91,107,267 95,460,860 6,493,864 7,256,432 97,601,131 102,717,292 Total long-term liabilities $ 138,874,841 $ 147,098,099 $ 20,868,809 $ 22,486,796 $ 159,743,650 $ 169,584,895 Governmental Activities Business-type Activities Total
Additional information on the City’s long-term liabilities can be found in Note 5 in the Financial Section of this report.

FISCAL YEAR 2025-2026 OPERATING BUDGET AND ENTERPRISE RATES The City Council adopted the fiscal year 2025-2026 Budget with total appropriations of $152.6 million and projected revenues of $132.0 million.

City of Fountain Valley
Management’s Discussion and Analysis
For the Fiscal Year Ended June 30, 2025
-14-
The General Fund estimated revenues for fiscal year 2025-2026 are $83.8 million and budgeted appropriations are $82.2 million. The General Fund includes an additional $7.3 million of one-time capital improvement projects that utilize reserves, which are legally required to be spent on specific capital projects.

The General Fund Operating Budget is balanced with a healthy operating surplus of $1.5 million, which will be used to build and maintain reserves. Measure HH provides the necessary funding to maintain essential city services, fund capital improvements, pay down debt, and restore reserves. The City’s fiscal policy is guided by the 20-Year Financial Plan with the goal of being debt free in 2037 when Measure HH sunsets.

The City is on a solid path towards long-term fiscal sustainability.

The fiscal year 2025-2026 budget includes an approved 5.24% CPI increase to residential and commercial trash collection rates as of January 2026. Water and sewer rates have not been increased for the current fiscal year. Future increases will be dependent on public hearings and Council adoption of an updated resolution.

REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of the financial position of the City for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City of Fountain Valley, Finance Department, 10200 Slater Avenue, Fountain Valley, California 92708.

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BASIC FINANCIAL STATEMENTS

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City of Fountain Valley
Statement of Net Position
June 30, 2025
The accompanying notes are an integral part of these financial statements. -15-
Primary Government
Governmental Business-Type
Activities Activities Total
Assets:

Cash and investments $ 99,617,299 $ 45,505,184 $ 145,122,483 Restricted cash and investments - 821,466 821,466
Restricted cash and investments - pension 18,973,664 18,973,664 - Receivables:

Accounts 8,507,354 4,923,201 13,430,555
Accrued interest 1,534,252 1,534,252 -
Loans 8,181,272 8,181,272 -
Leases 9,068,690 9,068,690 -
Inventories 12,590 436,209 448,799
Prepaid items 1,575,350 1,575,350 -
Capital assets, not being depreciated 102,020,863 575,668 102,596,531 Capital assets, net of accumulated depreciation 32,787,005 34,251,672 67,038,677 Total assets 282,278,339 86,513,400 368,791,739
Deferred outflows of resources:

Deferred outflows related to pension 33,023,674 2,662,830 35,686,504 Deferred outflows related to OPEB 8,280,129 2,163,635 10,443,764 Total deferred outflows of resources 41,303,803 4,826,465 46,130,268 Liabilities:

Accounts payable 3,182,614 4,967,491 8,150,105
Accrued wages payable 940,017 72,024 1,012,041
Accrued interest payable 239,348 166,466 405,814
Deposits payable 122,597 58,469 181,066
Unearned revenue 454,129 198,414 652,543
Long term liabilities
Due within one year 4,616,263 911,040 5,527,303
Due in more than one year:

Other long-term liabilities 22,835,648 8,155,333 30,990,981 Net pension liability 91,107,267 6,493,864 97,601,131
Net OPEB liability 20,315,663 5,308,572 25,624,235
Total liabilities 143,813,546 26,331,673 170,145,219
Deferred inflows of resources:

Deferred inflows related to pension 5,190,561 920,106 6,110,667 Deferred inflows related to OPEB 5,982,072 1,563,142 7,545,214 Deferred inflows related to leases 8,542,124 8,542,124 - Total deferred inflows of resources 19,714,757 2,483,248 22,198,005 Net position:

Net investment in capital assets 122,974,738 25,923,130 148,897,868 Restricted for:

Public safety 1,791,359 1,791,359 -
Transportation 9,585,694 9,585,694 -
Housing 18,064,264 18,064,264 -
Community development 195,997 - 195,997
Pension 18,973,664 18,973,664 -
Unrestricted (deficit) (11,531,877) 36,601,814 25,069,937 Total net position $ 160,053,839 $ 62,524,944 $ 222,578,783

City of Fountain Valley Statement of Activities For the Fiscal Year Ended June 30, 2025 The accompanying notes are an integral part of these financial statements. -16-

City of Fountain Valley
Balance Sheet
Governmental Funds
June 30, 2025
The accompanying notes are an integral part of these financial statements. -17-
Special
Revenue Fund
General
Housing
Authority
Nonmajor
Governmental
Funds Total
Assets:

Cash and investments $ 63,753,132 $ 9,401,452 $ 10,422,855 $ 83,577,439 Receivables:

Accounts 7,699,397 - 796,546 8,495,943
Accrued interest 1,224,450 309,802 - 1,534,252
Loans - 7,970,926 210,346 8,181,272
Leases 9,068,690 - - 9,068,690
Due from other funds 192,187 - - 192,187
Prepaid items 150,808 30,000 - 180,808
Restricted Assets:

Cash and investments - pension 18,973,664 - - 18,973,664 Total assets $ 101,062,328 $ 17,712,180 $ 11,429,747 $ 130,204,255 Liabilities, deferred inflows of resources,
and fund balances:

Liabilities:

Accounts payable $ 1,814,005 $ 2,033 $ 985,865 $ 2,801,903 Accrued wages payable 898,726 3,323 5,907 907,956
Deposits payable 122,597 - - 122,597
Unearned revenues - - 454,129 454,129
Due to other funds - - 192,187 192,187
Total liabilities 2,835,328 5,356 1,638,088 4,478,772
Deferred inflows of resources:

Deferred inflows related to leases 8,542,124 - - 8,542,124 Unavailable revenues 826,748 - 28,659 855,407
Total deferred inflows of resources 9,368,872 - 28,659 9,397,531 Fund balances:

Nonspendable:

Prepaid items 150,808 - - 150,808
Restricted for:

Public safety - - 1,791,359 1,791,359
Transportation 2,238,242 - 7,347,452 9,585,694
Housing - 17,706,824 357,440 18,064,264
Community development - - 195,997 195,997
Pension 18,973,664 - - 18,973,664
Committed:

Emergencies 17,089,652 - - 17,089,652
Assigned to:

Employee benefits 2,728,847 - - 2,728,847
Capital projects 1,409,756 - 70,752 1,480,508
Measure HH 22,102,682 - - 22,102,682
Economic development 1,708,965 - - 1,708,965
Unassigned 22,455,511 - - 22,455,511
Total fund balances 88,858,127 17,706,824 9,763,000 116,327,951 Total liabilities, deferred inflows of
resources, and fund balances $ 101,062,327 $ 17,712,180 $ 11,429,747 $ 130,204,254

City of Fountain Valley
Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position
June 30, 2025
The accompanying notes are an integral part of these financial statements. -18-
Fund balances of governmental funds $ 116,327,951
132,484,261
Long-term liabilities (27,014,874)
Accrued interest on long-term debt (232,975)
Net OPEB obligation (20,315,663)
Net pension liability (91,107,267)
855,407
Pension related deferred outflow of resources 33,023,674 OPEB related deferred outflows of resources 8,280,129
Pension related deferred inflows of resources (5,190,561) OPEB related deferred inflows of resources (5,982,072)
18,925,828
Net position of governmental activities $ 160,053,838
Internal service funds are used by management to charge the costs of certain activities, such as fleet management and information technology, to individual funds. The assets and liabilities of the internal service funds must be added to the Statement of Net Position.

Revenues that do not meet the "availability" criteria for revenue recognition are deferred inflows of resources in the governmental funds.

Deferred outflows and inflows of resources related to pension and OPEB are not reported in the government funds:

Amounts reported for governmental activities in the statement of net position are different because:

Capital assets net of accumulated depreciation used in governmental activities are not current financial resources and, therefore, are not reported in the governmental funds.

Noncurrent liabilities, as listed below, are not due and payable in the current period and therefore are not reported in the governmental funds:

City of Fountain Valley
Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds
For the Fiscal Year Ended June 30, 2025
The accompanying notes are an integral part of these financial statements. -19-
Special
Revenue Fund
Capital
Projects Fund
General
Housing
Authority
Capital
Improvement
Program
(formerly
major)
Nonmajor
Governmental
Funds Total
Revenues:

Taxes $ 63,136,598 $ - $ - $ 63,136,598
Licenses and permits 2,836,587 - - 2,836,587
Fines and penalties 704,984 - - 704,984
Investment income 5,524,662 454,243 324,814 6,303,719
Rental income 1,367,747 - - 1,367,747
Intergovernmental 1,215,788 - 5,517,042 6,732,830
Charges for services 12,174,871 512 18,144 12,193,527
Miscellaneous 980,212 6,180 - 986,392
Total revenues 87,941,449 460,935 5,860,000 94,262,384
Expenditures:

Current:

General government 17,673,744 - - 17,673,744
Public safety 41,425,930 - 134,433 41,560,363
Transportation 4,514,667 - 4,801,913 9,316,580
Community development 6,301,853 480,076 304,859 7,086,788 Community services 5,165,149 - 384 5,165,533
Capital outlay 608,143 - 1,745,743 2,353,886
Debt service:

Principal 939,155 - 681,944 1,621,099
Interest 470 - 408,873 409,343
Total expenditures 76,629,111 480,076 8,078,149 85,187,336 Excess (deficiency) of revenues
over (under) expenditures 11,312,338 (19,141) (2,218,149) 9,075,048 Other financing sources (uses):

Transfers in 678,033 - 7,599,117 8,277,150
Transfers out (3,237,216) - (5,200,466) (8,437,682)
Total other financing sources (uses) (2,559,183) - 2,398,651 (160,532) Net change in fund balances 8,753,155 (19,141) 180,502 8,914,516 Fund balances, beginning year,
as previously reported 80,104,972 17,725,965 - 9,582,498 107,413,435 Prior period restatement:

Adjustment - change in reporting entity (major to nonmajor) - - - - - Fund balances, beginning of year 80,104,972 17,725,965 - 9,582,498 107,413,435 Fund balances, end of year $ 88,858,127 $ 17,706,824 $ - $ 9,763,000 $ 116,327,951

City of Fountain Valley
Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance of Governmental Funds to the Statement of Activities For the Fiscal Year Ended June 30, 2025
The accompanying notes are an integral part of these financial statements. -20-
Net changes in fund balances - total governmental funds $ 8,914,516 Capital outlay 1,781,526
Depreciation (3,095,091)
Loss on disposal (21,606)
Changes in accrued interest on long-term debt 16,411
Changes in claims and judgments obligation 1,680,030
Changes in bond premium/discount 27,512
Changes in compensated absence benefits, net (84,747)
Principal repayments 1,621,099
555,675
(3,855,673)
3,136,296
1,784,793
Change in net position of governmental activities $ 12,460,741 Internal service funds are used by management to charge the costs of certain activities, such as fleet management and information technology, to individual funds. The net revenues (expenses) of the internal service funds is reported with governmental activities.

Governmental funds recognize OPEB costs when employer contributions are made; however, in the statement of activities, OPEB costs are recognized on the accrual basis. This is the difference between accrual-basis OPEB costs and actual employer contributions.

Governmental funds recognize pension costs when employer contributions are made; however, in the statement of activities, pension costs are recognized on the accrual basis. This is the difference between accrual-basis pension costs and actual employer contributions.

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 costs of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlay exceeded depreciation in the current period.

Some expenses reported in the statement of activities do not require the use of current resources and therefore are not reported as expenditures in governmental funds. The following adjustments combine the net change of these liabilities:

Repayment of debt principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net position.

Revenues reported as unavailable revenue in the governmental funds. Amounts are not recorded as revenue under the modified accrual basis of accounting. This is the net change in unavailable revenue from the prior fiscal year.

City of Fountain Valley
Statement of Fund Net Position
Proprietary Funds
June 30, 2025
The accompanying notes are an integral part of these financial statements. -21-
Water Utility Sewer Utility
Solid Waste
(Nonmajor) Total
Internal
Service Funds
Assets:

Current:

Cash and investments $ 32,572,381 $ 11,939,029 $ 993,774 $ 45,505,184 $ 16,039,860 Accounts receivable 3,578,560 425,711 918,930 4,923,201 11,411 Inventory 436,209 - - 436,209 12,590
Prepaid items - - - - 1,394,542
Restricted assets:

Cash and investments 821,466 - - 821,466 -
Total current assets 37,408,616 12,364,740 1,912,704 51,686,060 17,458,403 Noncurrent:

Capital assets not being depreciated 338,781 236,887 - 575,668 - Capital assets - net of accumulated depreciation 26,868,086 7,383,586 34,251,672 - 2,323,607 Total capital assets, net 27,206,867 7,620,473 34,827,340 - 2,323,607 Total noncurrent assets 27,206,867 7,620,473 34,827,340 - 2,323,607 Total assets 64,615,483 19,985,213 1,912,704 86,513,400 19,782,010 Deferred outflows of resources:

Deferred amounts from pension plan 2,138,670 524,160 - 2,662,830 - Deferred amounts from OPEB plan 1,737,738 425,897 - 2,163,635 - Total deferred outflows of resources 3,876,408 950,057 - 4,826,465 - Liabilities:

Current:

Accounts payable 4,505,458 34,834 427,199 4,967,491 380,711 Accrued wages payable 58,732 13,292 - 72,024 32,061
Interest payable 166,466 - - 166,466 6,373
Deposits payable 58,469 - - 58,469 -
Unearned revenues - - 198,414 198,414 -
Compensated absences, current portion 149,012 32,359 - 181,371 - Long-term liabilities, current portion 729,669 - - 729,669 204,290 Total current liabilities 5,667,806 80,485 625,613 6,373,904 623,435 Noncurrent:

Compensted absences, net of current portion 50,589 20,023 - 70,612 - Long-term liabilities, net of current portion 8,084,721 - - 8,084,721 232,747 Net pension liability 5,215,591 1,278,273 - 6,493,864 - Net OPEB liability 4,263,616 1,044,956 - 5,308,572 -
Total noncurrent liabilities 17,614,517 2,343,252 19,957,769 - 232,747 Total liabilities 23,282,323 2,423,737 625,613 26,331,673 856,182 Deferred inflows of resources:

Deferred amounts from pension plan 738,989 181,117 - 920,106 - Deferred amounts from OPEB plan 1,255,448 307,694 - 1,563,142 - Total deferred inflows of resources 1,994,437 488,811 2,483,248 - - Net position:

Net investment in capital assets 18,312,175 7,610,955 25,923,130 - 1,886,570 Unrestricted 24,902,956 10,411,767 1,287,091 36,601,814 17,039,258 Total net position $ 43,215,131 $ 18,022,722 $ 1,287,091 $ 62,524,944 $ 18,925,828 Business-Type Activities

City of Fountain Valley
Statement of Revenues, Expenses and Changes in Fund Net Position Proprietary Funds
For the Fiscal Year Ended June 30, 2025
The accompanying notes are an integral part of these financial statements. -22-
Water Utility Sewer Utility
Solid Waste
(Nonmajor) Total
Internal
Service Funds
Operating revenues:

Charges for services $ 20,142,885 $ 2,717,534 $ 5,104,039 $ 27,964,458 $ 12,909,758 Miscellaneous 256,566 - - 256,566 - Total operating revenues 20,399,451 2,717,534 5,104,039 28,221,024 12,909,758 Operating expenses:

Distribution maintenance 215,956 64,728 - 280,684 - Utility administration 434,823 880,516 - 1,315,339 - Contract services - 170,705 5,185,949 5,356,654 - Pumping and maintenance 2,273,985 - - 2,273,985 - Water treatment 13,232,266 - - 13,232,266 - Personnel services - - - - 4,814,056 Maintenance and operations - - - - 2,358,342
Equipment and software - - - - 1,918,657
Insurance premiums - - - - 1,925,263
Depreciation 1,028,477 332,656 - 1,361,133 619,552
Total operating expenses 17,185,507 1,448,605 5,185,949 23,820,061 11,635,870 Operating income 3,213,944 1,268,929 (81,910) 4,400,963 1,273,888 Nonoperating revenue (expense):

Investment income 1,659,775 569,368 38,916 2,268,059 -
Intergovernmental - - 17,387 17,387 -
Interest expense (258,259) - - (258,259) - Sale of assets - - - - 90,570 Total non-operating revenue (expense) 1,401,516 569,368 56,303 2,027,187 90,570 Income before transfers 4,615,460 1,838,297 (25,607) 6,428,150 1,364,458 Transfers:

Transfers in - - - - 420,335
Transfers out (117,066) (142,737) - (259,803) - Total transfers (117,066) (142,737) - (259,803) 420,335 Net change in net position 4,498,394 1,695,560 (25,607) 6,168,347 1,784,793 Net position, beginning of year 38,716,737 16,327,162 1,312,698 56,356,597 17,141,035 Net position, end of year $ 43,215,131 $ 18,022,722 $ 1,287,091 $ 62,524,944 $ 18,925,828 Business-Type Activities

City of Fountain Valley
Statement of Cash Flows
Proprietary Funds
For the Fiscal Year Ended June 30, 2025
The accompanying notes are an integral part of these financial statements. -23-
Water Utility Sewer Utility Solid Waste Total
Internal
Service Funds
Cash flows from operating activities:

Cash received from customers and users $ 20,224,807 $ 2,695,952 $ 5,025,632 $ 27,946,391 $ 13,148,347 Cash paid to suppliers for goods and services (15,020,973) (233,439) (5,577,097) (20,831,509) (7,570,501) Cash paid to employees for services (800,700) (985,251) - (1,785,951) (4,781,995) Net cash provided by (used by) operating activities 4,403,134 1,477,262 (551,465) 5,328,931 795,851 Cash flows from noncapital activities:

Cash paid (to) from other funds for advances (117,066) (142,737) - (259,803) 420,335 Net cash used by noncapital activities (117,066) (142,737) - (259,803) 420,335 Cash flows from capital and related financing activities:

Acquisition and construction of capital assets (1,593,846) (453,068) - (2,046,914) (962,606) Proceeds from sales of assets - - - - 90,570
Loan payment (625,000) - - (625,000) (487,171)
Interest paid (348,553) - - (348,553) -
Intergovernmental grant proceeds - - 17,387 17,387 -
Net cash provided by (used by) capital and related financing activities (2,567,399) (453,068) 17,387 (3,003,080) (1,359,207) Cash flows from investing activities:

Interest received on investments 1,659,775 569,368 38,916 2,268,059 - Net cash provided by (used by) investing activities 1,659,775 569,368 38,916 2,268,059 - Net increase in cash and cash equivalents 3,378,444 1,450,825 (495,162) 4,334,107 (143,021) Cash and cash equivalents at beginning of fiscal year 30,015,403 10,488,204 1,488,936 41,992,543 16,182,881 Cash and cash equivalents at end of fiscal year $ 33,393,847 $ 11,939,029 $ 993,774 $ 46,326,650 $ 16,039,860 Reconciliation of cash and cash equivalents to
amounts reported on the statement of net position
Cash and investments $ 32,572,381 $ 11,939,029 $ 993,774 $ 45,505,184 $ 16,039,860 Restricted cash and investments 821,466 - - 821,466 -
Cash and cash equivalents at end of fiscal year $ 33,393,847 $ 11,939,029 $ 993,774 $ 46,326,650 $ 16,039,860 Reconciliation of operating income to net cash
provided by operating activities
Operating income $ 3,213,944 $ 1,268,929 $ (81,910) $ 4,400,963 $ 1,273,888 Adjustments to reconcile operating income to net cash
provided by operating activities:

Depreciation 1,028,477 332,656 - 1,361,133 619,552
Decrease (increase) in receivables (174,644) (21,582) (75,383) (271,609) 238,589 Decrease (increase) in inventory (65,892) - - (65,892) - Decrease (increase) in prepaid items - - - - (1,232,442) Decrease (increase) in deferred outflows 1,104,367 270,667 - 1,375,034 - Increase (decrease) in accounts payable 780,077 1,994 (391,148) 390,923 (142,170) Increase (decrease) in accrued wages payable 58,732 13,292 - 72,024 32,061 Increase (decrease) in accrued interest payable - - - - 6,373 Increase (decrease) in deposits payable (12,951) - - (12,951) - Increase (decrease) in compensated absences 28,503 (6,979) - 21,524 - Increase (decrease) in unearned revenues - - (3,024) (3,024) - Increase (decrease) in pension and OPEB liabilities (754,841) (185,001) - (939,842) - Increase (decrease) in deferred inflows (802,638) (196,714) - (999,352) - Total adjustments 1,189,190 208,333 (469,555) 927,968 (478,037) Net cash provided by operating activities $ 4,403,134 $ 1,477,262 $ (551,465) $ 5,328,931 $ 795,851 Non-cash Financing Activities:

Acquisition of subscription assets - - - - (539,819)
Subscription liability - - - - 539,819
Business-Type Activities

City of Fountain Valley
Statement of Fiduciary Net Position
Fiduciary Funds
June 30, 2025
The accompanying notes are an integral part of these financial statements. -24-
PrivatePurpose Trust
Fund
Successor
Agency
Custodial
Fund
Assets:

Cash and investments $ 565,823 $ 954,685
Total assets 565,823 954,685
Liabilities:

Account payable - 843,106
Total liabilities - 843,106
Net position:

Restricted for others 565,823 111,579
Total net position $ 565,823 $ 111,579

City of Fountain Valley
Statement of Changes in Fiduciary Net Position
Fiduciary Funds
For the Fiscal Year Ended June 30, 2025
The accompanying notes are an integral part of these financial statements. -25-
PrivatePurpose Trust
Fund
Successor
Agency
Custodial
Fund
Additions:

Taxes $ 100,000 $ -
Net investment income 15,536 37
Fees assessed by other governments - 1,173,841
Total additions 115,536 1,173,878
Deductions:

Community development 100,000 -
Payments to other governments - 1,170,211
Total deductions 100,000 1,170,211
Change in net position 15,536 3,667
Net position, beginning of year 550,287 107,912
Net position, end of year $ 565,823 $ 111,579

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City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-26-
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The basic financial statements of the City of Fountain Valley, California (City) have been prepared in accordance with accounting principles generally accepted in the United States of America, as applied to government units. The Governmental Accounting Standards Board is the accepted standardsetting body for establishing governmental accounting and financial reporting principles. The following is a summary of the City’s significant accounting policies.

A) Reporting Entity
The City of Fountain Valley is a general law city governed by an elected five-member city council. As required by generally accepted accounting principles, these financial statements present the City of Fountain Valley (the primary government) and its component units. The component units discussed below are included in the City’s reporting entity because of the significance of their operational or financial relationship with the City. These entities are legally separate from the City. However, the City’s elected officials have a continuing full or partial accountability for fiscal matters of the other entities.

An organization is fiscally dependent on the primary government if it is unable to adopt its budget, levy taxes or set rates or charges, or issue bonded debt without approval by the primary government.

In a blended presentation, a component unit’s balances and transactions are reported in a manner similar to the balances and transactions of the City. Component units are presented on a blended basis when the component unit’s governing body is substantially the same as the City’s or the component unit provides services almost entirely to the City and the City either has a financial benefit or burden relationship or has operational responsibility for the component unit. The component units discussed below have governing bodies substantially the same as the City and the City has operational responsibility for them. Therefore, these component units of the City are blended within the financial statements of the City.

The Fountain Valley Housing Authority (Housing Authority) was established in 2011 to preserve the ability to provide affordable housing activities. The City provides management assistance to the Housing Authority and the members of the City Council also act as the Housing Authority’s governing body. The activities of the Housing Authority are reported in the Housing Authority Special Revenue Fund. Separate financial statements are not prepared for this blended component unit.

The Fountain Valley Public Financing Authority (Authority) was established on August 19, 2014, for the purpose of issuing tax exempt obligations for the water utility proprietary fund (2014 Revenue Bond) and for the City’s governmental activities (Lease Revenue Bond, Series 2016A and Clean Renewable Energy Bonds). The activities of the Authority are reported in the Water Utility Proprietary Fund and the Fountain Valley Public Financing Authority Debt Service Fund. Separate financial statements are not prepared for this blended component unit.

B) Basis of Accounting, Measurement Focus and Financial Statement Presentation The basic financial statements of the City are composed of the following:

Government-wide financial statements
Fund financial statements
Notes to basic financial statements

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-27-
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) B) Basis of Accounting, Measurement Focus and Financial Statement Presentation (continued) The accounting and financial reporting treatment is determined by the applicable measurement focus and basis of accounting. Measurement focus indicates the type of resources being measured such as current financial resources or economic resources. The basis of accounting indicates the timing of transactions or events for recognition in the financial statements.

Government-Wide Financial Statements
While separate government-wide and fund financial statements are presented, they are interrelated. In the government-wide financial statements, the governmental activities column incorporates data from governmental funds and internal service funds, while business-type activities incorporate data from the government’s enterprise funds.

Government-wide financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. Under the economic resources measurement focus, all (both current and long-term) economic resources and obligations of the reporting government are reported in the government-wide financial statements. Accrual basis of accounting refers to when revenues and expenses are recognized in the accounts and reported in the financial statements. Under the accrual basis of accounting, revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows.

Revenue from property taxes is recognized in the fiscal year which the taxes are levied. Grants and similar items are recognized as revenues as soon as the eligibility requirements imposed by the provider have been satisfied. Special assessments are recorded as revenue when earned. Unbilled receivables are recorded as revenues when services are provided.

The Statement of Activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. The types of transactions reported as program revenues for the City are reported in three categories:

Charges for services,
Operating grants and contributions
Capital grants and contributions.

Charges for services include revenues from customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function. Grants and contributions include revenues restricted to meeting the operational or capital requirements of a particular function. Taxes and other items not properly included among program revenues are reported instead as general revenues.

Amounts paid to acquire capital assets are capitalized as assets in the government-wide financial statements, rather than reported as expenses. Proceeds of long-term debt are recorded as a liability in the government-wide financial statements, rather than as another financing source.

Amounts paid to reduce long-term indebtedness of the reporting government are reported as a reduction of the related liability, rather than as an expenditure.

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-28-
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) B) Basis of Accounting, Measurement Focus and Financial Statement Presentation (continued) As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are payments in lieu of taxes where the amounts are reasonably equivalent in value to the interfund services provided and other charges between the government’s Water Utility, Sewer Utility, and Solid Waste functions and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned.

Fund Financial Statements
The underlying accounting system of the City is organized and operated on the basis of separate funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, deferred outflows of resources, liabilities, deferred inflows of resources, fund equity (net position), revenues and expenditures or expenses, as appropriate. Governmental resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled.

The fund financial statements provide information about the government’s funds, including its fiduciary funds and blended component units. Separate statements for each fund category - governmental, proprietary, and fiduciary - are presented. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds.

During the course of operations, the City has activity between funds for various purposes. Any residual balances outstanding at year-end are reported as due to/from other funds and advances to/from other funds. While these balances are reported in fund financial statements, certain eliminations are made in the preparation of the government-wide financial statements. Balances between the funds included in governmental activities are eliminated so that only the net amount is included as internal balances in the governmental activities column. Similarly, balances between the funds included in business-type activities are eliminated so that only the net amount is included as internal balances in the business-type activities column.

Further, certain activity occurs during the year involving transfers of resources between funds. In fund financial statements, these are reported at gross amounts as transfers in/out. While this is the reporting method for the fund financial statements, certain eliminations are made in the preparation of the government-wide financial statements. Transfers between the funds included in governmental activities are eliminated so that only the net amount is included as transfers in the governmental activities column. Similarly, balances between the funds included in business- type activities are eliminated so that only the net amount is included as transfers in the business-type activities column.

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-29-
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) B) Basis of Accounting, Measurement Focus and Financial Statement Presentation (continued) Governmental Funds
In the fund financial statements, governmental funds are presented using the modified-accrual basis of accounting. Under the modified-accrual basis of accounting, revenues are recognized when they become both measurable and available. Revenues are considered to be available when they are collected 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 year (within 60 days of year-end for all revenue except for grant revenue for which the availability period is 90 days). 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. General capital asset acquisitions are reported as expenditures in governmental funds. Issuance of long-term debt and acquisitions under capital leases are reported as other financing sources.

Sales taxes, property taxes, franchise taxes, intergovernmental, rental income, transient occupancy taxes and special assessments are all considered to be susceptible to accrual and have been recognized as revenues in the current fiscal period to the extent normally collected within the availability period. Expenditure driven grants are recognized as revenue when the qualifying expenditures have been incurred and all other eligibility requirements have been met, and the amount is received during the period or within the availability period for this revenue source (within 60 days of year-end for all revenue except for grant revenue for which the availability period is 90 days).

Other revenue items are considered to be measurable and available when cash is received by the government.

In the fund financial statements, governmental funds are presented using the current financial resources measurement focus. This means that only current assets, deferred outflows of resources, current liabilities and deferred inflows of resources are generally included on their balance sheets. The reported fund balance is considered to be a measure of “available spendable resources”. Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in fund balance.

Accordingly, they are said to present a summary of sources and uses of “available spendable resources” during a period.

Proprietary Funds
Proprietary fund types are accounted for using the economic resources measurement focus and accrual basis of accounting. This means that all assets, deferred outflows of resources, liabilities, and deferred inflows of resources (whether current or noncurrent) associated with the activity are included on the statement of net position. Their reported fund equity presents total net position.

The operating statement of the proprietary fund presents increases (revenues) and decreases (expenses) in total net position. Revenues are recognized when they are earned, and expenses are recognized when the liability is incurred.

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-30-
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) B) Basis of Accounting, Measurement Focus and Financial Statement Presentation (continued) Proprietary funds distinguish operating revenues and expenses from nonoperating items.

Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the City's water utility, sewer utility, and solid waste funds are charges to customers for sales and services. Operating expenses for proprietary funds include all cost 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.

Fiduciary Funds
Fiduciary Fund Financial Statements include a Statement of Fiduciary Net Position and a Statement of Changes in Fiduciary Net Position. The City's Fiduciary private-purpose trust funds are accounted for using the economic resources measurement focus and accrual basis of accounting. The private-purpose trust funds account for the assets held by the City for the Successor Agency to the Fountain Valley Agency for Community Development. The City's Fiduciary custodial funds use the economic resources measurement focus and utilize the accrual basis for reporting its assets and liabilities. The City uses a custodial fund to account for the collection and disbursement of funds for fees assessed by other governments collected by the City on behalf of others. Because these funds are not available for use by the City, fiduciary funds are not included in the governmental-wide statements.

C) Fund Classifications
The City reports the following major governmental funds:

General Fund - This is the primary operating fund of the City. It accounts for all activities of the general government, except those required to be accounted for in another fund.

Housing Authority Special Revenue Fund - This special revenue fund is used to account for the housing activities of the former Fountain Valley Agency for Community Development. Funding sources consists primarily of loan repayments and corresponding interest that are used to increase, improve, and preserve the community’s supply of low- and moderate-income housing.

The City reports the following major enterprise funds:

Water Utility Fund - This enterprise fund is used to account for the provision of water to the residents of the City. All activities necessary to provide such services are accounted for in this fund including, but not limited to, administration, operation, maintenance, construction, financing, and related debt service.

Sewer Utility Fund - This enterprise fund is used to account for fees and services for sewer activities.

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-31-
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) C) Fund Classifications (continued)
Additionally, the government reports the following fund types:

The Special Revenue Funds are used to account for proceeds of specific revenue sources that are legally restricted or otherwise assigned for specific purposes.

The Debt Service Funds are used to account for resources restricted or assigned for expenditure of principal and interest.

The Capital Projects Funds are used to account for resources restricted or assigned for capital improvements.

The Private-Purpose Trust Fiduciary Funds are used to account for the activities of the Successor Agency of the former Fountain Valley Agency for Community Development.

The Custodial Fund is used to account for the collection and disbursement of funds for fees assessed by other governments collected by the City on behalf of others in the special deposit and receipt fund.

The Internal Service Funds are established to account for the financing of goods or services provided by one department to other departments of the City, on a cost reimbursement basis. The City’s internal service funds include information technology, government buildings, fleet management, capital equipment and self insurance.

D) Accounting Changes
New Governmental Accounting Standards Implemented for the Year Ended June 30, 2025:

GASB Statement No. 101 – Compensated Absences. The primary objective of this Statement is to establish accounting and financial reporting guidance for compensated absences, which are leave benefits that are attributable to services already rendered, relate to rights that accumulate, and are more likely than not to be used for time off or otherwise paid to employees. The Statement requires governments to recognize a liability for certain types of compensated absences, such as vacation, sick leave, and paid time off, when the leave is earned rather than when it is taken.

The adoption of GASB Statement No. 101 did not result in a restatement of beginning net position, as the City’s existing policies and practices for compensated absences were consistent with the provisions of the Statement. The City has updated its disclosures to conform with the new requirements.

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-32-
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) D) Accounting Changes (continued)
GASB Statement No. 102 – Certain Risk Disclosures. The primary objective of this Statement is to provide users of financial statements with better insight into risks that could have a material impact on the government’s ability to provide services or meet obligations. These risks include concentrations in revenue sources, investments, or loans; constraints imposed by external parties or legislation; and other conditions that may expose the City to significant vulnerabilities.

Upon evaluation, management determined that there were no concentrations, constraints, or vulnerabilities that met the disclosure criteria under GASB Statement No. 102 for the current fiscal year. The entity has incorporated the applicable disclosure considerations in accordance with the new requirements.

Upcoming Governmental Accounting Standards Implementation:

The City is currently analyzing its accounting practices to determine the potential impact on the financial statements for the following GASB statements:

GASB Statement No. 103 – Financial Reporting Model Improvements. The requirements of this Statement will take effect for fiscal years beginning after June 15, 2025.

GASB Statement No. 104 – Disclosure of Certain Capital Assets. The requirements of this Statement will take effect for fiscal years beginning after June 15, 2025.

E) Cash and Investments
Investments are reported in the accompanying basic financial statements at fair value, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Investments in external pools are valued based on the stated fair value represented by the external pool.

Changes in fair value that occur during a fiscal year are recognized as investment income reported for that fiscal year. Investment income includes interest earnings, changes in fair value, and any gains or losses realized upon the liquidation or sale of investments. The City pools cash and investments of all funds, except for assets held by fiscal agents. Each fund’s share in this pool is displayed in the accompanying financial statements as cash and investments.

F) Cash Equivalents
For purposes of the statement of cash flows, cash equivalents are defined as short-term, highly liquid investments that are both readily convertible to known amounts of cash or so near their maturity that they present insignificant risk of changes in value because of changes in interest rates and have an original maturity date of three months or less. Cash equivalents represent the proprietary funds’ share in the cash and investment pool of the City of Fountain Valley.

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-33-
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) G) Inventories
Inventories are stated at average cost. Physical counts of inventory are taken on a cyclical basis during each fiscal year with perpetual records adjusted to actual at that time. The City uses the consumption method of accounting for inventories.

H) Prepaid Items
Payments to vendors that reflect costs applicable to future accounting periods are recorded as prepaid expenses in both government-wide and fund financial statements utilizing the consumption method.

I) Capital Assets
Capital assets, which include property, plant, equipment, and infrastructure assets, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements.

Capital assets are valued at historical cost or estimated cost if purchased or constructed.

Donated capital assets are valued at acquisition value on the date of donation. Capital assets subject to lease obligations or subscription-based information technology arrangements (SBITA) are valued at the present value of future lease/SBITA payments at the inception of the lease/SBITA.

Depreciation of all exhaustible capital assets used by the governmental and business-type activities is charged as an expense against their operations. Accumulated depreciation is reported on the statement of net position.

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City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-34-
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) I) Capital Assets (continued)
Depreciation has been calculated using the straight-line method over the following estimated useful lives:

Buildings 25 – 40 years
Improvements other than buildings 10 – 50 years
Vehicles 3 – 25 years
Machinery and equipment 10 years
Furniture and fixtures 10 years
Infrastructure 20 – 50 years
Reservoirs 60 years
Wells, pumps and mains 25 – 75 years
Water meters and hydrants 30 years
Other water equipment 6 – 25 years
Subscription-based IT assets Life of the agreement
The following schedule shows the minimum threshold at which the various types of asset purchases are capitalized when the estimated useful life is in excess of one year:

Land/land improvements Capitalize all
Buildings $50,000
Building improvements $25,000
Structures and improvements other than buildings $25,000 Equipment and vehicles $5,000
Infrastructure $100,000
The City has reported all capital assets including infrastructure in the government-wide statement of net position. The City has elected to use the straight-line depreciation method for some of the infrastructure assets and the modified approach for others, in which the City agrees to maintain those assets at a specified level of maintenance. Those assets reported using the straight-line depreciation method are traffic signals, sewers, and storm drains. Those assets reported using the modified approach are arterial pavement, local pavement, curbs and gutters and sidewalks.

J) 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, represent a consumption of net assets that applies to future periods and so will not be recognized as an outflow of resources (expense/expenditure) until that time. The City has the following items that qualify for reporting in this category: deferred outflows – pension related and deferred outflows – Other Post Employment Benefits (OPEB) related.

In addition to liabilities, the statement of net position and governmental funds balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represent an acquisition of net assets that applies to future periods and will not be recognized as an inflow of resources (revenue) until that time.

The City has the following items that qualify for reporting in this category: unavailable revenue deferred and recognized as inflow of resources in the period that the amounts become available, deferred inflows – pension related, deferred inflows – OPEB related, and deferred inflows – lease related.

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-35-
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) K) Property Taxes
Under California law, property taxes are assessed and collected by the counties up to 1 % of assessed value, plus other increases approved by the voters. The property taxes go into a pool and are then allocated to the cities based on complex formulas. Accordingly, the City of Fountain Valley accrues only those taxes which are received within 60 days after year-end.

The property tax calendar is as follows:

Lien Date: January 1
Levy Date: July 1
Due Date: First installment – November 1
Second Installment – February 1
Delinquent Date: First installment – December 10
Second installment – April 10
L) Claims and Judgments
The City records a liability for litigation, judgments, and claims when it is probable that an asset has been impaired or a liability (including incurred but not reported) has been incurred prior to year-end and the probable amount of loss (net of any insurance coverage) can be reasonably estimated.

This liability is recorded in the government-wide financial statements and has typically been paid from the City’s general fund.

M) Employee Leave Benefits
A liability is recorded for unused vacation and similar compensatory leave balances since the employees’ entitlement to these balances are attributable to services already rendered and it is probable that virtually all of these balances will be liquidated by either paid time off or payments upon termination or retirement.

A liability is recorded for unused sick leave balances only to the extent that it is probable that the unused balances will result in termination payments. This is estimated by including in the liability the unused balances of employees currently entitled to receive termination payment, as well as those who are expected to become eligible to receive termination benefits as a result of continuing their employment with the City. Other amounts of unused sick leave are excluded from the liability since their payment is contingent solely upon the occurrence of a future event (illness) which is outside the control of the City and the employee.

If material, a proprietary fund liability is accrued for all leave benefits relating to the operations of the proprietary funds. A current liability is accrued in the governmental funds for material leave benefits due on demand to governmental fund employees that have terminated prior to year-end.

All other amounts are recorded in the government-wide financial statements. These non-current amounts will be recorded as fund expenditures in the year in which they are paid or become due on demand to terminated employees.

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-36-
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) N) Subscription-based Information Technology Arrangements The City is a participant in subscription-based IT arrangements as detailed in Note 5. The City recognizes a subscription-based IT payable and right to use IT assets in the financial statements.

At the commencement of the arrangement, the City initially measures the payable at the present value of payments expected to be paid during the arrangement term. Subsequently, the payable is reduced by the principal portion of payments made. The right to use assets are initially measured at the initial amount of the subscription-based IT payable. Subsequently, the right to use assets are amortized over the life of the arrangement term.

O) Net Position
The government-wide financial statements, proprietary fund statements and fiduciary fund statements utilize a net position presentation. Net position is classified in the following categories:

Net investment in capital assets - This amount consists of capital assets net of accumulated depreciation and reduced by outstanding debt that is attributed to the acquisition, construction, or improvement of the assets.

Restricted net position - This amount is restricted by enabling legislation (such as external creditors, grantors, contributors, or laws or regulations of other governments) and includes unspent proceeds of bonds issued to acquire or construct capital assets.

Unrestricted net position - This amount is all net position that does not meet the definition of “net investment in capital assets” or “restricted net position”.

P) Net Position Flow Assumption
Sometimes the City 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, a flow assumption must be made about the order in which the resources are considered to be applied. It is the City’s practice to consider restricted net position to have been depleted before unrestricted net position is applied, unless otherwise directed by Council.

Q) Fund Balances
Fund balances are reported in the fund statements in the following classifications:

Nonspendable Fund Balance - this includes amounts that cannot be spent because they are either not spendable in form (such as inventory) or legally or contractually required to be maintained intact (such as endowments).

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-37-
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Q) Fund Balances (continued)
Restricted Fund Balance - this includes amounts that can be spent only for specific purposes stipulated by legal requirements imposed by other governments, external resource providers, or creditors. City Council imposed restrictions do not create restricted fund balance unless the legal document that initially authorized the revenue (associated with that portion of fund balance) also included language that specified the limited use for which the authorized revenues were to be expended.

Committed Fund Balance - this includes amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the City Council. Those committed amounts cannot be used for any other purpose unless City Council removes or changes the specified use by taking the same type of action (for example, resolution, ordinance, minutes action, etc.) that it employed to previously commit those amounts. If the Council action that limits the use of the funds was separate from the action that initially created the revenues that form the basis for the fund balance, then the resultant fund balance is considered to be committed, not restricted. The City considers a resolution to constitute the highest formal action of City Council for the purposes of establishing committed fund balance.

Assigned Fund Balance - this includes amounts that are intended to be used for specific purposes as indicated either by City Council or by persons to whom City Council has delegated the authority to assign amounts for specific purposes. City Council has not delegated this authority.

Unassigned Fund Balance - this includes the remaining spendable amounts which are not included in one of the other classifications. In other funds, the unassigned classification is used only to report a deficit balance resulting from overspending for specific purposes for which amounts had been restricted, committed, or assigned. Only the General Fund shows a positive unassigned fund balance.

It is the City’s policy that restricted resources will be applied first, followed by (in order of application) committed, assigned, and unassigned resources, in the absence of a formal policy adopted by the Council.

The City maintains a General Fund Emergency Contingency Reserve to provide financial stability during periods of severe economic uncertainty or unforeseen catastrophic events. In accordance with City policy, the reserve is calculated at 25 percent of total General Fund expenditures, excluding capital outlay, based on the most recent audited financial statements. For the current fiscal year, the Emergency Contingency Reserve totals $17.1 million, which is presented as committed fund balance in the general fund and represents approximately three months of funding for essential City operations. Emergency Contingency reserves may only be appropriated with City Council approval and solely for nonrecurring emergency needs such as natural or man-made disasters including fires, floods, earthquakes, pandemics, or other significant events, or to sustain essential services during a severe short-term fiscal crisis when revenues are insufficient. Any formal approval to utilize these reserves must include a replenishment plan identifying the funding sources and a timeline to restore the reserve to the 25 percent target level.

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-38-
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

R) OPEB
For purposes of measuring the net OPEB liability and deferred outflows/inflows of resources related to OPEB and OPEB expense, information about the fiduciary net position of the City’s OPEB Plan and additions to/deductions from the OPEB Plans’ fiduciary net position have been determined on the same basis as they are reported by the Plan. For this purpose, the City’s OPEB Plan recognizes benefit payments when due and payable in accordance with the benefit terms.

Investments are reported at fair value.

S) Pensions
For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Plan and additions to/deductions from the Plan’s fiduciary net position have been determined on the same basis. For this purpose, benefit payments (including refunds of employee contributions) are recognized when currently 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 June 30, 2023
Measurement Date June 30, 2024
Measurement Period July 1, 2023 to June 30, 2024
T) Use of Estimates
The preparation of financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets, deferred outflows of resources, liabilities, and deferred inflows of resources, at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-39-
2) CASH AND INVESTMENTS
Cash and Investments
Cash and investments as of June 30, 2025, are classified in the accompanying financial statements as follows:

Statement of Net Position:

Cash and investments $ 145,122,483
Restricted cash and investments 821,466
Restricted cash and investments - pension 18,973,664
Statement of Fiduciary Net Position:

Cash and investments 1,520,508
Total cash and investments $ 166,438,121
Cash and investments held by the City at June 30, 2025 consisted of the following:

Cash on hand $ 38,175
Deposits with financial institutions 16,645,172
Investments 149,754,774
Total $ 166,438,121
Investments Authorized by the California Government Code and the City’s Investment Policy
The table below identifies the investment types that are authorized for the City by the California Government Code (or the City’s investment policy, where more restrictive). The table also identifies certain provisions of the California Government Code (or the City’s investment policy, where more restrictive) that address interest rate risk, credit risk, and concentration of credit risk.

This table does not address investments of debt proceeds held by bond trustees that are governed by the provisions of debt agreements of the City or the investment of the funds within the pooled trusts with PARS and CERBT that are governed by the agreements between the City and the trustee, rather than the general provisions of the California Government Code or the City’s investment policy.

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-40-
2) CASH AND INVESTMENTS (continued)
Investments Authorized by the California Government Code and the City’s Investment Policy (continued)
Maximum Maximum
Maximum Percentage Investment
Authorized Investment Type Maturity* of Portfolio* in One Issuer* Local Agency Bonds 5 years None None
U.S. Treasury Obligations 5 years None None
U.S. Government-Sponsored Agency Securities 5 years None 25% Banker's Acceptances 180 days 40% 5%
Commercial Paper 270 days 25% 5%
Negotiable Certificates of Deposit 5 years 30% 5%
Repurchase Agreements 1 year None None
Medium-Term Notes 5 years 30% 5%
Mutual Funds N/A 20% 10%
Money Market Mutual Funds N/A 20% 10%
Mortgage Pass-Through Securities 5 years 20% 5%
Local Agency Investment Funds N/A None $75 million
JPA Pools (other investment pools) N/A None None
Supranational Investments 5 years 30% 10%
*Based on state law requirements or the City’s investment policy requirements, whichever is more restrictive
Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is by purchasing a combination of short-term and long-term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flows and liquidity needed for operations.

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-41-
2) CASH AND INVESTMENTS (continued)
Disclosures Relating to Interest Rate Risk
Information about the sensitivity of the fair values of the City’s investments (including those held by bond trustees) to market interest rate fluctuations is provided by the following table that shows the distribution of the City’s investments by maturity. For purposes of the schedule shown below, any callable securities are assumed to be held to maturity. 12 Months or 1 to 3 3 to 5
Less Years Years Total
Local Agency Investment Fund $ 73,842,561 $ - $ 73,842,561 - $ U.S. Government Sponsored
Agency Securities 3,337,599 560,093 1,381,976 5,279,668 U.S. Treasury Notes 11,964,392 - 17,432,763 29,397,155
Money Market Mutual Funds 492,169 - - 492,169
Medium-Term Notes 451,299 8,353,862 5,673,451 14,478,612 Asset Backed Securities 14,041 678,661 1,395,517 2,088,219 Supranational Investments 2,090,620 245,084 1,208,847 3,544,551 Collateralized Mortgage Obligations - 835,241 - 835,241 Held by Trust:

PARS Pooled Pension Trust:

Money Market Mutual Funds 441,706 - - 441,706
Mutual Funds - Equity 9,511,866 - - 9,511,866
Mutual Funds - Fixed Income 9,021,560 - - 9,021,560
Held by Fiscal Agent:

Money Market Mutual Funds 821,466 - - 821,466
$ 100,024,887 $ 22,637,333 $ 27,092,554 $ 149,754,774
Remaining Investment Maturities
Disclosures Relating to Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented on the following page is the minimum rating required by (where applicable) the California Government Code, the City’s investment policy, or debt agreements, and the Standard and Poor’s actual rating as of fiscal year end for each investment type.

Total
Minimum
Legal Rating AAA Other
Exempt/
Not Rated
Local Agency Investment Fund $ 73,842,561 N/A $ - $ 73,842,561 - $ U.S. Government Sponsored
Agency Securities 5,279,669 N/A 5,279,669 - -
U.S. Treasury Notes 29,397,154 N/A 29,397,154 - -
Money Market Mutual Funds 492,169 A 492,169 - -
Medium-Term Notes 14,478,612 A 14,478,612 - -
Asset Backed Securities 2,088,219 AA 2,088,219 - -
Supranational Investments 3,544,551 AA 3,544,551 - -
Collateralized Mortgage Obligations 835,241 AA 835,241 - - Held by Trust:

PARS Pooled Pension Trust:

Money Market Mutual Funds 441,706 N/A 441,706 - -
Mutual Funds - Equity 9,511,866 N/A - - 9,511,866
Mutual Funds - Fixed Income 9,021,560 N/A - - 9,021,560 Held by Fiscal Agent:

Money Market Mutual Funds 821,466 A 821,466 - -
Total $ 149,754,774 $ 42,900,175 $ 14,478,612 $ 92,375,987 Ratings as of Fiscal Year End

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-42-
2) CASH AND INVESTMENTS (continued)
The ratings for the “Other” category above are as follows:

AA / BBB+ A+ / A / A- Total
Medium-Term Notes $ 1,675,251 $ 12,803,361 $ 14,478,612 Custodial Credit Risk
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 its 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 (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the City’s investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The fair value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. At June 30, 2025, the City deposits (bank balances) were insured by the Federal Depository Insurance Corporation or collateralized as required under California Law.

For investments identified herein as held by bond trustee, the bond trustee selects the investment under the terms of the applicable trust agreement, acquires the investment, and holds the investment on behalf of the City.

Investment in State Investment Pool
The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by the California Government Code under the oversight of the Treasurer of the State of California. The fair value of the City’s investment in this pool is reported in the accompanying financial statements at amounts based upon the City’s pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio. The balance available for withdrawal is based on the accounting records maintained by LAIF. LAIF is not rated.

Cash and Investments - OPEB and Pension Trusts
The City pre-funds the City’s pension plans and OPEB health plan through tax qualified irrevocable trusts organized under Internal Revenue Code Section 115. OPEB and Pension trust fund assets are held on behalf of the City by the Public Agency Retirement Services (PARS). The City provides investment direction and determines the amount and timing of disbursements for PARS trust fund assets.

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-43-
2) CASH AND INVESTMENTS (continued)
Those guidelines are as follows:

Risk Tolerance Moderate
Risk Management The portfolio is constructed to control risk through four layers of diversification – asset classes (cash, fixed income, equity), investment styles (large cap, small cap, international, value, growth), managers and securities. Disciplined mutual fund selection and monitoring process helps to drive return potential while reducing portfolio risk.

Investment Objective To provide growth of principal and income. It is expected that dividend and interest income will comprise a significant portion of total return, although growth through capital appreciation is equally important.

Strategic Ranges OPEB
0% - 10% Cash
40% - 60% Fixed Income
40% - 60% Equity
Pension
0% - 10% Cash
45% - 65% Fixed Income
30% - 50% Equity
Fair Value Measurements
The City categorizes its fair value measurement within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets, Level 2 inputs are quoted prices for similar assets in active markets, and Level 3 inputs are significant unobservable inputs.

The City has the following recurring fair value measurements as of June 30, 2025:

Quoted Prices
Level 1
Observable
Inputs Level 2
Unobservable
Inputs Level 3 Total
U.S. Government Sponsored
Agency Securities $ - $ 5,279,669 $ - $ 5,279,669
U.S. Treasury Notes 29,397,154 - 29,397,154 -
Medium-Term Notes 14,478,612 - 14,478,612 -
Asset Backed Securities - 2,088,219 - 2,088,219
Supranational Investments - 3,544,551 - 3,544,551
Collateralized Mortgage Obligations - 835,241 - 835,241 Held by Trust:

PARS Pooled Pension Trust:

Mutual Funds - Equity 9,511,866 - - 9,511,866
Mutual Funds - Fixed Income 9,021,560 - - 9,021,560
Total Leveled Investments $ 18,533,426 $ 55,623,446 $ 74,156,872 - Local Agency Investment Fund* 73,842,561
Money Market Mutual Funds* 492,169
Held by Trust:

PARS Pooled Pension Trust:

Money Market Mutual Funds* 441,706
Held by Fiscal Agent:

Money Market Mutual Funds* 821,466
Total Investment Portfolio $ 149,754,774
*Not subject to fair value measurements.

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-44-
3) INTERFUND ACTIVITY
The following represents the interfund activity of the City for the fiscal year ended June 30, 2025.

Due to/From Other Funds
Receivable Fund Payable Fund Amount
General Fund Nonmajor Governmental Funds 192,187 $
Current interfund balances arise in the normal course of business and to assist funds with negative cash balance at fiscal year-end. They are expected to be repaid shortly after the end of the fiscal year.

Transfers In/Out
The following schedule summarizes the City’s transfer activity:

Transfers in Transfers out Amount
Non-major Fund $ 607,296
Sewer Fund 70,737
Non-major Fund Non-major Fund 4,537,835
General Fund 2,872,216
Water Fund 117,066
Sewer Fund 72,000
General Fund 365,000
Non-major Fund 55,335
$ 8,697,485
Internal Service Fund
General Fund
Transfers into the General Fund include $478,325 from Other Government Funds to fund HUT 2107 and 2107.5 Pass-Thru to General Fund and $128,971 from the Measure M Special Revenue Fund for funding assistance for Senior Transportation Services. Transfers into the General Fund additionally include $70,737 from the Sewer Fund to the General Fund for administrative services.

Transfers between the non-major funds consisted of contributions for various CIP projects from the Gas Tax Fund of $1,810,605, from the Road Maintenance and Rehabilitation Fund of $1,002,865, from the Measure M Fund of $1,651,635 and from the Pollution Reduction Fund of $72,730.

The transfer out of the non-major fund and into the Internal Service Fund consisted of a transfer for an e-transit cab purchase of $55,335.

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-45-
3) INTERFUND ACTIVITY (continued)
Transfers In/Out (continued)
Transfers out of the General Fund include $1,781,403 to the Capital Improvement Program Fund for various CIP projects, $1,090,813 for the Fountain Valley Public Financing Authority Debt Service Fund for debt service payments on the 2017 Clean Revenue Renewal Energy Bonds and 2016A Lease Revenue Bonds and $365,000 for the Measure HH contribution to the Fleet Management Fund for fire apparatus.

Transfers out of the Water Utility Proprietary Fund into the Capital Improvement Fund for $117,066 were to fund water related expenses incurred for the Residential Roadway Rehabilitation Project and the Ellis and Warner Roadway Rehabilitation Project.

Transfers out of the Sewer Proprietary Fund into the Capital Improvement Fund for $72,000 were to fund water related expenses incurred for the Ellis and Warner Roadway Rehabilitation Project. 4) CAPITAL ASSETS
Governmental Activities
Changes in capital assets for governmental activities for the year ended June 30, 2025 were as follows:

Balance Balance
July 1, 2024 Increases Decreases June 30, 2025
Governmental Activities:

Capital Assets, Not Being Depreciated:

Infrastructure (modified approach) 63,548,697 $ $ - $ - $ 63,548,697 Land 15,003,148 - - 15,003,148
Right of way 17,948,464 - - 17,948,464
Construction in progress 6,321,423 1,766,007 (2,566,876) 5,520,554 Total Capital Assets
Not Being Depreciated 102,821,732 1,766,007 (2,566,876) 102,020,863 Capital Assets, Being Depreciated:

Buildings 20,648,428 - - 20,648,428
Improvements 10,428,775 1,975,626 - 12,404,401
Vehicles and equiment 16,859,251 1,227,979 (192,109) 17,895,121 Furniture and fixtures 290,265 214,182 - 504,447
Infrastructure 30,605,306 127,214 - 30,732,520
Right-to-use subscriptions 1,177,192 539,819 - 1,717,011 Total Capital Assets
Being Depreciated 80,009,217 4,084,820 (192,109) 83,901,928 Less Accumulated Depreciation:

Buildings (12,771,017) (449,673) (13,220,690) -
Improvements (4,911,539) (574,806) - (5,486,345)
Vehicles and equipment (10,646,803) (1,364,357) 170,503 (11,840,657) Furniture and fixtures (120,758) (39,383) - (160,141)
Infrastructure (18,450,071) (843,357) (19,293,428) -
Right-to-use subscriptions (670,595) (443,067) - (1,113,662) Total Accumulated Depreciation (47,570,783) (3,714,643) 170,503 (51,114,923) Total Capital Assets
Being Depreciated, Net 32,438,434 370,177 (21,606) 32,787,005 Capital Assets, Net $ 135,260,166 $ 2,136,184 $ (2,588,482) $ 134,807,868

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-46-
4) CAPITAL ASSETS (continued)
Depreciation expense was charged to the following functions in the Statement of Activities:

General government $ 395,037
Transportation 3,558
Public safety 1,215,639
Community development 901,534
Community services 579,323
Internal Service Funds 619,552
Total $ 3,714,643
Business-type Activities
Changes in capital assets for business-type activities for the fiscal year ended June 30, 2025 were as follows:

Balance Balance
July 1, 2024 Increases Decreases June 30, 2025
Business-Type Activities:

Capital Assets, Not Being Depreciated:

Land $ 123,076 $ - $ - $ 123,076
Construction In Progress 611,891 2,046,914 (2,206,213) 452,592 Total Capital Assets
Not Being Depreciated 734,967 2,046,914 (2,206,213) 575,668 Capital Assets, Being Depreciated:

Buildings 30,562,268 777,017 - 31,339,285
Improvements 31,608,833 1,429,196 - 33,038,029
Machinery and equipment 252,088 - - 252,088
Total Capital Assets
Being Depreciated 62,423,189 2,206,213 - 64,629,402
Less Accumulated Depreciation:

Buildings (11,853,986) (709,819) (12,563,805) -
Improvements* (16,912,884) (650,527) (17,563,411) -
Machinery and equipment* (249,727) (787) - (250,514)
Total Accumulated Depreciation (29,016,597) (1,361,133) (30,377,730) - Total Capital Assets
Being Depreciated, Net 33,406,592 845,080 - 34,251,672
Capital Assets, Net $ 34,141,559 $ 2,891,994 $ (2,206,213) $ 34,827,340 * Beginning balances were adjusted
Depreciation expense was charged to the following proprietary funds:

Water Utility $ 1,028,477
Sewer 332,656
Total $ 1,361,133

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-47-
5) LONG-TERM LIABILITIES
Changes in long-term liabilities for the governmental activities for the year ended June 30, 2025 (including unamortized discounts and refunding costs) are as follows:

Balance Balance Due Within
July 1, 2024 Additions Deletions June 30, 2025 One Year Governmental Activities:

Taxable Pension Obligation
Bonds, Series 2015A $ 11,990,000 $ - $ (925,000) $ 11,065,000 $ 1,010,000 Less: unamortized bond discount (194,147) - 17,386 (176,761) 17,386 Lease Revenue Refunding Bonds,
Series 2016A 9,100,000 - (550,000) 8,550,000 570,000
Add: unamortized bond premium 553,739 - (44,898) 508,841 44,898 2017 Clean Renewable Energy Bonds 2,147,713 - (131,944) 2,015,769 138,111 Compensated absences * 2,644,100 84,747 - 2,728,847 2,046,635 Claims and judgements 3,997,800 1,277,200 (2,957,230) 2,317,770 579,443 Subscription liability 403,952 539,819 (501,326) 442,445 209,790 Total $ 30,643,157 $ 1,901,766 $ (5,093,012) $ 27,451,911 $ 4,616,263 *Compensated absences are reported net.

Taxable Pension Obligation Bonds Series 2015A
On August 19, 2015, the City issued $15,995,000 in Taxable Pension Obligation bonds for the financing of the City’s outstanding side fund obligation to CalPERS with respect to its Tier I Safety Plan (3% @ 50) and Tier I Miscellaneous Plan (2.5% @ 55). The bonds are obligations imposed by law payable from any source of funds to be appropriated by the City pursuant to Retirement Law.

The City will deposit with the Trustee on or before August 1 of each Fiscal Year the amount which, together with excess moneys remaining in the bond fund after the last interest payment date of each fiscal year, is sufficient to pay the City’s debt service obligations on the bonds payable during such fiscal year. The bonds bear interest ranging from 3.33% to 6.39%, payable semiannually on March 1 and September 1, commencing March 1, 2016.

The bonds maturing on September 1, 2036 are subject to mandatory sinking fund redemption on September 1 in each year, commencing September 1, 2030, at a redemption price equal to the principal amount thereof to be redeemed, without premium, plus accrued interest to the date of redemption, in the aggregate principal amounts ranging from $650,000 to $1,440,000.

The amount of bonds outstanding at June 30, 2025 is $11,065,000.

Future debt service principal and interest payments on the Taxable Pension Obligation Bonds Series 2015A are as follows:

Fiscal Year
Ending June 30, Principal Interest Total
2026 $ 1,010,000 $ 439,144 $ 1,449,144
2027 1,110,000 398,638 1,508,638
2028 1,215,000 352,138 1,567,138
2029 1,320,000 301,438 1,621,438
2030 1,440,000 246,238 1,686,238
2031 - 2035 3,950,000 686,876 4,636,876
2036 1,020,000 22,313 1,042,313
Total $ 11,065,000 $ 2,446,785 $ 13,511,785

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-48-
5) LONG-TERM LIABILITES (continued)
Lease Revenue Bonds, Series 2016A
On January 27, 2016, the Fountain Valley Public Financing Authority issued $12,895,000 in Lease Revenue Bonds for the purpose of refunding the 2003 Certificates of Participation and financing the improvement of two storm water pump stations of the City. The issuance of the Lease Revenue Bonds, Series 2016A resulted in the full repayment of the 2003 Certificates of Participation in the fiscal year ended June 30, 2016. The bonds are payable from Lease Payments to be made by the City to the Fountain Valley Public Financing Authority. The bonds bear interest ranging from 3.000% to

3.125%, payable semiannually on May 1 and November 1, commencing May 1, 2016.

The amount of bonds outstanding at June 30, 2025 is $8,550,000.

Future debt service principal and interest payments on the Lease Revenue Bonds, Series 2016A are as follows:

Fiscal Year
Ending June 30, Principal Interest Total
2026 $ 570,000 $ 292,550 $ 862,550
2027 595,000 269,250 864,250
2028 620,000 244,950 864,950
2029 645,000 219,650 864,650
2030 675,000 193,250 868,250
2031 - 2035 3,765,000 566,825 4,331,825
2036 - 2037 1,680,000 52,969 1,732,969
Total $ 8,550,000 $ 1,839,444 $ 10,389,444
2017 Clean Renewable Energy Bonds
On January 7, 2017, the Fountain Valley Public Financing Authority issued $2,843,166 in Clean Renewable Energy bonds for the financing of the City’s energy efficiency project including the acquisition, construction, and installation of solar photovoltaic systems. The bonds are payable from Lease Payments to be made by the City to the Fountain Valley Public Financing Authority. The bonds bear interest of 4.44%, payable semiannually on March 1 and September 1, commencing September 1, 2017.

The amount of bonds outstanding at June 30, 2025 is $2,015,769.

Future debt service principal and interest payments on the 2017 Clean Renewable Energy Bonds are as follows:

Fiscal Year
Ending June 30, Principal Interest Total
2026 $ 138,111 $ 88,002 $ 226,113
2027 144,490 81,800 226,290
2028 151,082 75,313 226,395
2029 157,894 68,531 226,425
2030 164,932 61,443 226,375
2031 - 2035 938,363 189,508 1,127,871
2036 - 2037 320,897 14,332 335,229
Total $ 2,015,769 $ 578,929 $ 2,594,698

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-49-
5) LONG-TERM LIABILITES (continued)
Subscription-based Information Technology Arrangements (SBITAs) As of June 30, 2025, the City had 9 active subscriptions. The subscriptions have payments that range from $0 to $193,566 and interest rates that range from 1.7100% to 3.2380%. As of June 30, 2025, the total combined value of the subscription liability is $442,445, and the total combined value of the short-term subscription liability is $209,790. The combined value of the right to use asset, as of June 30, 2025 of $1,717,011 with accumulated amortization of $1,113,662 is included in the rightto-use subscriptions classifications of capital assets, found in Note 4. The subscriptions had $1,547 of variable payments not included in the subscription liability, within the fiscal year.

Future debt service principal and interest payments on the SBITAs are as follows:

Fiscal Year
Ending June 30, Principal Interest Total
2026 $ 209,790 $ 10,255 $ 220,045
2027 177,643 5,294 182,937
2028 27,272 941 28,213
2029 27,740 474 28,214
Total $ 442,445 $ 16,964 $ 459,409
Business-type Activities
Changes in long-term liabilities for business-type activities for the year ended June 30, 2025, are as follows:

Balance Balance Due Within
July 1, 2024 Additions Deletions June 30, 2025 One Year Business-Type Activities:
2014A Revenue Bond $ 8,730,000 $ - $ (625,000) $ 8,105,000 $ 655,000 Add: unamortized bond premium 784,059 - (74,669) 709,390 74,669 Compensated absences * 230,459 21,524 - 251,983 181,371 Total $ 9,744,518 $ 21,524 $ (699,669) $ 9,066,373 $ 911,040 *Compensated absences are reported net.
2014A Revenue Bonds
On December 17, 2014, the Fountain Valley Public Financing Authority (the Authority) issued approximately $13,695,000 in Revenue bonds for the financing of the acquisition and construction of certain improvements, betterments, renovations and expansions of facilities within its water system (the 2014 Project) and to refinance the Orange County Water District Note Payable. The Bonds are special limited obligation of the Authority payable solely from Authority revenues, which consist of installment payments to be made by the City to the Authority pursuant to an installment purchase agreement, dated as of December 1, 2014 by and between the City and the Authority. The Bonds are secured by installment payments to be made pursuant to an Installment Purchase Agreement, by and between the City and the Authority.

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-50-
5) LONG-TERM LIABILITES (continued)
The 2014A Revenue Bonds were issued to provide for the refinancing of the OCWD Well Loan and the financing of the 2014 Project which installment payments will be payable from net revenues of the City’s water system. The Installment Purchase Agreement also requires the water fund to fix, prescribe and collect rates and charges for the water service which will be at least sufficient to yield during each fiscal year net revenues equal to 120% of the debt service for such fiscal year. For the fiscal year 2024-2025, the net revenues equal 616% of the debt service. Total interest expense for the 2014A bonds was $258,258 for the year ended June 30, 2025.

Future requirements to amortize outstanding 2014A Revenue Bonds as of June 30, 2025, are as follows:

Fiscal Year
Ending June 30, Principal Interest Total
2026 $ 655,000 $ 300,181 $ 955,181
2027 690,000 265,681 955,681
2028 725,000 229,431 954,431
2029 765,000 191,181 956,181
2030 800,000 159,181 959,181
2031 - 2035 4,470,000 311,887 4,781,887
Total $ 8,105,000 $ 1,457,542 $ 9,562,542
6) CLAIMS AND JUDGMENTS
Self-Insurance
At June 30, 2025, the City was self-insured for workers’ compensation, employee long-term disability, and earthquake and flood insurance. Additionally, the City has purchased coverage for individual workers’ compensation claims in excess of $750,000 for general employees and $1,000,000 for public safety. The City has also purchased coverage for individual earthquake and flood claims in excess of $50,000 up to a limit of $10,000,000 per occurrence.

Description of Self-Insurance Pool Pursuant to Joint Powers Agreement The City’s general and auto liability self-insurance retention is $350,000, and the balance extending to $25,000,000 is covered by the use of pooling maintained through the California State Association of Counties Excess Insurance Authority (Insurance Authority). The City also purchased commercial insurance for other risks of loss, including pollution, property loss, fidelity, and vehicle physical damage.

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-51-
6) CLAIMS AND JUDGMENTS (continued)
The City is a member of the Insurance Authority (Insurance Authority). The Insurance Authority is composed of 283 California public entities, including 55 of 58 California Counties, and is organized under a joint power’s agreement pursuant to California Government Code Section 6500 et. seq. The purpose of the Insurance Authority is to arrange and administer programs for the pooling of self-insured losses, to purchase excess insurance or reinsurance, and to arrange for group purchased insurance for property and other lines of coverage. The Insurance Authority began covering claims of its members in 1979. The Insurance Authority has 55 County Board Members, appointed by the Board of Supervisors of each participating County. Additionally, the Insurance Authority has 10 Public Entity Board Members, including 3 alternates, appointed by the public entity membership. The Board operates through an eleven-member Executive Committee, and a ninemember Finance Committee.

Self-Insurance Programs of the Insurance Authority
The City pays an annual basic premium for excess coverage and is assessed an annual risk premium based on an actuarial review that estimates each of the program participant’s ultimate liabilities.

Should actual losses among participants be greater than anticipated, the City will be assessed its pro rata share of that deficiency. Conversely, if the actual losses are less than anticipated, the City will be refunded its pro rata share of the excess.

Property Insurance
The City participates in the all-risk property protection program of the Insurance Authority. This insurance protection is underwritten by several insurance companies. The City property is currently insured according to a schedule of covered property submitted by the City to the Insurance Authority. The City property currently has all-risk property insurance protection in the amount of $79 million. There is a $10,000 deductible per occurrence.

Crime Insurance
The City of Fountain Valley purchases crime insurance coverage in the amount of $1,000,000 with a $2,500 deductible. The fidelity coverage is provided through the Insurance Authority.

Adequacy of Protection
During the past three fiscal years, none of the above programs of protection experienced settlements or judgments that exceeded pooled or insured coverage. There were also no significant reductions in pooled or insured liability coverage in 2024-25.

Changes in Claims and Judgments Payable
Changes in claims and judgments payable amounts for the past three fiscal years are as follows:

Fiscal Year
Beginning
balance
Claims Incurred
and Changes in
Estimates Claim Payments Ending Balance
2022-2023 $ 4,830,132 $ 1,566,504 $ (1,470,682) 4,925,954 $ 2023-2024* 4,218,176 1,913,945 (2,134,321) 3,997,800
2024-2025 3,997,800 1,277,200 (2,957,230) 2,317,770
* Beginning balance adjusted

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-52-
7) OTHER POST-EMPLOYMENT BENEFITS
A. Plan Description
The City administers a single-employer defined benefit other post-employment benefit (OPEB) plan that provides eligible retirees and qualified family members with a subsidy towards medical and dental insurance premiums. Benefits vary by hire date, employment status and employment classification. Benefits continue to the surviving spouses.

In 2010, the City established a trust with Public Agency Retirement Services (PARS) to hold assets that are legally restricted for the City’s OPEB plan under Section 115 of the Internal Revenue Code. Contributions to the OPEB Trust and earnings on those contributions are irrevocable.

The PARS OPEB Trust issues a publicly available financial report for the fiduciary net position that is available upon request. Copies of PARS’s annual financial report may be obtained from its executive office at 4350 Von Karman Ave. Suite 100, Newport Beach, California 92660.

The City’s OPEB Plan does not issue a separate financial report.

Benefits Provided
For all covered employees with effective dates of retirement after October 1, 1980, and a minimum of 10-20 years of continuous service, the City contributes the actual cost of insurance up to the amount contributed for active employees. For general, professional, and technical employees hired prior to February 16, 1986, insurance with the City will be supplemental to Medicare upon reaching the age of 65.

For employees hired after February 16, 1986, benefits with the City will terminate upon reaching age

65. For fire employees hired prior to August 10, 1985, insurance with the City will be supplemental to Medicare upon reaching the age of 65. For fire employees hired after August 10, 1985, benefits with the City will terminate upon reaching age 65. For police employees, insurance with the City will be supplemental to Medicare upon reaching the age of 65. Department Directors receive paid supplemental coverage after the age of 65.

Employees are eligible for retiree health benefits if they retire from the City on or after age 50 with at least five years of service and are eligible for a CalPERS pension.

Employees Covered
As of measurement date June 30, 2024, the following current and former employees were covered by the benefit terms under the plan:

Inactive employees or beneficiaries currently receiving benefits 181 Inactive employees entitled to but not yet receiving benefits 95 Active employees 227
Total 503

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-53-
7) OTHER POST-EMPLOYMENT BENEFITS (continued)
A. Plan Description (continued)
Contributions
The benefit provisions and contribution requirements of plan members and the City are established and may be amended through agreements and memorandums of understanding between the City, its employees, and unions representing the City’s employees. Administrative costs of the OPEB plan are financed through investment earnings. The contribution required to be made under City Council and labor agreements is based on a pay-as-you-go basis (i.e., as medical insurance premiums become due). For the fiscal year ending June 30, 2025, the City contributed $4,778,693 for current premiums.

No contributions were made to the PARS OPEB Trust for the fiscal year ended June 30, 2025. The contributions to the OPEB plan are generally made from the General Fund. The water utility and sewer proprietary funds are responsible for the pay-as-you-go amounts for their respective employees.

Method Used to Value Investments
Investments are reported at fair value, which is determined by the means of the most recent bid and asked prices as obtained from dealers that make markets in such securities. Securities for which market quotations are not readily available are valued at their fair value as determined by the custodian with the assistance of a valuation service.

B. Net OPEB liability
The City’s total OPEB liability was measured as of June 30, 2024, and was used to calculate the net OPEB liability as of June 30, 2025.

Actuarial Assumptions
Valuation Date June 30, 2023
Measurement Date June 30, 2024
Actuarial Cost Method Entry-Age Normal, Level Percentage of Salary Actuarial Assumptions:

Discount Rate 6.28%
Investment Rate of Return 6.28%
Inflation 2.30%
Salary Increase 2.80%**
Healthcare Cost Trend
Rates:

Pre-Medicare 7.40%*
Medicare 4.20%*
Mortality Rates Based on CalPERS tables
*Trending down to 4.14% over 52 years; applies to calendar years **Additional merit-based increases based on CalPERS merit salary increase tables.

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-54-
7) OTHER POST-EMPLOYMENT BENEFITS (continued)
B. Net OPEB liability (continued)
Discount Rate
The discount rate used to measure the total OPEB liability was 6.28%. The projection of cash flows used to determine the discount rate assumed that the City would make benefit payments outside of the trust. Based on those assumptions, the OPEB plan’s fiduciary net position was projected to be available to make all projected OPEB payments for current active and inactive employees and beneficiaries. Therefore, the long-term expected rate of return on the PARS OPEB was applied to all periods of the projected benefit payments to determine the total OPEB liability.

C. Changes in the Net OPEB Liability
The changes in the net OPEB liability are as follows:

Total OPEB
Liability
Plan Fiduciary
Net Position
Net OPEB
Liability
Balance at June 30, 2024
(measurement date 6/30/23) $ 39,751,178 $ 13,271,250 $ 26,479,928 Service cost 825,497 - 825,497
Interest 2,465,875 - 2,465,875
Differences between expected
and actual experience - - -
Changes of assumptions - - -
Net investment income - 1,551,100 (1,551,100)
Contributions - city contributions and implicit subsidy - 2,622,288 (2,622,288) Benefit payments, including refunds
of employee contributions (2,622,288) (2,622,288) -
Administrative expense - (26,323) 26,323
Net changes 669,084 1,524,777 (855,693)
Balance at June 30, 2025
(measurement date 6/30/24) $ 40,420,262 $ 14,796,027 $ 25,624,235 Change of Assumptions
There were no assumption changes.

Sensitivity of the Net OPEB Liability to Changes in the Discount Rate The following presents the net OPEB liability of the City, as well as what the City’s net OPEB liability would be if it were calculated using a discount rate that is 1-percentage point lower (5.28%) or 1-percentage point higher (7.28%) than the current discount rate:

Discount Rate - Current Discount Discount Rate
1% (5.28%) Rate (6.28%) +1% (7.28%)
Net OPEB Liability 29,620,139 $ $ 25,624,235 $ 22,190,299

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-55-
7) OTHER POST-EMPLOYMENT BENEFITS (continued)
C. Changes in the Net OPEB Liability (continued)
Sensitivity of the Total OPEB Liability to Changes in Medical Trend Rates The following presents the total OPEB liability of the City, as well as what the City’s total OPEB liability would be if it were calculated using medical trend rates that are 1-percentage point lower and 1- percentage point higher than the current medical trend rate:

Current
Healthcare Cost
1% Decrease Trend Rates 1% Increase
Net OPEB Liability 21,939,178 $ $ 25,624,235 $ 29,981,376 D. OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB For the year ended June 30, 2025, the City recognized OPEB expense of $822,871. At June 30, 2025, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Deferred Deferred
Outflows of Inflows of
Resources Resources
OPEB contributions subsequent to measurement date 4,778,693 $ $ - Differences between expected and actual experience 2,866,890 3,912,496 Changes of assumption 2,792,144 3,632,718
Differences between projected and actual earnings
on OPEB plan investments 6,037 -
Total $ 10,443,764 $ 7,545,214
The contributions subsequent to the measurement date of $4,778,693 will be recognized as a reduction of the total OPEB liability in the subsequent fiscal year. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized as OPEB expense as follows:

Deferred Outflows
Fiscal Year (Inflows) of
Ended June 30, Resources
2026 $ (1,675,066)
2027 138,954
2028 (544,085)
2029 (28,147)
2030 228,201
Thereafter -

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-56-
8) DEFINED BENEFIT PENSION PLANS (CalPERS)
A. General Information about the Pension Plans
Plan Descriptions
All qualified permanent and probationary employees are eligible to participate in the Public Agency Cost-Sharing Multiple-Employer Defined Benefit Pension Plan (Plan or PERF C) administered by the California Public Employees’ Retirement System (CalPERS.) The Plan consists of a miscellaneous pool and a safety pool (also referred to as “risk pools”), which are comprised of individual employer miscellaneous and safety rate plans, respectively. Plan assets may be used to pay benefits for any employer rate plan of the safety and miscellaneous pools. Accordingly, rate plans within the safety or miscellaneous pools are not separate plans under generally accepted accounting principles.

Individual employers may sponsor more than one rate plan in the miscellaneous or safety risk pools.

The City participates in three miscellaneous and six safety plans. Benefit provisions under the Plan are established by State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plan regarding benefit provisions, assumptions and membership information that can be found on the CalPERS’ website, at www.calpers.ca.gov.

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. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 5 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost-of-living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law.

The Plan operates under the provisions of the California Public Employees’ Retirement Law (PERL), the California Public Employees’ Pension Reform Act of 2013 (PEPRA), and the regulations, procedures and policies adopted by the CalPERS Board of Administration. The Plan’s authority to establish and amend the benefit terms are set by the PERL and PEPRA, and may be amended by the California state legislature and in some cases require approval by the CalPERS Board.

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-57-
8) DEFINED BENEFIT PENSION PLANS (CalPERS) (continued)
A. General Information about the Pension Plans (continued) The Plan’s provisions and benefits in effect at June 30, 2025 are summarized as follows:

Miscellaneous
Tier I Tier II Tier III - PEPRA
Prior to On or After On or After
December 25, 2010 December 25, 2010 January 1, 2013
Benefit formula 2.5% @ 55 2% @ 60 2% @ 62
Benefit vesting schedule 5 years of service 5 years of service 5 years of service Benefit payments monthly for life monthly for life monthly for life monthly for life monthly for life Retirement age 50-55 50-62 52-67
Monthly benefits, as a % of eligible compensation 2.0% to 2.5% 1.092% to 2.272% 1.0% to 2.5% Required employee contribution rates 8.00% 7.00% 7.75%
Required employer contribution rates 14.99% 10.15% 7.87% Safety - Police
Tier I Tier II Tier III - PEPRA
Prior to On or After On or After
December 25, 2010 December 25, 2010 January 1, 2013
Benefit formula 3% @ 50 3% @ 55 2.7% @ 57
Benefit vesting schedule 5 years of service 5 years of service 5 years of service Benefit payments monthly for life monthly for life monthly for life monthly for life monthly for life Retirement age 50 50-55 50-57
Monthly benefits, as a % of eligible compensation 3.00% 2.4% to 3.0% 2% to 2.7% Required employee contribution rates 9.00% 9.00% 13.75% Required employer contribution rates 29.30% 23.00% 13.76% Safety - Fire
Tier I Tier II Tier III - PEPRA
Prior to On or After On or After
December 25, 2010 December 25, 2010 January 1, 2013
Benefit formula 3% @ 50 2% @ 50 2.7% at 57
Benefit vesting schedule 5 years of service 5 years of service 5 years of service Benefit payments monthly for life monthly for life monthly for life monthly for life monthly for life Retirement age 50 50-55 50-57
Monthly benefits, as a % of eligible compensation 3% 2% to 2.7% 2.0% to 2.7% Required employee contribution rates 9.00% 9.00% 13.75% Required employer contribution rates 29.30% 20.09% 13.76%

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-58-
8) DEFINED BENEFIT PENSION PLANS (CalPERS) (continued)
A. General Information about the Pension Plans (continued) Contributions
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 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.

Employer contributions to the Plan for the fiscal year ended June 30, 2025 were $15,023,830.

B. Net Pension Liability
The City’s net pension liability for the Plan is measured as the total pension liability, less the pension plan’s fiduciary net position. The net pension liability of the Plan is measured as of June 30, 2024, using an annual actuarial valuation as of June 30, 2023 rolled forward to June 30, 2024 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is as follows.

Actuarial Methods and Assumptions Used to Determine Total Pension Liability The collective total pension liability for the June 30, 2024 measurement period was determined by an actuarial valuation as of June 30, 2023, with update procedures used to roll forward the total pension liability to June 30, 2024. The collective total pension liability was based on the following assumptions:

Valuation Date June 30, 2023
Measurement Date June 30, 2024
Actuarial Cost Method Entry Age Actuarial Cost Method
Asset Valuation Method Fair Value of Assets
Actuarial Assumptions:

Discount Rate 6.90%
Inflation 2.30%
Salary Increases Varies by Entry Age and Service
Mortality Rate Table (1) Derived using CalPERS' membership data for all funds Post Retirement Benefit Increase Contract COLA up to 2.30% until Purchasing Power Protection Allowance floor on purchasing power applies,

2.30% thereafter.
(1) The mortality table used was developed based on CalPERS-specific data. The rates incorporate Generational Mortality to capture ongoing mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries. For more details, please refer to the 2021 experience study report from November 2021 that can be found on the CalPERS website.

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-59-
8) DEFINED BENEFIT PENSION PLANS (CalPERS) (continued)
B. Net Pension Liability (continued)
Long-term Expected Rate of Return
The long-term expected rate of return on pension plan investments was determined using a buildingblock method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.

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

The expected real rates of return by asset class are as follows:

Asset Class
Assumed
Asset
Allocation
Real
Return1,2
Global equity - cap-weighted 30.00% 4.54%
Global equity - non-cap-weighted 12.00% 3.84%
Private equity 13.00% 7.28%
Treasury 5.00% 0.27%
Mortgage-backed securities 5.00% 0.50%
Investment grade corporates 10.00% 1.56%
High yield 5.00% 2.27%
Emerging market debt 5.00% 2.48%
Private debt 5.00% 3.57%
Real assets 15.00% 3.21%
Leverage (5.00%) (0.59%)
2 Figures are based on the 2021-22 Asset Liability Management study. 1 An expected inflation of 2.30% used for this period.

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-60-
8) DEFINED BENEFIT PENSION PLANS (CalPERS) (continued)
B. Net Pension Liability (continued)
Discount Rate
The discount rate used to measure the total pension liability for PERF C was 6.90%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

Subsequent Events
There were no subsequent events that would materially affect the results presented in this disclosure.

Pension Plans Fiduciary Net Position
Information about the pension plan’s assets, deferred outflows of resources, liabilities, deferred inflows of resources, and fiduciary net position are presented in CalPERS’ audited financial statements, which are publicly available reports that can be obtained at CalPERS’ website, at www.calpers.ca.gov. The plan’s fiduciary net position and additions to/deductions from the plan’s fiduciary net position have been determined on the same basis used by the pension plan, which is the economic resources measurement focus and the accrual basis of accounting. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan. Investments are reported at fair value.

C. Proportionate Share of Net Pension Liability
The following table shows the City’s proportionate share of the Plan’s net pension liability over the measurement period.

Increase (Decrease)
Proportionate
Share of Total
Pension Liability
Proportionate
Share of Fiduciary
Net Position
Proportionate
Share of Net
Pension Liability
Balance at: 6/30/2023 (VD) $ 381,988,160 $ 279,270,868 $ 102,717,292 Balance at: 6/30/2024 (MD) 404,889,925 307,288,794 97,601,131 Net Changes during 2023-24 $ 22,901,765 $ 28,017,926 $ (5,116,161) Valuation Date (VD), Measurement Date (MD).

The City’s proportion of the net pension liability was determined by CalPERS using the output from the Actuarial Valuation System and the fiduciary net position, as provided in the CalPERS Public Agency Cost-Sharing Allocation Methodology Report, which is a publicly available report that can be obtained at CalPERS’ website, at www.calpers.ca.gov. The City’s proportionate share of the net pension liability for the total Plan as of the June 30, 2023 and 2024 measurement dates was as follows:

Proportionate Share - June 30, 2024 0.82336%
Proportionate Share - June 30, 2025 0.80480%
Change - Increase (Decrease) (0.01856%)

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-61-
8) DEFINED BENEFIT PENSION PLANS (CalPERS) (continued)
C. Proportionate Share of Net Pension Liability (continued) Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate The following presents the City’s proportionate share of the net pension liability of the Plan as of the measurement date, calculated using the discount rate of 6.9 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 (5.9 percent) or 1 percentage-point higher (7.9 percent) than the current rate:

Discount Discount
Rate - 1% Current Discount Rate +1%
(5.9%) Rate (6.9%) (7.9%)
Plan's Net Pension Liability/(Asset) $ 152,686,390 $ 97,601,131 $ 52,453,495 Amortization of Deferred Outflows and Deferred Inflows of Resources Gains and losses related to changes in total pension liability and fiduciary net position are recognized in pension expense systematically over time.

The first amortized amounts are recognized in pension expense for the year the gain or loss occurs.

The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to pensions and are to be recognized in future pension expense.

The amortization period differs depending on the source of the gain or loss:

Net difference between projected
and actual earnings on pension
plan investments
5-year straight-line amortization
All other amounts Straight-line amortization over the expected average remaining service lives (EARSL) of all members that
are provided with benefits (active, inactive and retired) as of the beginning of the measurement period

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-62-
8) DEFINED BENEFIT PENSION PLANS (CalPERS) (continued)
D. Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions
As of the start of the measurement period (July 1, 2023), the City’s net pension liability was $102,717,292. For the measurement period ending June 30, 2024 (the measurement date), the City incurred a pension expense of $19,134,867.

As of June 30, 2025, the City has deferred outflows and deferred inflows of resources related to pensions as follows:

Deferred Outflows
of Resources
Deferred Inflows of
Resources
Changes of Assumptions $ 2,438,047 $ -
Differences between expected and
actual experience 8,117,155 281,553
Differences between projected and actual
investment earnings 5,007,017 -
Differences between employer's contributions
and proportionate share of contributions 3,642,831 1,408,589 Change in employer's proportion 1,457,624 4,420,525
Pension contributions subsequent to the
measurement date 15,023,830 -
Total $ 35,686,504 $ 6,110,667
The amounts above are net of outflows and inflows recognized in the 2023-24 measurement period expense. Contributions subsequent to the measurement date of $15,023,830 reported with deferred outflows of resources will be recognized as a reduction of the net pension liability in the upcoming fiscal year. Other amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in future pension expense as follows:

Deferred Outflows
Fiscal Year (Inflows) of
Ended June 30, Resources
2026 $ 5,010,262
2027 11,329,189
2028 (73,306)
2029 (1,714,138)
2030 - Thereafter -
E. Payable to the Pension Plan
At June 30, 2025, the City reported a payable of $11,525 for the outstanding amount of contributions to the pension plan required for the year then ended.

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-63-
9) DEFINED CONTRIBUTION PENSION PLAN (PARS)
As of January 1, 1992, the City implemented a defined contribution pension Plan through PARS for all of its non-regular employees. In a defined contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings. All non-regular employees are eligible to participate from the date of employment. Federal legislation requires contributions of at least 7.5% to a retirement plan, and City Council has resolved to match the employees’ contributions of 3.75% for employees hired prior to August 29, 2014. Employees hired after August 29, 2014, are required to pay the full 7.5%. The City’s contributions for each employee (and interest earned by the accounts) are fully vested immediately. For the year ended June 30, 2025, the City’s payroll covered by the plan was $1,16,693 and the City made employer contributions of $2,110 (3.75% of current covered payroll for employees hired before August 29, 2014).
10) LOANS RECEIVABLE
The City has outstanding rehabilitation and first-time home buyer loans receivable totaling $763,174 from qualified applicants. Loans receivable of $7,970,926 is recorded in the Housing Authority Fund; $195,998 in the Community Development Block Grant (CDBG) Special Revenue Fund; and $14,348 in the HOME Grant Special Revenue Fund. All housing rehabilitation loans are repaid when title to the property changes or according to payment schedules.

On January 22, 2019, the Fountain Valley Housing Authority approved a loan agreement with The Related Companies of California LLC (“Developer”) to assist with the development of a new 50-unit multifamily affordable housing project intended for tenancy by qualified extremely low, very low and low-income persons and families.

Under the loan agreement, the Housing Authority will advance and loan Developer up to $6,443,882 for the sole purposes of acquisition of the property and termination of the billboard lease of the proposed project. The loan will be funded from the Housing Authority Special Revenue Fund utilizing low and moderate housing asset funds of the former Fountain Valley Agency for Community Development. The outstanding principal balance of the loan shall bear simple interest at the rate of zero percent (0%) per annum. The loan will have a 60-year term to be repaid from residual receipts from operation of the proposed project. The amount outstanding at June 30, 2025 is $7,418,098.

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-64-
11) LEASE RECEIVABLE
As of June 30, 2025, the City had 4 active leases. The leases have receipts that range from $34,424 to $424,900 and interest rates that range from 1.3120% to 1.5020%. As of June 30, 2025, the total combined value of the lease receivable is $9,068,690, the total combined value of the short-term lease receivable is $407,497, and the combined value of the deferred inflow of resources is $8,542,124. The leases had $12,751 of variable receipts, not included in the lease receivable, within the fiscal year.

The annual lease receipts expected through maturity are as follows:

Fiscal Year
Ending June 30, Principal Interest Total
2026 $ 407,497 $ 124,274 $ 531,771
2027 415,273 118,543 533,816
2028 452,604 112,534 565,138
2029 463,830 106,137 569,967
2030 472,589 99,617 572,206
2031 - 2035 2,603,085 393,945 2,997,030
2036 - 2040 2,968,833 198,339 3,167,172
2041 - 2045 1,250,079 26,733 1,276,812
2046 34,900 524 35,424
Total $ 9,068,690 $ 1,180,646 $ 10,249,336
12) TAX ABATEMENT
Hotel Incentive Program
In January 2017, the City Council adopted guidelines that established a Hotel Incentive Program (HIP) which provides economic incentives to develop 3-to-5-star quality hotels in the City of Fountain Valley. The City will reimburse up to 50 percent of the total new transient occupancy tax (TOT) each year over a period of 15 years or less for new hotels with 100 or more rooms maintained at 3 to 5 star quality. Reimbursement applies for TOT above a $200,000 revenue requirement. No amounts have been abated under the HIP.

City of Fountain Valley
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2025
-65-
13) NET INVESTMENT IN CAPITAL ASSETS
The net investment in capital assets component of net position consists of capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other liabilities that are attributable to the acquisition, construction, or improvement of those assets.

If there are significant unspent related debt proceeds at yearend, the portion of the debt attributable to the unspent proceeds are not included in the calculation of net investment in capital assets. Rather, that portion of the debt is included in the same net position component as the unspent proceeds.

At June 30, 2025, net investment in capital assets was determined as follows:

Governmental
Activities
Business-Type
Activities
Capital assets, net of accumulated depreciation $ 134,807,868 $ 34,827,340 and amortization
Less:

Bonds, net of unamortized premiums and discounts (11,074,610) (8,814,390) Subscriptions payable (442,445) -
Retentions payable related to capital assets (316,075) (89,820) Total $ 122,974,738 $ 25,923,130
14) RECLASSIFICATION
During the fiscal year ended June 30, 2025, the government implemented a reclassification of certain capital asset categories. The reclassification was made to more appropriately align asset types with their functional use.

The reclassification resulted in adjustments to the beginning balances of capital assets but did not affect the total reported capital assets, nor did it result in a restatement of beginning net position. The reclassification involved only the movement of asset amounts between existing capital asset classes.

This reclassification is reported in accordance with GASB Statement No. 100, Accounting Changes and Error Corrections. Refer to Note 4 in the Notes to the Basic Financial Statements for additional information.
15) CHANGE WITHIN THE FINANCIAL REPORTING ENTITY
As a result of GASB 100, the City is required to restate its June 30, 2024 governmental funds’ fund balance when there is a change within the financial reporting entity. The Capital Improvement Program Fund was formerly reported as major. This qualifies as a change to or within the financial reporting entity, under the guidance of GASB 100.

As the beginning balance in the Capital Improvement Program Fund was zero, the change within the financial reporting entity did not have an effect on the beginning balance of the Capital Improvement Program Fund or the total Nonmajor Governmental Funds.

REQUIRED SUPPLEMENTARY INFORMATION

THIS PAGE INTENTIONALLY LEFT BLANK

City of Fountain Valley
Schedule of Proportionate Share of the Net Pension Liability Last Ten Fiscal Years
-66-
Measurement Date
Employer's
Proportion of the
Collective Net
Pension Liability1
Employer's
Proportionate
Share of the
Collective Net
Pension Liability Covered Payroll
Employer's
Proportionate
Share of the
Collective Net
Pension Liability as
a percentage of the
Covered Payroll
Pension Plan's
Fiduciary Net
Position as a
percentage of the
Total Pension
Liability
6/30/2015 1.07012% 73,452,278 $ $ 18,347,687 400.34% 78.40% 6/30/2016 0.84126% 72,795,357 19,284,950 377.47% 74.06% 6/30/2017 0.82936% 82,249,932 19,741,697 416.63% 73.31% 6/30/2018 0.83345% 80,313,009 18,733,501 428.71% 75.26% 6/30/2019 0.82843% 84,889,944 20,505,883 413.98% 75.26% 6/30/2020 0.81153% 88,298,205 21,555,099 409.64% 75.10% 6/30/2021 0.93115% 50,359,180 21,061,543 239.10% 88.29% 6/30/2022 0.85206% 98,420,189 20,811,283 472.92% 76.68% 6/30/2023 0.82336% 102,717,292 21,770,775 471.81% 76.21% 6/30/2024 0.80480% 97,601,131 23,157,296 421.47% 78.08% 1 Proportion of the net pension liability represents the plan's proportion of PERF C, which includes both the Miscellaneous and Safety Risk Pools excluding the 1959 Survivors Risk Pool.

City of Fountain Valley
Schedule of Pension Plan Contributions
Last Ten Fiscal Years
-67-
Fiscal Year
Actuarially
Determined
Contribution
Contributions in
Relation to the
Actuarially
Determined
Contribution
Contribution
Deficiency
(Excess) Covered Payroll
Contributions as a
Percentage of
Covered Payroll
6/30/2016 $ 6,447,749 $ (22,260,050) $ (15,812,301) $ 19,284,950 115.43% 6/30/2017 5,717,808 (5,717,808) - 19,741,697 28.96%
6/30/2018 6,183,724 (6,183,724) - 18,733,501 33.01%
6/30/2019 7,352,296 (7,352,296) - 20,505,883 35.85%
6/30/2020 8,391,979 (8,391,979) - 21,555,099 38.93%
6/30/2021 11,034,403 (11,034,403) - 21,061,543 52.39%
6/30/2022 9,991,154 (12,991,154) (3,000,000) 20,811,283 62.42% 6/30/2023 10,752,318 (13,752,318) (3,000,000) 21,770,775 63.17% 6/30/2024 10,795,740 (13,795,740) (3,000,000) 23,157,296 59.57% 6/30/2025 12,023,830 (15,023,830) (3,000,000) 24,122,577 62.28% Notes to Schedule:

Changes in Benefit Terms: There were no changes to benefit terms that applied to all members of the Public Agency Pool.

However, individual employers in the Plan may have provided a benefit improvement to their employees such as Golden Handshakes, service purchases, and other prior service costs. Employers that have done so may need to report this information as a separate liability in their financial statement as CalPERS considers such amounts to be separately financed employerspecific liabilities. These employers should consult with their auditors. Additionally, the figures above do not include any liability impact that occurred after the June 30, 2023, valuation date, unless the liability impact is deemed to be material to the Public Agency Pool.

Change in Assumptions: There were no assumption changes in 2023 or 2024. Effective with the June 30, 2021, valuation date (June 30, 2022, measurement date), the accounting discount rate was reduced from 7.15% to 6.90%. In determining the long-term expected rate of return, CalPERS took into account long-term market return expectations as well as the expected pension fund cash flows. In addition, demographic assumptions and the price inflation assumption were changed in accordance with the 2021 CalPERS Experience Study and Review of Actuarial Assumptions. The accounting discount rate was 7.15% for measurement dates June 30, 2017, through June 30, 2021, and 7.65% for measurement dates June 30, 2015, through June 30, 2016.

City of Fountain Valley Schedule of Changes in the Net OPEB Liability and Related Ratios Last Ten Fiscal Years* -68-

City of Fountain Valley
Schedule of OPEB Plan Contributions
Last Ten Fiscal Years*
-69-
Fiscal Year
Actuarially
Determined
Contribution
Contributions in
Relation to the
Actuarially
Determined
Contribution
Contribution
Deficiency
(Excess) Covered Payroll
Contributions as
a Percentage of
Covered Payroll
6/30/2018 $ 3,534,962 $ (2,209,000) $ 1,325,962 $ 19,742,000 11.19% 6/30/2019 3,699,062 (3,956,000) (256,938) 18,734,000 21.12% 6/30/2020 1,832,900 (1,647,702) 185,198 21,555,000 7.64% 6/30/2021 3,222,849 (2,620,294) 602,555 21,061,543 12.44% 6/30/2022 3,237,566 (2,692,398) 545,168 20,811,283 12.94% 6/30/2023 2,460,257 (1,804,338) 655,919 21,770,775 8.29% 6/30/2024 2,660,361 (2,756,326) (95,965) 21,767,048 12.66% 6/30/2025 2,672,456 (4,778,693) (2,106,237) 26,937,789 17.74% Notes to Schedule:

Assumptions and Methods:

Actuarial cost method: Entry-age normal, level percent of pay Amortization method: Level percent of pay
Amortization period: 20 years
Inflation: 2.30%
Healthcare trend rates: 7.40%, trending down to 4.14%
Discount rate: 6.28%
Mortality rate: CalPERS rates
Retirement rates: CalPERS rates
*GASB Statement No. 75 was implemented in FY 2018; additional years will be presented as they are available.

City of Fountain Valley
Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual – General Fund
For the Year Ended June 30, 2025
-70-
Variance with
Final Budget
Budgeted Amount Actual Positive
Original Final Amounts (Negative)
Revenues:

Taxes $ 63,191,000 $ 62,841,000 $ 63,136,598 $ 295,598
Licenses and permits 2,310,400 2,410,400 2,836,587 426,187 Fines and penalties 412,700 647,700 704,984 57,284
Investment income 1,208,850 1,238,850 5,524,662 4,285,812 Rental income 1,295,870 1,345,870 1,367,747 21,877
Intergovernmental 1,091,000 1,166,485 1,215,788 49,303
Charges for services 9,516,975 12,396,958 12,174,871 (222,087) Miscellaneous 514,300 767,260 980,212 212,952
Total revenues 79,541,095 82,814,523 87,941,449 5,126,926 Expenditures:

Current:

General government 9,603,705 11,568,088 17,673,744 (6,105,656) Public safety 41,154,840 42,531,234 41,425,930 1,105,304 Transportation 5,403,662 5,446,679 4,514,667 932,012
Community development 6,588,965 6,814,719 6,301,853 512,866 Community services 5,098,933 5,317,846 5,165,149 152,697 Capital outlay 1,545,705 1,557,266 608,143 949,123
Debt service:

Principal retirement 925,000 939,155 939,155 -
Interest - 543 470 73
Total expenditures 70,320,810 74,175,530 76,629,111 (2,453,581) Excess of Revenues over
(under) Expenditures 9,220,285 8,638,993 11,312,338 2,673,345 Other financing sources (uses):

Transfers in 643,240 693,640 (15,607) 678,033
Transfers out (16,916,135) (16,176,395) (3,237,216) 12,939,179 Total other financing sources (uses) (16,272,895) (15,482,755) (2,559,183) 12,923,572 Net change in fund balance (7,052,610) (6,843,762) 8,753,155 15,596,917 Fund balance, beginning of year 80,104,972 80,104,972 80,104,972 - Fund balance, end of year $ 73,052,362 $ 73,261,210 $ 88,858,127 $ 15,596,917

City of Fountain Valley
Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual – Housing Authority Special Revenue Fund For the Year Ended June 30, 2025
-71-
Variance with
Final Budget
Budgeted Amount Actual Positive
Original Final Amounts (Negative)
Revenues:

Investment income $ 252,200 $ 252,200 $ 454,243 $ 202,043 Charges for services - - 512 512
Miscellaneous - - 6,180 6,180
Total revenues 252,200 252,200 460,935 208,735
Expenditures:

Current:

Community development 664,885 712,285 480,076 232,209
Total expenditures 664,885 712,285 480,076 232,209
Net change in fund balance (412,685) (460,085) (19,141) 440,944 Fund balance, beginning of year 17,725,965 17,725,965 17,725,965 - Fund balance, end of year $ 17,313,280 $ 17,265,880 $ 17,706,824 $ 440,944

City of Fountain Valley
Notes to Required Supplementary Information
For the Fiscal Year Ended June 30, 2025
-72-
NOTE 1 - BUDGETS AND BUDGETARY DATA
The adopted budget of the City consists of the presentation of a Council action request in the form of a staff report specifying the total appropriation for each departmental activity, (e.g., Police Administration, Street Maintenance, etc.).

Total appropriations for each fund may only be increased by the City Council by the approval of a staff report requesting to amend the budget with the exception of budget adjustments which involve offsetting revenues and expenditures. In cases involving offsetting revenues and expenditures, the Finance Director is authorized to increase or decrease an appropriation for a specific purpose where said appropriation is offset by unbudgeted revenue which is designated for said specific purpose.

The City Manager has the authority to adjust the amounts appropriated between the departments and activities of a fund, objects within each departmental activity and between accounts within the objects, provided, however, that the total appropriations for each fund does not exceed the amounts provided in the original Council action formally adopting the budget.

The level at which expenditures may not legally exceed appropriations is the fund level.

For the year ended June 30, 2025, General Fund expenditures exceeded appropriations by $2,453,583.

All appropriations lapse at fiscal year-end unless City Council takes formal action in the form of an adopted staff report that allows the appropriation to continue into the following fiscal year.

Budgets for the various funds are adopted on a basis consistent with accounting principles generally accepted in the United States of America. Annual appropriated budgets are legally adopted for the general, special revenue, debt service, capital projects, and proprietary fund types.

NOTE 2 - DISCLOSURES FOR STREETS, SIDEWALKS, CURBS AND GUTTERS The City elected to use the modified approach in reporting its street pavement infrastructure network.

Under the modified approach, infrastructure assets that are part of a network or subsystem of a network are not required to be depreciated as long as two requirements are met.

First, the government must manage the eligible infrastructure assets using an asset management system that has the following characteristics:

An up-to-date inventory of eligible infrastructure assets, Annual condition assessments of the eligible infrastructure assets and summaries of the results using a measurement scale, and
Estimates of the annual cost to maintain and preserve the eligible infrastructure assets at the condition level established and disclosed by the government.

Second, the government must document that the eligible infrastructure assets are being preserved approximately at (or above) a condition level established and disclosed by the government. If eligible infrastructure assets meet all requirements and are not depreciated, all expenditures made for those assets (except for additions and improvements) are expensed in the period incurred. Additions and improvements to eligible infrastructure assets are capitalized. Additions or improvements increase the capacity or efficiency of infrastructure assets rather than preserve the useful life of the assets.

City of Fountain Valley
Notes to Required Supplementary Information
For the Fiscal Year Ended June 30, 2025
-73-
NOTE 2 - DISCLOSURES FOR STREETS, SIDEWALKS, CURBS AND GUTTERS (continued) Streets
The condition of the City’s roadway pavements is measured using the CarteGraph Pavement Management System. The system uses a measurement scale that is based on a Pavement Condition Index (PCI) ranging from zero for a very poor pavement to 100 for a pavement in very good condition. The City’s road system is divided into roadway segments according to the classifications of Primary, Major, and Secondary routes which are combined for reporting purposes as Master Plan of Arterial Highways (MPAH) and Locals. Field condition surveys of the pavement surface are conducted using 19 pavement distress types and a five-level measurement scale to develop the PCI for each roadway segment and an overall pavement network rating. The five levels are: Very Good (86-100), Good (75-85), Fair (60-74), Poor (41- 59), and Very Poor (0-40). Field condition surveys are undertaken, and PCI ratings are compiled biannually for MPAH’s and Locals. It is the City’s policy to maintain a weighted average of all roadway segments at a PCI of 65 or better. The following table shows the results of the field condition surveys:

Condition PCI Range MPAH Locals Total Mi. % of Network
Very good 86-100 23.5 54.2 77.7 47.1%
Good 75-85 18.9 46.1 65.0 39.4%
Fair 60-74 9.3 9.2 18.5 11.2%
Poor 41-59 2.5 0.7 3.2 1.9%
Very poor 0-40 - 0.4 0.4 0.2%
Totals 54.2 110.6 164.8 100%
The overall condition of the City’s pavement network based on the most recent complete assessment performed in fiscal year 2024 was “Very Good” with a weighted average PCI of 84.7 based on the surface area of each segment. The City’s four assessments performed previously in fiscal years 2020, 2018, 2016, and 2014 were “Very Good” to “Good” with a weighted average Overall Condition Index (OCI) of 86.4, 86.1, 85.1, and 81.4, respectively.

Sidewalks
The City’s maintenance standards for sidewalks are based upon the various vertical offset criteria listed below:

Sidewalk Maintenance
0” to ½” - will be flagged for identification purposes, however, will be excluded from the budgetary section of the report. These distress locations are potential hazards and should be considered for future maintenance.
½” to 1” - will be flagged for grinding maintenance.
1” to 2”- will be flagged for ramping maintenance.
>2” caused by a tree - will be flagged as ramp maintenance until the tree is removed. Then the City will remove the deficient sidewalk and/or curbs and gutter.

It is the City’s policy to perform maintenance on sidewalks consistent with the above criteria.

City of Fountain Valley
Notes to Required Supplementary Information
For the Fiscal Year Ended June 30, 2025
-74-
NOTE 2 - DISCLOSURES FOR STREETS, SIDEWALKS, CURBS AND GUTTERS (continued) Curbs and Gutters
The City’s maintenance standards for curbs and gutters requires that sections of curbs and gutters that experience a vertical offset of 1-1/2 inches or greater, which create “standing” water shall be placed on a schedule for removal and replacement consistent with existing City Council policy. To the greatest extent possible, removal and replacement of curbs and gutters meeting the above criteria shall be performed in conjunction with street resurfacing projects within which the deficient curbs and gutters sections are located.

Comparison of Needed-to-Actual Maintenance/Preservation 2017-2018 2018-2019 2019-2020 2020-2021 2021-2022 2022-2023 2023-2024 2024-2025 Sidewalks, curbs and gutters:

Budgeted 296,000 - 296,000 575,000 575,000 2,055,000 - 3,865,724 Actual - 12,540 9,310 152,184 348,134 1,137,293 - 2,132,636 Roadway Classification:

Arterial and collectors
Budgeted 1,426,127 3,259,479 3,800,494 1,819,743 1,920,000 2,377,015 2,890,000 4,237,956 Actual 43,755 1,287,645 2,106,312 1,267,756 1,353,847 2,087,181 528,123 1,907,486 Residential roadway
Budgeted 1,800,000 1,800,000 2,300,000 2,921,000 2,000,000 3,050,000 1,155,000 1,657,430 Actual 1,535,470 1,485,305 2,287,898 2,615,071 1,798,038 2,864,058 1,137,359 1,053,785

SUPPLEMENTARY SCHEDULES

City of Fountain Valley
Nonmajor Government Funds
June 30, 2025
-75-
Special Revenue Funds
Special revenue funds are used to account for specific revenue sources that are legally restricted to or otherwise assigned for specific purposes.

Criminal Activities - This fund is used to account for receipts and disbursements of seized and forfeited assets used for sale of controlled substances and to account for state monies to be used for policing activities. This fund includes the opioid settlement allocation from the State of California (Abatement Funds) and related opioid remediation activities.

Road Maintenance and Rehabilitation Program SB 1 - This fund is used to account for revenues received from the State SB1 taxes. Expenditures are restricted to basic road maintenance, rehabilitation, and critical safety projects.

Gas Tax - This fund is used to account for state gasoline taxes received by the City. These funds may be used for street maintenance, right-of-way acquisition and street construction.

Abandoned Vehicle Abatement - This fund is used to account for abatement of abandoned or disabled vehicles illegally parked in the City.

Traffic Improvement - This fund is used to account for Measure M revenues received by the City. These funds may be used for street projects to improve traffic.

Pollution Reduction - This fund is used to account for South Coast Air Quality Management District revenues received by the City. These funds may be used for various programs to reduce air pollution.

HOME Grant - This fund is used to account for federal HOME Grant funds.

Measure M2 - This fund is used to account for Measure M2 revenue and interest earnings. These funds are transferred out for traffic improvement related projects.

Community Development Block Grant - This fund is used to account for Federal Housing and Community Development Block Grant funds.

Debt Service Funds
Debt service funds are used to account for resources restricted or assigned for expenditure of principal and interest.

Fountain Valley Public Financing Authority - This fund is used to account for the repayment of principal and interest on the Lease Revenue Bonds, Series 2016A.

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City of Fountain Valley
Nonmajor Government Funds
June 30, 2025
-76-
Capital Project Funds
Capital projects funds are used to account for resources restricted or assigned for capital improvements.

Capital Improvement Program Fund – This fund is used to account for major capital improvement projects.

Drainage - This fund is used to account for the implementation of goals and objectives of the master drainage plan and to mitigate water runoff impacts of new development in the drainage area.

City of Fountain Valley
Combining Balance Sheet
Nonmajor Governmental Funds
June 30, 2025
-77-
Criminal
Activities
Road Maint
and Rehab
Program
SB1 Gas Tax
Abandoned
Vehicle
Abatement
Traffic
Improvement
Assets:

Cash and investments $ 1,753,240 $ 1,466,302 $ - $ 4,325 $ 1,296,613 Receivables:

Accounts 9,051 274,713 137,265 - -
Loans - - - - -
Total assets $ 1,762,291 $ 1,741,015 $ 137,265 $ 4,325 $ 1,296,613 Liabilities, deferred inflows of resources, and fund balances Liabilities:

Accounts payable $ 39,660 $ - $ - $ - $ 598
Accrued wages payable 3,481 - - - -
Unearned revenues 454,129 - - - -
Due to other funds - - 131,388 - -
Total liabilities 497,270 - 131,388 - 598
Deferred inflows of resources:

Unavailable revenues 9,051 - - - -
Total deferred inflows of resources 9,051 - - - -
Fund balances:

Restricted for:

Public safety 1,255,970 - - - -
Transportation 1,741,015 - 5,877 4,325 1,296,015
Housing - - - - -
Community development - - - - -
Assigned:

Capital projects - - - - -
Total fund balances 1,255,970 1,741,015 5,877 4,325 1,296,015 Total liabilities, deferred inflows of resources, and fund balances (deficit) $ 1,762,291 $ 1,741,015 $ 137,265 $ 4,325 $ 1,296,613 Special Revenue Funds

-78-
Debt Service
Fund
Pollution
Reduction HOME Grant Measure M2
Community
Development
Block Grant
Fountain Valley
Public
Financing
Authority
Capital
Improvement
Program
(formerly major) Drainage Total
$ 535,389 $ 343,092 $ 4,020,685 $ - $ - $ 932,457 $ 70,752 $ 10,422,855 19,608 - 279,535 76,374 - - - 796,546
- 14,348 - 195,998 - - - 210,346
$ 554,997 $ 357,440 $ 4,300,220 $ 272,372 $ - $ 932,457 $ 70,752 $ 11,429,747 $ - $ - $ - $ 13,150 $ - $ 932,457 $ - $ 985,865
- - - 2,426 - - - 5,907
- - - - - - - 454,129
- - - 60,799 - - - 192,187
- - - 76,375 - 932,457 - 1,638,088
19,608 - - - - - - 28,659
19,608 - - - - - - 28,659
535,389 - - - - - - 1,791,359
- - 4,300,220 - - - - 7,347,452
- 357,440 - - - - - 357,440
- - - 195,997 - - - 195,997
- - - - - - 70,752 70,752
535,389 357,440 4,300,220 195,997 - - 70,752 9,763,000
$ 554,997 $ 357,440 $ 4,300,220 $ 272,372 $ - $ 932,457 $ 70,752 $ 11,429,747 Special Revenue Funds
Capital
Projects Fund

City of Fountain Valley
Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds
For the Year Ended June 30, 2025
-79-
Criminal
Activities
Road Maint
and Rehab
Program SB1 Gas Tax
Abandoned
Vehicle
Abatement
Traffic
Improvement
Revenues:

Investment income $ 49,794 $ 40,458 $ 32,752 $ 142 $ 42,986 Intergovernmental 393,538 1,558,916 1,612,634 - -
Charges for services 500 - - - 6,970
Total revenues 443,832 1,599,374 1,645,386 142 49,956
Expenditures:

Current:

Public safety 134,433 - - - -
Transportation - - - - -
Community development - - - - -
Community services - - - 384 -
Capital outlay 39,352 - - - -
Debt service:

Principal - - - - -
Interest - - - - -
Total expenditures 173,785 - - 384 -
Excess (deficiency) of revenues
over (under) expenditures 270,047 1,599,374 1,645,386 (242) 49,956 Other financing sources (uses):

Transfers in - - - - -
Transfers out (1,002,865) - (2,288,930) - -
Total other financing sources (uses) (1,002,865) - (2,288,930) - - Net change in fund balances 270,047 596,509 (643,544) (242) 49,956 Fund balances, beginning of year,
as previously reported 985,923 1,144,506 649,421 4,567 1,246,059 Adjustment - change in reporting entity (major to nonmajor) - - - - - Fund balances, beginning of year, as restated 985,923 1,144,506 649,421 4,567 1,246,059 Fund balances, end of year $ 1,255,970 $ 1,741,015 $ 5,877 $ 4,325 $ 1,296,015 Special Revenue Funds

-80-
Debt Service
Fund
Pollution
Reduction HOME Grant
Measure
M2
Community
Development
Block Grant
Fountain Valley
Public
Financing
Authority
Capital
Improvement
Program
(formerly major) Drainage Total
$ 19,398 $ 10,843 $ 128,439 $ - $ 2 $ - $ - $ 324,814
74,652 1,572,443 - 304,859 - - - 5,517,042
- - - - - - 10,674 18,144
94,050 10,843 1,700,882 304,859 2 - 10,674 5,860,000
- - - - - - - 134,433
- - - - - 4,801,913 - 4,801,913
- - - 304,859 - - - 304,859
- - - - - - - 384
- - - - - 1,706,391 - 1,745,743
- - - - 681,944 - - 681,944
- - - - 408,873 - - 408,873
- - - 304,859 1,090,817 6,508,304 - 8,078,149
94,050 10,843 1,700,882 - (1,090,815) (6,508,304) 10,674 (2,218,149) - - - - 1,090,813 6,508,304 - 7,599,117
(128,065) (1,780,606) - - - - - (5,200,466)
(128,065) (1,780,606) - - 1,090,813 6,508,304 - 2,398,651 (34,015) 10,843 (79,724) - (2) - 10,674 180,502
569,404 346,597 4,379,944 195,997 2 - 60,078 9,582,498
- - - - - - - -
569,404 346,597 4,379,944 195,997 2 - 60,078 9,582,498
$ 535,389 $ 357,440 $ 4,300,220 $ 195,997 $ - $ - $ 70,752 $ 9,763,000 Special Revenue Funds
Capital
Projects Fund

City of Fountain Valley
Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual – Criminal Activities Special Revenue Fund For the Year Ended June 30, 2025
-81-
Variance with
Final Budget
Budgeted Amount Actual Positive
Original Final Amounts (Negative)
Revenues:

Investment income $ 17,550 $ 17,550 $ 49,794 $ 32,244
Intergovernmental 212,830 212,830 393,538 180,708
Charges for services - 550 500 (50)
Total revenues 230,380 230,930 443,832 212,902
Expenditures:

Current:

Public safety 183,960 162,880 134,433 28,447
Capital outlay - 42,830 39,352 3,478
Total expenditures 183,960 205,710 173,785 31,925
Net change in fund balance 46,420 25,220 270,047 244,827 Fund balance, beginning of year 985,923 985,923 985,923 - Fund balance, end of year $ 1,032,343 $ 1,011,143 $ 1,255,970 $ 244,827

City of Fountain Valley
Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual – Road Maintenance and Rehabilitation Program (SB1) Special Revenue Fund
For the Year Ended June 30, 2025
-82-
Variance with
Final Budget
Budgeted Amount Actual Positive
Original Final Amounts (Negative)
Revenues:

Investment income $ 9,500 $ 9,500 $ 40,458 $ 30,958
Intergovernmental 1,463,010 1,463,010 1,558,916 95,906
Total revenues 1,472,510 1,472,510 1,599,374 126,864
Excess (Deficiency) of Revenues
over (under) Expenditures 1,472,510 1,472,510 1,599,374 126,864 Other financing sources (uses):

Transfers out (1,930,650) (1,930,650) (1,002,865) 927,785 Total other financing sources (uses) (1,930,650) (1,930,650) (1,002,865) 927,785 Net change in fund balance (458,140) (458,140) 596,509 1,054,649 Fund balance, beginning of year 1,144,506 1,144,506 1,144,506 - Fund balance, end of year $ 686,366 $ 686,366 $ 1,741,015 $ 1,054,649

City of Fountain Valley
Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual – Gas Tax Special Revenue Fund
For the Year Ended June 30, 2025
-83-
Variance with
Final Budget
Budgeted Amount Actual Positive
Original Final Amounts (Negative)
Revenues:

Investment income $ 17,400 $ 17,400 $ 32,752 $ 15,352
Intergovernmental 1,633,020 1,633,020 1,612,634 (20,386) Total revenues 1,650,420 1,650,420 1,645,386 (5,034)
Expenditures:

Current:

Transportation 60,000 60,000 - 60,000
Total expenditures 60,000 60,000 - 60,000
Excess (Deficiency) of Revenues
over (under) Expenditures 1,590,420 1,590,420 1,645,386 54,966 Other financing sources (uses):

Transfers out (2,413,300) (2,413,300) (2,288,930) 124,370 Total other financing sources (uses) (2,413,300) (2,413,300) (2,288,930) 124,370 Net change in fund balance (822,880) (822,880) (643,544) 179,336 Fund balance, beginning of year 649,421 649,421 649,421 - Fund balance, end of year $ (173,459) $ (173,459) $ 5,877 $ 179,336

City of Fountain Valley
Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual – Abandoned Vehicle Abatement Special Revenue Fund For the Year Ended June 30, 2025
-84-
Variance with
Final Budget
Budgeted Amount Actual Positive
Original Final Amounts (Negative)
Revenues:

Investment income $ 100 $ 100 $ 142 $ 42
Total revenues 100 100 142 42
Expenditures:

Current:

Community services 1,385 1,385 384 1,001
Total expenditures 1,385 1,385 384 1,001
Net change in fund balance (1,285) (1,285) (242) 1,043
Fund balance, beginning of year 4,567 4,567 4,567 -
Fund balance, end of year $ 3,282 $ 3,282 $ 4,325 $ 1,043

City of Fountain Valley
Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual – Traffic Improvement Special Revenue Fund For the Year Ended June 30, 2025
-85-
Variance with
Final Budget
Budgeted Amount Actual Positive
Original Final Amounts (Negative)
Revenues:

Investment income $ 17,650 $ 17,650 $ 42,986 $ 25,336
Charges for services 10,000 10,000 6,970 (3,030)
Total revenues 27,650 27,650 49,956 22,306
Expenditures:

Current:

Transportation 165,440 165,440 - 165,440
Capital outlay 65,000 65,000 - 65,000
Total expenditures 230,440 230,440 - 230,440
Net change in fund balance (202,790) (202,790) 49,956 252,746 Fund balance, beginning of year 1,246,059 1,246,059 1,246,059 - Fund balance, end of year $ 1,043,269 $ 1,043,269 $ 1,296,015 $ 252,746

City of Fountain Valley
Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual – Pollution Reduction Special Revenue Fund For the Year Ended June 30, 2025
-86-
Variance with
Final Budget
Budgeted Amount Actual Positive
Original Final Amounts (Negative)
Revenues:

Investment income $ 11,000 $ 11,000 $ 19,398 $ 8,398
Intergovernmental 74,600 74,600 74,652 52
Total revenues 85,600 85,600 94,050 8,450
Expenditures:

Current:

Public safety 2,000 2,000 - 2,000
Total expenditures 2,000 2,000 - 2,000
Excess (Deficiency) of Revenues
over (under) Expenditures 83,600 83,600 94,050 10,450
Other financing sources (uses):

Transfers out (210,000) (265,335) (128,065) 137,270
Total other financing sources (uses) (210,000) (265,335) (128,065) 137,270 Net change in fund balance (126,400) (181,735) (34,015) 147,720 Fund balance, beginning of year 569,404 569,404 569,404 - Fund balance, end of year $ 443,004 $ 387,669 $ 535,389 $ 147,720

City of Fountain Valley
Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual – HOME Grant Special Revenue Fund
For the Year Ended June 30, 2025
-87-
Variance with
Final Budget
Budgeted Amount Actual Positive
Original Final Amounts (Negative)
Revenues:

Investment income $ 7,000 $ 7,000 $ 10,843 $ 3,843
Total revenues 7,000 7,000 10,843 3,843
Net change in fund balance 7,000 7,000 10,843 3,843
Fund balance, beginning of year 346,597 346,597 346,597 - Fund balance, end of year $ 353,597 $ 353,597 $ 357,440 $ 3,843

City of Fountain Valley
Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual – Measure M2 Special Revenue Fund
For the Year Ended June 30, 2025
-88-
Variance with
Final Budget
Budgeted Amount Actual Positive
Original Final Amounts (Negative)
Revenues:

Investment income $ 70,500 $ 70,500 $ 128,439 $ 57,939
Intergovernmental 2,010,035 2,010,035 1,572,443 (437,592) Total revenues 2,080,535 2,080,535 1,700,882 (379,653)
Excess (Deficiency) of Revenues
over (under) Expenditures 2,080,535 2,080,535 1,700,882 (379,653) Other financing sources (uses):

Transfers out (4,894,285) (5,172,195) (1,780,606) 3,391,589 Total other financing sources (uses) (4,894,285) (5,172,195) (1,780,606) 3,391,589 Net change in fund balance (2,813,750) (3,091,660) (79,724) 3,011,936 Fund balance, beginning of year 4,379,944 4,379,944 4,379,944 - Fund balance, end of year $ 1,566,194 $ 1,288,284 $ 4,300,220 $ 3,011,936

City of Fountain Valley
Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual – Community Development Block Grant Special Revenue Fund For the Year Ended June 30, 2025
-89-
Variance with
Final Budget
Budgeted Amount Actual Positive
Original Final Amounts (Negative)
Revenues:

Intergovernmental $ 500,000 $ 500,000 $ 304,859 $ (195,141) Total revenues 500,000 500,000 304,859 (195,141)
Expenditures:

Current:

Community development 500,000 500,000 304,859 195,141
Total expenditures 500,000 500,000 304,859 195,141
Net change in fund balance - - - -
Fund balance, beginning of year 195,997 195,997 195,997 - Fund balance, end of year $ 195,997 $ 195,997 $ 195,997 $ -

City of Fountain Valley
Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual – Fountain Valley Public Financing Authority Debt Service Fund For the Year Ended June 30, 2025
-90-
Variance with
Final Budget
Budgeted Amount Actual Positive
Original Final Amounts (Negative)
Revenues:

Investment income $ - $ - $ 2 $ 2
Total revenues - - 2 2
Expenditures:

Debt service:

Principal 681,940 681,940 681,944 (4)
Interest 408,880 408,880 408,873 7
Total expenditures 1,090,820 1,090,820 1,090,817 3
Excess (Deficiency) of Revenues over
(under) Expenditures (1,090,820) (1,090,820) (1,090,815) 5 Other financing sources (uses):

Transfers in 1,090,820 1,090,820 1,090,813 (7)
Total other financing sources (uses) 1,090,820 1,090,820 1,090,813 (7) Net change in fund balance - - (2) (2)
Fund balance, beginning of year 2 2 2 - Fund balance, end of year $ 2 $ 2 $ - $ (2)

City of Fountain Valley
Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual – Capital Improvement Program Capital Projects Fund For the Year Ended June 30, 2025
-91-
Variance with
Final Budget
Budgeted Amount Actual Positive
Original Final Amounts (Negative)
Expenditures:

Current:

Transportation $ 4,801,913 $ 4,801,913 $ 4,801,913 $ -
Capital outlay 10,206,057 9,737,327 1,706,391 8,030,936 Total expenditures 15,007,970 14,539,240 6,508,304 8,030,936 Excess (Deficiency) of Revenues
over (under) Expenditures (15,007,970) (14,539,240) (6,508,304) 8,030,936 Other financing sources (uses):

Transfers in 15,007,970 14,539,240 6,508,304 (8,030,936) Total other financing sources (uses) 15,007,970 14,539,240 6,508,304 (8,030,936) Net change in fund balance - - - -
Fund balance, beginning of year - - - -
Fund balance, end of year $ - $ - $ - $ -

City of Fountain Valley
Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual – Drainage Capital Projects Fund
For the Year Ended June 30, 2025
-92-
Variance with
Final Budget
Budgeted Amount Actual Positive
Original Final Amounts (Negative)
Revenues:

Charges for services $ - $ - $ 10,674 $ 10,674
Total revenues - - 10,674 10,674
Expenditures:

Capital outlay 10,000 10,000 - 10,000
Total expenditures 10,000 10,000 - 10,000
Net change in fund balance (10,000) (10,000) 10,674 20,674 Fund balance, beginning of year 60,078 60,078 60,078 -
Fund balance, end of year $ 50,078 $ 50,078 $ 70,752 $ 20,674

City of Fountain Valley
Combining Statement of Fund Net Position
Internal Service Funds
June 30, 2025
-93-
Information
Technology
Government
Buildings
Fleet
Management
Assets:

Current:

Cash and investments $ 2,060,841 $ 5,625,396 $ 3,563,537 Accounts receivable 7,604 3,807 -
Inventory - - 12,590
Prepaid items 278,117 26,596 1,089,146
Total current assets 2,346,562 5,655,799 4,665,273
Noncurrent:

Capital assets - net of accumulated depreciation 659,586 54,466 1,486,106 Total capital assets, net 659,586 54,466 1,486,106
Total noncurrent assets 659,586 54,466 1,486,106
Total assets 3,006,148 5,710,265 6,151,379
Liabilities:

Current:

Accounts payable 66,784 103,591 124,288
Accrued wages payable 14,625 7,298 10,138
Interest payable 6,373 - -
Long-term liabilities, current portion 204,290 - -
Total current liabilities 292,072 110,889 134,426
Noncurrent:

Long-term liabilities, net of current portion 232,747 - - Total noncurrent liabilities 232,747 - -
Total liabilities 524,819 110,889 134,426
Net position:

Net investment in capital assets 222,549 54,466 1,486,106 Unrestricted 2,258,780 5,544,910 4,530,847
Total net position $ 2,481,329 $ 5,599,376 $ 6,016,953

-94-
Capital
Equipment Self Insurance Total
$ 1,545,240 $ 3,244,846 $ 16,039,860
- - 11,411
- - 12,590
- 683 1,394,542
1,545,240 3,245,529 17,458,403
123,449 - 2,323,607
123,449 - 2,323,607
123,449 - 2,323,607
1,668,689 3,245,529 19,782,010
25,766 60,282 380,711
- - 32,061
- - 6,373
- - 204,290
25,766 60,282 623,435
- - 232,747
- - 232,747
25,766 60,282 856,182
123,449 - 1,886,570
1,519,474 3,185,247 17,039,258
$ 1,642,923 $ 3,185,247 $ 18,925,828

City of Fountain Valley
Combining Statement of Revenues, Expenses and Changes in Fund Net Position Internal Service Funds
For the Year Ended June 30, 2025
-95-
Information
Technology
Government
Buildings
Fleet
Management
Operating revenues:

Charges for services $ 3,232,792 $ 2,399,035 $ 2,223,910 Total operating revenues 3,232,792 2,399,035 2,223,910
Operating expenses:

Personnel services 808,780 444,228 608,443
Maintenance and operations 283,503 1,458,368 573,096
Equipment and software 1,424,272 98,837 142,459
Insurance premiums - - -
Depreciation 446,852 6,589 158,225
Total operating expenses 2,963,407 2,008,022 1,482,223
Operating income 269,385 391,013 741,687
Nonoperating revenue (expense):

Sale of assets - - 90,570
Total non-operating revenue (expense) - - 90,570
Income before transfers 269,385 391,013 832,257
Transfers
Transfers in - - 420,335
Total transfers - - 420,335
Net change in net position 269,385 391,013 1,252,592
Net position, beginning of year 2,211,944 5,208,363 4,764,361 Net position, end of year $ 2,481,329 $ 5,599,376 $ 6,016,953

-96-
Capital
Equipment Self Insurance Total
$ 500,887 $ 4,553,134 $ 12,909,758
500,887 4,553,134 12,909,758
- 2,952,605 4,814,056
- 43,375 2,358,342
253,089 - 1,918,657
- 1,925,263 1,925,263
7,886 - 619,552
260,975 4,921,243 11,635,870
239,912 (368,109) 1,273,888
- - 90,570
- - 90,570
239,912 (368,109) 1,364,458
- - 420,335
- - 420,335
239,912 (368,109) 1,784,793
1,403,011 3,553,356 17,141,035
$ 1,642,923 $ 3,185,247 $ 18,925,828

City of Fountain Valley
Combining Statement of Cash Flows
Internal Service Funds
For the Year Ended June 30, 2025
-97-
Information
Technology
Government
Buildings
Fleet
Management
Cash flows from operating activities:

Cash received from customers and users $ 3,225,188 $ 2,395,228 $ 2,223,910 Cash paid to suppliers for goods and services (1,830,614) (1,640,353) (1,825,318) Cash paid to employees for services (794,155) (436,930) (598,305) Net cash provided by operating activities 600,419 317,945 (199,713) Cash flows from noncapital activities:

Cash paid from other funds for advances - - 420,335
Net cash used by noncapital activities - - 420,335
Cash flows from capital and related financing activities:

Acquisition and construction of capital assets (13,214) (7,161) (810,896) Proceeds from sales of assets - - 90,570
Loan payment (487,171) - -
Net cash used by capital and related financing activities (500,385) (7,161) (720,326) Net increase in cash and cash equivalents 100,034 310,784 (499,704) Cash and cash equivalents at beginning of fiscal year 1,960,807 5,314,612 4,063,241 Cash and cash equivalents at end of fiscal year $ 2,060,841 $ 5,625,396 $ 3,563,537 Reconciliation of operating income to net cash
provided by operating activities
Operating income $ 269,385 $ 391,013 $ 741,687
Adjustments to reconcile operating income to net cash
provided by operating activities:

Depreciation 446,852 6,589 158,225
Decrease (increase) in receivables (7,604) (3,807) -
Decrease (increase) in prepaid items (116,017) (26,596) (1,089,146) Increase (decrease) in accounts payable (13,195) (56,552) (20,617) Increase (decrease) in accrued wages payable 14,625 7,298 10,138 Increase (decrease) in accrued interest payable 6,373 - - Total adjustments 331,034 (73,068) (941,400)
Net cash provided by operating activities $ 600,419 $ 317,945 $ (199,713) Non-cash Financing Activities:

Acquisition of subscription assets (539,819) - -
Subscription liability 539,819 - -

-98-
Capital
Equipment Self Insurance Total
$ 500,887 $ 4,803,134 $ 13,148,347
(264,614) (2,009,602) (7,570,501)
- (2,952,605) (4,781,995)
236,273 (159,073) 795,851
- - 420,335
- - 420,335
(131,335) - (962,606)
- - 90,570
- - (487,171)
(131,335) - (1,359,207)
104,938 (159,073) (143,021)
1,440,302 3,403,919 16,182,881
$ 1,545,240 $ 3,244,846 $ 16,039,860
$ 239,912 $ (368,109) $ 1,273,888
7,886 - 619,552
- 250,000 238,589
- (683) (1,232,442)
(11,525) (40,281) (142,170)
- - 32,061
- - 6,373
(3,639) 209,036 (478,037)
$ 236,273 $ (159,073) $ 795,851
- - (539,819)
- - 539,819

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STATISTICAL SECTION

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CITY OF FOUNTAIN VALLEY
Description of Statistical Section Contents
June 30, 2025
This part of the City of Fountain Valley’s annual comprehensive financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information say about the government’s overall financial health.

Contents: Pages
Financial Trends - Theses schedules contain trend information to help the reader understand how the City’s financial performance and well-being have changed over time. 99
Revenue Capacity - These schedules contain information to help the reader assess the City’s most significant local revenue source, the property tax. 104
Debt Capacity - These schedules present information to help the reader assess the affordability of the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future. 108 Demographic and Economic Information - These schedules offer demographic and economic indicators to help the reader understand the environment within which the City’s financial activities take place. 113 Operating Information - These schedules contain service and infrastructure data to help the reader understand how the information in the City’s financial report relates to the services the City provides and the activities it performs. 116

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City of Fountain Valley Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) -99-

City of Fountain Valley Changes in Net Position – Expenses and Program Revenues Last Ten Fiscal Years (accrual basis of accounting) -100-

City of Fountain Valley Changes in Net Position – General Revenues Last Ten Fiscal Years (accrual basis of accounting) -101-

City of Fountain Valley Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) -102-

City of Fountain Valley Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) -103-

City of Fountain Valley
Assessed Value of Estimated Actual Value of Taxable Property Last Ten Fiscal Years
-104-
Fiscal Year Taxable Total
Ended Assessed Direct Tax
June 30, Secured Unsecured Value Rate(1)
2016 $ 8,142,567,704 $ 240,473,501 $ 8,383,041,205 0.17172 2017 8,444,874,157 238,403,442 8,683,277,599 0.13173
2018 8,843,461,588 269,238,862 9,112,700,450 0.13173
2019 9,282,526,512 293,682,416 9,576,208,928 0.13550
2020 9,796,913,673 316,787,979 10,113,701,652 0.13505
2021 10,182,790,098 332,988,158 10,515,778,256 0.13491
2022 10,395,996,372 332,366,455 10,728,362,827 0.13488
2023 11,142,057,244 376,665,339 11,518,722,583 0.13468
2024 11,894,609,167 414,100,716 12,308,709,883 0.13461
2025 12,405,966,391 502,947,330 12,908,913,721 0.13398
Notes:

Exempt values are not included in Total.
(1) Total Direct Tax Rate is the weighted average City general fund share of the 1% Prop 13 rate for all TRA's.

Data Source: Orange County Assessor 2015/16 - 2024/25 Combined Tax Rolls Source: HdL, Coren & Cone, prepared on 7/23/2025
City
In 1978 the voters of the State of California passed Proposition 13 which limited property taxes to a total maximum rate of 1%, based upon the assessed value of the property being taxed. Each year, the assessed value of property may be increased by an "inflation factor" (limited to a maximum increase of 2%). With few exceptions, property is only reassessed at the time that it is sold to a new owner. At that point, the new assessed value is reassessed at the purchase price of the property sold. The assessed valuation data shown above represents the only data currently available with respect to the actual market value of taxable property and is subject to the limitations described above.

City of Fountain Valley Direct and Overlapping Property Tax Rates (Rate per $100 of assessed value) Last Ten Fiscal Years -105-

City of Fountain Valley
Principal Property Taxpayers
Current Year and Nine Years Ago
-106-
Taxable Percent of Total City Taxable Percent of Total City Taxpayer (Parcels) Assessed Value Taxable Assessed Value Assessed Value Taxable Assessed Value 1) Orange Coast Memorial Medical Center (9) 252,275,004 $ 1.95% $ 185,360,509 2.21% 2) Hyundai Motor America (1) 208,955,018 1.62% 188,202,045 2.25% 3) Bexaew the Havens LP (2) 127,258,315 0.99% 107,651,615 1.28% 4) JKS-CMFV LLC (17) 94,297,301 0.73% 74,783,214 0.89%
5) Corte Bella Fee Ower (2) 94,030,401 0.73%
6) Regents The (7) 86,845,279 0.67%
7) Hospitality Properties Trust 82,172,983 0.64%
8) Fountain Valley Regional Hospital (5) 82,024,201 0.64% 158,025,970 1.89% 9) Yakult USA Inc (1) 76,703,454 0.59% 40,905,389 0.49% 10) Euclid and Heil FV Owner LLC (1) 67,626,000 0.52%
11) Shea Center Crystal Springs LLC (2) 43,083,265 0.51% 12) Vermeulen Properties 6 LLC (13) 40,949,714 0.49%
13) Fountain Valley Senior Housing LLC (1) 40,062,122 0.48% 14) US Millennium LP (11) 39,181,741 0.47%
$ 1,172,187,956 9.08% $ 918,205,584 10.95%
The amounts shown above include assessed value data for the City .

Data Source: Orange County Assessor 2024/25 Combined Tax Rolls and the SBE Non Unitary Tax Roll Data Source: Orange County Assessor 2015/16 Combined Tax Rolls and the SBE Non Unitary Tax Roll Source: HdL, Coren & Cone, prepared on 7/23/2025
2025 2016

City of Fountain Valley
Property Tax Levies and Collections
Last Ten Fiscal Years
-107-
Fiscal Taxes Levied Collections in
Year Ended for the Percent Subsequent Percent
June 30, Fiscal Year Amount(1) of Levy Years(2) Amount of Levy 2016 10,286,311 $ $ 10,155,604 98.73% 41,013 $ $ 10,196,617 99.13% 2017 10,652,346 10,543,581 98.98% 33,732 10,577,313 99.30% 2018 11,193,927 11,101,526 99.17% 35,678 11,137,204 99.49% 2019 11,678,495 11,586,299 99.21% 41,659 11,627,958 99.57% 2020 12,264,593 12,121,446 98.83% 54,334 12,175,780 99.28% 2021 12,756,006 12,612,713 98.88% 51,500 12,664,213 99.28% 2022 13,110,041 12,930,762 98.63% 52,005 12,982,767 99.03% 2023 14,256,951 14,043,987 98.51% 64,638 14,108,625 98.96% 2024 14,470,305 14,322,579 98.98% 68,754 14,391,333 99.45% 2025 15,609,917 15,479,599 99.17% 85,523 15,565,122 99.71% Notes:
(1) The amounts presented include City property taxes only.

Source: Orange County Assessor's Office
(2) These amounts consist of "prior year" taxes (excluding penalties and interest) remitted in the subsequent fiscal year; the Orange County Auditor Controller's Office aggregates these payments and does not provide detail on allocations to particular years.

Fiscal Year of Levy Total Collections to Date
Collected within the

City of Fountain Valley
Ratios of Outstanding Debt by Type
Last Ten Fiscal Years
-108-
Fiscal Year Leases & Certificates Taxable Pension Lease Total Total Total Percentage Debt Ended Subscriptions of Obligation Revenue Governmental Loans Revenue Business-type Primary of Personal per June 30, Payable Participation(1) Bonds(3) Bonds(4) (5) Activities Payable Bonds(2) Activities Government Income Capita(6) 2016 - - $ 15,661,765 $ 13,807,919 $ 29,469,684 $ 14,611,443 - $ $ 14,611,443 $ 44,081,127 2.26% 777 $ 2017 - - 15,679,151 31,855,338 14,041,771 - 14,041,771 45,897,109 2.27% 806 2018 - - 15,696,538 15,660,893 31,357,431 13,457,099 - 13,457,099 44,814,530 2.15% 791 2019 - - 15,203,923 15,079,889 30,283,812 12,847,425 - 12,847,425 43,131,237 2.01% 772 16,176,187
2020 - - 14,651,309 14,466,011 29,117,320 12,217,751 - 12,217,751 41,335,071 1.82% 752 2021 - - 14,038,695 13,836,909 27,875,604 11,563,077 - 11,563,077 39,438,681 1.79% 697 2022 811,867 13,366,081 - 13,187,409 27,365,357 10,888,405 - 10,888,405 38,253,762 1.62% 671 2023 835,764 12,618,467 - 12,507,318 25,961,549 10,183,732 - 10,183,732 36,145,281 1.53% 634 2024 403,952 11,795,853 - 11,801,452 24,001,257 9,514,059 - 9,514,059 33,515,316 1.27% 595 2025 442,445 10,888,239 - 11,074,610 22,405,294 8,814,390 - 8,814,390 31,219,684 1.15% 552 (1) On July 9, 2003, the City issued 2003 Certificates of Participation in the amount of $13,270,000. (2) On December 17, 2014, the City issued 2014A Revenue Bonds in the amount of $13,695,000. (3) On September 2, 2015, the City issued 2015A Taxable Pension Obligation Bonds in the amount of $15,995,000. (4) On February 10, 2016, the City issued 2016A Lease Revenue Bonds in the amount of $12,895,000. (5) On January 7, 2017, the City issued 2017 Clean Renewable Energy Bonds in the amount of $2,843,166. (6) These ratios are calculated using personal income and population for the prior calendar year.

Details regarding the City's outstanding debt can be found in the notes to basic financial statements.

Governmental Activities Business-type Activities

City of Fountain Valley
Ratios of General Bonded Debt Outstanding
Last Ten Fiscal Years
-109-
Certificates Taxable Pension Lease Percent of
Ended of Obligation Revenue Assessed Per
June 30, Participation Bonds Bonds Total Value(1) Capita 2016 $ 15,661,766 - $ $ 13,807,919 $ 29,469,685 0.34% $ 520 2017 15,679,151 - 16,176,187 31,855,338 0.35% 560
2018 15,696,538 - 15,660,893 31,357,431 0.33% 554
2019 15,203,923 - 15,079,889 30,283,812 0.30% 542
2020 14,651,309 - 14,466,011 29,117,320 0.28% 530
2021 14,038,695 - 13,836,909 27,875,604 0.26% 493
2022 13,366,081 - 13,187,409 26,553,490 0.25% 466
2023 12,618,467 - 12,507,318 25,125,785 0.22% 441
2024 11,795,853 - 11,801,452 23,597,305 0.19% 414
2025 10,888,239 - 11,074,610 21,962,849 0.17% 388
General bonded debt is debt payable with governmental fund resources and general obligation bonds recorded in enterprise funds.
(1) Assessed value has been used because the actual value of taxable property is not readily available in the State of California.

City of Fountain Valley
Direct and Overlapping Debt
As of June 30, 2025
-110-
2024-2025 City Assessed Valuation
Total Assessed Valuation: $ 12,866,146,006
Total Debt Percentage City's Share of Debt
June 30, 2025 Applicable(1) June 30, 2025
OVERLAPPING TAX AND ASSESSMENT DEBT:

Metropolitan Water District $ 17,155,000 0.316% $ 54,210 Coast Community College District 854,816,084 6.487% 55,451,919 Rancho Santiago Community College District 132,145,756 0.332% 438,724 Rancho Santiago Community College District SFID No. 1 138,730,000 0.625% 867,063 Garden Grove Unified School District 509,370,000 10.776% 54,889,711 Huntington Beach Union High School District 122,999,998 12.183% 14,985,090 Fountain Valley School District 56,185,000 73.314% 41,191,471 Ocean View School District Certificates of Participation 148,220,000 0.916% 1,357,695 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $ 169,235,883 OVERLAPPING GENERAL FUND DEBT:

Orange County General Fund Obligations $ 429,065,000 1.587% 6,809,262 $ Orange County Board of Education Certificates of Partic 9,120,000 1.587% 144,734 Coast Community College District Certificates of Particip 660,000 6.487% 42,814 Coast Community College District Pension Obligation Bo 465,000 6.487% 30,165 Huntington Beach Union High School District Certificates 47,461,090 12.183% 5,782,185 Ocean View School District Certificates of Participation 10,835,000 0.916% 99,249 TOTAL OVERLAPPING GENERAL FUND DEBT $ 12,908,408

DIRECT GENERAL FUND DEBT
City of Fountain Valley General Fund Obligations 11,517,055 100.000% 11,517,055 City of Fountain Valley Pension Obligation Bonds 10,888,239 100.000% 10,888,239 TOTAL DIRECT DEBT $ 22,405,294
TOTAL OVERLAPPING DEBT $ 182,144,291
COMBINED TOTAL DIRECT AND OVERLAPPING DEBT(2) $ 204,549,585 (2) Ratios to 2024-25 Assessed Valuation:

Total Overlapping Tax and Assessment Debt

.

1.32%
Total Direct Debt ($22,405,294)

.
..
......

.. 0.17%
Combined Total Debt

.
..

1.59%
Source: California Municipal Statistics, Inc., dated November 14, 2025 (1) The percentage of overlapping debt applicable to the city is estimated using taxable assessed property value.

Applicable percentages were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the city divided by the district's total taxable assessed value. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations.

City of Fountain Valley Legal Debt Margin Information Last Ten Fiscal Years -111-

City of Fountain Valley
Pledged Revenue Coverage
Last Ten Fiscal Years
-112-
Fiscal Net Revenue
Year Ended Operating Operating Available for
June 30, Revenues(1) Expenses(2) Debt Service Principal Interest Total Coverage 2016 13,051,544 $ $ 10,851,750 $ 2,199,794 $ 495,000 $ 546,531 $ 1,041,531 211.2% 2017 14,174,832 $ $ 11,269,638 $ 2,905,194 $ 510,000 $ 536,631 $ 1,046,631 277.6% 2018 15,828,056 $ $ 12,524,879 $ 3,303,177 $ 535,000 $ 516,231 $ 1,051,231 314.2% 2019 16,786,253 $ $ 12,247,390 $ 4,538,863 $ 555,000 $ 494,831 $ 1,049,831 432.3% 2020 18,058,993 $ $ 13,268,179 $ 4,790,814 $ 555,000 $ 494,831 $ 1,049,831 456.3% 2021 19,432,555 $ $ 13,335,179 $ 6,097,376 $ 580,000 $ 472,631 $ 1,052,631 579.3% 2022 19,507,971 $ $ 14,537,706 $ 4,970,265 $ 600,000 $ 449,431 $ 1,049,431 473.6% 2023 19,165,142 $ $ 8,948,063 $ 10,217,079 $ 630,000 $ 425,431 $ 1,055,431 968.0% 2024 20,462,653 $ $ 16,356,187 $ 4,106,466 $ 595,000 $ 393,931 $ 988,931 415.2% 2025 22,059,226 $ $ 16,157,030 $ 5,902,196 $ 625,000 $ 332,931 $ 957,931 616.1% Notes:
(1) Total operating revenues (including investment income). (2) Total operating expenses exclusive of depreciation and amortization.

Details regarding the City's outstanding debt can be found in the notes to the basic financial statements.

Debt Service Requirements
Series 2014A Revenue Bonds
On December 17, 2014, the City issued 2014A Revenue Bonds in the amount of $13,695,000.

City of Fountain Valley
Demographic and Economic Statistics
Last Ten Fiscal Years
-113-
Calendar Personal Income Per Capita Unemployment
Year Population (in thousands) Personal Income Rate
2015 56,714 $ 1,940,507 $ 34,215 4.4%
2016 56,709 1,947,214 34,336 3.9%
2017 56,920 2,023,830 35,555 3.4%
2018 56,652 2,087,077 36,840 3.0%
2019 55,878 2,150,520 38,485 2.8%
2020 54,953 2,276,596 41,428 9.3%
2021 56,564 2,206,548 39,009 6.1%
2022 56,987 2,363,225 41,469 3.3%
2023 56,333 2,645,274 46,957 3.6%
2024 56,560 2,718,583 48,065 4.2%
Notes and Data Sources:

Source: HdL, Coren & Cone, prepared on 7/23/2025
Population: California State Department of Finance.

Unemployment Data: California Employment Development Department 2000-2009 Income, Age, and Education Data: ESRI - Demographic Estimates are based on the last available Census. Projections are developed by incorporating all of the prior census data released to date. Demographic Data is totaled from Census Block Groups that overlap the City's boundaries 2010 and later - Income, Age and Education Data - US Census Bureau, most recent American Community Survey

City of Fountain Valley
Principal Employers
Current and Nine Years Ago
-114-
Number of Percent of Number of Percent of
Employer Employees Total Employment Employees Total Employment Antech Diagnostic Inc. * 1,698 7.36% 266 1.14%
Orange Coast Memorial Medical 1,344 5.83% 1046 4.50%
Memorial Health Services 995 4.32% 1103 4.75%
Hyundai Motor America, Inc. 856 3.71% 1034 4.45%
Kingston Technology Company 566 2.45% 626 2.69%
Memorial Care Medical Foundation 522 2.26% - -
Costco Wholesale #411 397 1.72% - -
Surefire, LLC 368 1.60% 258 1.11%
Hyundai Autoever America 309 1.34% - -
Mobis Parts America, LLC 262 1.14% - -
Fountain Valley Post Acute 241 1.05% - -
Spec Services, Inc. 237 1.03% 224 0.96%
Amazon Fresh 200 0.87% - -
Fountain Valley Regional Hospital ** - - 1799 7.74%
Cerdian Tax Service, Inc. 266 1.14%
Sam's Club #6615 209 0.90%
Manor Care of Fountain Valley 180 0.77%
Mobis Parts America, LLC 166 0.71%
7,995 34.67% 7,177 30.89%
Total Employment 23,057
Source: HdL, Coren & Cone, prepared on 8/29/2025
* Antech Diagnostics did not submit a filing during the reporting period. The reported employee counted above is from their last filing for FY 23-24.
** Fountain Valley Regional Hospital, previously ranked #2, was sold to UCI Health during the reporting period. The new business license issued to UCI Health is classified under the Exempt rate type, which does not require reporting of employee counts.
2025 2016

City of Fountain Valley
Full-Time Equivalent City Government Employees by Function Last Ten Fiscal Years
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2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Administration 2.00 1.00 3.00 3.00 3.50 3.00 3.00 4.00 4.00 5.00 City clerk 2.00 2.00 1.00 1.00 1.00 * * * * *
Finance 10.75 9.80 9.75 9.75 9.75 9.75 7.75 10.75 10.75 11.75 Information services 4.00 4.00 4.00 4.00 4.00 3.00 3.00 3.00 5.00 6.00 Human resources 4.00 3.00 4.00 4.00 4.75 3.75 3.00 6.00 6.00 7.00 Community developme 7.00 6.00 6.00 7.00 8.00 8.00 13.00 14.50 14.00 15.00 Public works 9.00 8.00 9.00 8.00 13.00 9.00 8.00 8.00 10.00 11.00 Field services 23.00 22.00 24.75 26.75 24.00 20.75 21.75 22.75 24.75 28.00 Fire 42.00 39.00 45.00 45.00 46.00 43.00 43.00 42.00 45.00 46.00 Police 82.00 72.50 79.00 79.00 87.00 78.00 80.00 78.00 73.50 88.00 ** Community services 6.00 6.00 6.00 6.00 6.00 4.00 6.00 7.00 7.00 10.00 Utilities (W&S) 20.00 19.00 18.00 19.00 22.00 19.00 18.00 18.00 18.00 22.00 Total 211.75 192.30 209.50 212.50 229.00 201.25 206.50 214.00 218.00 249.75 *Note: City Clerk position reclassified into Administration count, as of June 2021. ** Police Department temporarily authorized 1 additional Police Officer Source: City of Fountain Valley, Human Resources: Authorized List for Full-Time Employees, June 2025 Department
Fiscal Year Ended June 30,

City of Fountain Valley
Operating Indicators by Function
Last Ten Fiscal Years
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Function 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Police:

Arrests 1,616 1,475 1,460 1,800 1,783 1,524 1,241 1,321 1,611 1,853 Parking citations issued 6,604 8,246 6,649 7,569 5,627 9,880 8,209 5,194 15,839 6,083 Fire:

Number of emergency cal 5,359 5,488 5,660 5,401 5,401 5,360 5,912 6,137 6,319 6,814 Inspections 7,627 10,260 8,156 4,147 2,115 813 504 747 940 813 Public works:

Street resurfacing (miles) 8 7 4 6 7 5 5 5 10 2
Parks and recreation:

Number of recreation clas 447 502 1,003 767 715 371 357 287 415 360 Number of class participan 3,968 3988 4,432 5,036 3,502 2,078 985 2,090 2,527 3,209 Number of facility rentals 1,565 2,673 2,235 2,343 1,825 448* 770 1,597 1,830 2,028 Water:

New connections 1,310 1,298 402 430 411 423 410 430 427 391 Average daily consumption
(thousands of gallons) 6,630 6,937 7,367 8,387 7,228 7,794 8,705 7,627 7,688 8,343 Notes:

New connections are all new customers connected
*Number of rentals & recreation classes low due to the Corona Virus Pandemic of 20-21 Source: City of Fountain Valley
Fiscal Year Ended June 30,

City of Fountain Valley
Capital Asset Statistics by Function/Program
Last Ten Fiscal Years
-117-
Function 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Police:

Stations 1 1 1 1 1 1 1 1 1 1
Fire:

Fire stations 2 2 2 2 2 2 2 2 2 2
Public works:

Street (miles) 165 165 165 165 165 165 165 165 165 165
Streetlights** N/A N/A N/A 3,200 3,200 3,614 3,614 3,614 3,634 3,540 Traffic signals 54 54 54 54 55 55 55 55 58 58
Parks and recreation:

Parks 19 19 19 19 19 19 19 20 20 20
Community centers 2 2 2 2 2 2 2 2 2 2
Water:

Water mains (miles) 202 209 209 209 209 209 209 217 217 218 Maximum daily capacity
(thousands of gallons) 11,500,000 12,000,000 12,060,000 11,404,785 10,427,232 13,131,795 11,958,732 12,102,106 13,580,000 10,830,000 **Streetlights were acquired from So. Cal Edison on 11/30/18 Streetlight counts have been revised as of 6/30/25 due to a miscount.

In 2024, City gained 18 lights as part of the OCSAN project. In 2025, City purchased 346 lights from So. Cal Edison.

Source: City of Fountain Valley
Fiscal Year Ended June 30,

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Tel. 909-889-0871 | www.ramscpa.net | 735 E. Carnegie Dr. Suite 100, San Bernardino, CA 92408

CERTIFIED PUBLIC ACCOUNTANTS
-1-
December 15, 2025
To the Honorable City Council
City of Fountain Valley, California
We have audited the financial statements of the City of Fountain Valley (the entity) as of and for the year ended June 30, 2025, and have issued our report thereon dated December 15, 2025. Professional standards require that we advise you of the following matters relating to our audit.

Our Responsibility in Relation to the Financial Statement Audit As communicated in our engagement letter dated April 1, 2025, our responsibility, as described by professional standards, is to form and express opinions about whether the financial statements that have been prepared by management with your oversight are presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of your respective responsibilities.

Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes consideration of the system of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, as part of our audit, we considered the system of internal control of the entity solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control.

We are also responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process.

However, we are not required to design procedures for the purpose of identifying other matters to communicate to you.

Planned Scope and Timing of the Audit
We conducted our audit consistent with the planned scope and timing we previously communicated to you.

Compliance with All Ethics Requirements Regarding Independence The engagement team, others in our firm, as appropriate, and our firm have complied with all relevant ethical requirements regarding independence.

We have evaluated whether certain nonattest services performed by our firm during the audit have created a significant threat to our independence in relation to the entity. We have identified a threat to our independence (preparation of the entity’s financial statements, creating a self-review threat) that if not reduced to an acceptable level, would impair our independence. In order to reduce the threat to an acceptable level, we have applied the following safeguard:

Prior to the issuance of the entity’s financial statements, another partner or manager, independent of the engagement, will review the financial statements.

-2-
Significant Risks Identified
We have identified the possibility of the following significant risks:

Management's override of internal controls over financial reporting – Management override of internal controls is the intervention by management in handling financial information and making decisions contrary to internal control policy.

Revenue recognition – Revenue recognition is a generally accepted accounting principle that refers to the conditions under which an entity can recognize a transaction as revenue. Auditing standards indicate that recognizing revenue is a presumed fraud risk and usually classified as a significant risk in most audits.

These significant risks are presumptive in most audits and merit attention by the auditors due to the direct impact over financial reporting and internal control processes. Although identified as significant risks, we noted no matters of management override of controls or deviations from generally accepted accounting principles which caused us to modify our audit procedures or any related matters which are required to be communicated to those charged with governance due to these identified risks.

Qualitative Aspects of the Entity’s Significant Accounting Practices Significant Accounting Policies
Management has the responsibility to select and use appropriate accounting policies. A summary of the significant accounting policies adopted by the entity is included in Note 1 to the financial statements. The City adopted GASB Statement No. 101, Compensated Absence, and GASB Statement No. 102, Certain Risk Disclosures during 2025. No matters have come to our attention that would require us, under professional standards, to inform you about (1) the methods used to account for significant unusual transactions and (2) the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus.

Significant Accounting Estimates and Related Disclosures Accounting estimates and related disclosures are an integral part of the financial statements prepared by management and are based on management’s current judgments. Those judgments are normally based on knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ markedly from management’s current judgments.

The most sensitive accounting estimates affecting the entity’s financial statements are:

Management’s estimate of the net pension liability and related deferred inflows and outflows of resources are based on actuarial reports by independent actuaries. We evaluated the key factors and assumptions used to develop the estimate in determining that it is reasonable in relation to the basic financial statements taken as a whole and in relation to the applicable opinion units.

Management’s estimate of the liability for other post-employment benefits (OPEB) and related deferred inflows and outflows of resources are based on actuarial reports provided by independent actuaries. We evaluated the key factors and assumptions used to develop the estimate in determining that it is reasonable in relation to the basic financial statements taken as a whole and in relation to the applicable opinion units.

-3-
Management’s estimate of the modified approach for infrastructure assets are based on the pavement management program by independent consultant. We evaluated the key factors and assumptions used to develop the estimate in determining that it is reasonable in relation to the basic financial statements taken as a whole and in relation to the applicable opinion units.

Financial Statement Disclosures
Certain financial statement disclosures involve significant judgment and are particularly sensitive because of their significance to financial statement users.

The most sensitive disclosures affecting the entity’s financial statements relate to:

The disclosure of fair value of investments in the basic financial statements represents amounts susceptible to market fluctuations.

The disclosure of capital assets (and related accumulated depreciation) in the basic financial statements is based on historical information which could differ from actual useful lives of each capitalized item.

The disclosure of net pension liability and related deferred inflows and outflows of resources in the basic financial statements is based on actuarial assumptions. Actual future liabilities and actuarial deferred inflows and outflows may vary from disclosed estimates.

The disclosures of the other post-employment benefits (OPEB) liability and related deferred inflows and outflows of resources in the basic financial statements is based on actuarial assumptions.

Actual future liabilities and actuarial deferred inflows and outflows may vary from disclosed estimates.

The disclosure of claims payable in the basic financial statements is based on claims loss reports from third party claims management companies. Actual future liabilities may vary from disclosed estimates.

The disclosure of leases and subscription liabilities, right-to-use assets, and asset amortization in the basic financial statements is based on certain terms and assumptions in the agreements which could differ from actual amounts.

Significant Difficulties Encountered during the Audit
We encountered no significant difficulties in dealing with management relating to the performance of the audit.

Uncorrected and Corrected Misstatements
For purposes of this communication, professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that we believe are trivial, and communicate them to the appropriate level of management. Further, professional standards require us to also communicate the effect of uncorrected misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the financial statements as a whole and each applicable opinion unit. There were no uncorrected misstatements noted.

In addition, professional standards require us to communicate to you all material, corrected misstatements that were brought to the attention of management as a result of our audit procedures. Attachment A reflects all material misstatements that we identified as a result of our audit procedures that were brought to the attention of, and corrected by, management.

-4-
Disagreements with Management
For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter, which could be significant to the entity’s financial statements or the auditor’s report. No such disagreements arose during the course of the audit.

Representations Requested from Management
We have requested certain written representations from management, which are included in the attached letter dated December 15, 2025.

Management’s Consultations with Other Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting matters. Management informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and accounting matters.

Other Significant Matters, Findings, or Issues
In the normal course of our professional association with the entity, we generally discuss a variety of matters, including the application of accounting principles and auditing standards, significant events or transactions that occurred during the year, operating and regulatory conditions affecting the entity, and operational plans and strategies that may affect the risks of material misstatement. None of the matters discussed resulted in a condition to our retention as the entity’s auditors.

Other Information Included in Annual Reports
Pursuant to professional standards, our responsibility as auditors for other information, whether financial or nonfinancial, included in the entity’s annual reports, does not extend beyond the information identified in the audit report, and we are not required to perform any procedures to corroborate such other information.

However, in accordance with such standards, we have:

Read the transmittal letter and statistical section and considered whether a material inconsistency existed between the other the information and the basic financial statements, or the other information otherwise appears to be materially misstated. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon.

Our responsibility also includes communicating to you any information which we believe is a material misstatement of fact. Nothing came to our attention that caused us to believe that such information, or its manner of presentation, is materially inconsistent with the information, or manner of its presentation, appearing in the financial statements.

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

Very truly yours,

Client: City of Fountain Valley
Engagement: 2025 - City of Fountain Valley Attachment A Period Ending: 6/30/2025
Account Description Debit Credit
500.00.00000.28400 NET PENSION LIABILITY 612,462.00
500.00.00000.29001 DEFERRED INFLOWS FROM PENSION 223,217.00 500.00.00000.51701 CONTRA-PENSION EXPENSE ACCT. 205,097.00 501.00.00000.28400 NET PENSION LIABILITY 150,106.00
501.00.00000.29001 DEFERRED INFLOWS FROM PENSION 54,707.00 501.00.00000.51701 CONTRA-PENSION EXPENSE ACCT. 50,268.00 500.00.00000.17001 DEFERRED OUTFLOWS FROM PENSION 1,040,776.00 501.00.00000.17001 DEFERRED OUTFLOWS FROM PENSION 255,081.00 Total 1,295,857.00 1,295,857.00
100.00.00000.22001 ACCRUD INTEREST PAYABLE-GASB96 72.19 100.70.70700.53071 INTEREST PAYMENT-GASB 96 72.19
Total 72.19 72.19
100.00.90004.56025 OPEB TRUST CONTRIBUTIONS 2,000,000.00 100.00.00000.58603 TRANSFERS OUT - OPEB TRUST 2,000,000.00 Total 2,000,000.00 2,000,000.00
100.00.00000.24000 DEPOSITS 450.81
100.60.60602.53605 1ST AID/PARAMEDIC SUPPLIES 308.50
100.60.60602.53605 1ST AID/PARAMEDIC SUPPLIES 638.55
100.60.60602.53605 1ST AID/PARAMEDIC SUPPLIES 77.63
272.00.00000.10010 EQUITY IN POOLED CASH 1,024.68
272.00.00000.44050 SETTLEMENT DISTRIBUTIONS 1,024.68
100.00.00000.10010 EQUITY IN POOLED CASH 1,024.68
100.50.50500.45200 RECOVERY OF EXPENSE 450.81
272.00.00000.27000 UNEARNED REVENUES 1,024.68
272.00.00000.53605 1ST AID/PARAMEDIC SUPPLIES 308.50
272.00.00000.53605 1ST AID/PARAMEDIC SUPPLIES 638.55
272.00.00000.53605 1ST AID/PARAMEDIC SUPPLIES 77.63
Total 3,524.85 3,524.85
241.00.00000.58300 TRANSFERS OUT - CIP 9,957.50
243.00.00000.10010 EQUITY IN POOLED CASH 18,457.50
244.00.00000.58300 TRANSFERS OUT - CIP 8,500.00
999.00.00000.34241 DUE TO FUND 241 9,957.50
999.00.00000.34244 DUE TO FUND 244 8,500.00
241.00.00000.10010 EQUITY IN POOLED CASH 9,957.50
243.00.00000.58300 TRANSFERS OUT - CIP 9,957.50
243.00.00000.58300 TRANSFERS OUT - CIP 8,500.00
244.00.00000.10010 EQUITY IN POOLED CASH 8,500.00
999.00.00000.34243 DUE TO FUND 243 18,457.50
Total 55,372.50 55,372.50
500.50.50571.53581 DISTRIBUTION SYSTEMS M & R 103,385.00 500.00.00000.14500 INVENTORY-WATER SYSTEM 103,385.00
Total 103,385.00 103,385.00
Adjusting Journal Entries
Adjusting Journal Entries JE # 102
To adjust water and sewer funds for pension liability and related deferreds.

Adjusting Journal Entries JE # 203
AJE 4 RCLS EXP/REVENUE
Adjusting Journal Entries JE # 202
AJE 6: To reverse transfer in/out between internal tracking fund 603 and Gen Fund 100 and To Move FY25OPEB Contribution Adjusting Journal Entries JE # 201
PBC JE 5: reverse incorrect interest payable
Adjusting Journal Entries JE # 204
PBC - For Transfers
Adjusting Journal Entries JE # 205
PBC - To Adjust the invetory
1 of 2

243.00.00000.27001 UNAVAILABLE REVENUE 392,931.00
243.00.00000.12200 ACCOUNTS RECEIVABLE-GENERAL 392,931.00 Total 392,931.00 392,931.00
500.00.00000.28300 NET OPEB LIABILITY 142,378.96
500.00.00000.29000 DEFERRED INFLOWS FROM OPEB 579,420.79 501.00.00000.28300 NET OPEB LIABILITY 34,894.56
501.00.00000.29000 DEFERRED INFLOWS FROM OPEB 142,007.49 701.00.00000.17000 DEFERRED OUTFLOWS FROM OPEB 176,125.30 701.00.00000.28300 NET OPEB LIABILITY 3,152,813.49
701.00.00000.29000 DEFERRED INFLOWS FROM OPEB 5,795,253.71 500.00.00000.17000 DEFERRED OUTFLOWS FROM OPEB 63,590.63 500.00.00000.51753 CONTRA-OPEB EXPENSE ACCT. 658,209.12 501.00.00000.17000 DEFERRED OUTFLOWS FROM OPEB 15,585.67 501.00.00000.51753 CONTRA-OPEB EXPENSE ACCT. 161,316.38 701.00.00000.17011 AMT TO PROVIDE FOR GASB 75 LT 9,124,192.50 Total 10,022,894.30 10,022,894.30
110.00.00000.16070 GASB 96 SUBSCRIPTION ASSETS 87,264.88 110.00.00000.28500 GASB 96 SUBSCRIPTION LIABILITY 101,994.80 110.00.00000.53510 DEPRECIATION EXPENSE-GASB 96 37,399.23 110.10.10050.53010 SERVICE CONTRACTS 87,418.86
110.10.10050.53010 SERVICE CONTRACTS 14,729.92
110.10.10050.53071 INTEREST PAYMENT-GASB 96 153.98
300.00.00000.10010 EQUITY IN POOLED CASH 87,418.86
999.00.00000.34110 DUE TO FUND 110 87,418.86
110.00.00000.10010 EQUITY IN POOLED CASH 87,418.86
110.00.00000.16078 ACCUM DEPRECIATION-GASB 96 37,399.23 110.00.00000.28500 GASB 96 SUBSCRIPTION LIABILITY 87,264.88 110.00.00000.28500 GASB 96 SUBSCRIPTION LIABILITY 14,729.92 110.10.10050.53010 SERVICE CONTRACTS 102,148.78
300.50.95300.56011 CONSTRUCTION MGMT/INSPECTION 87,418.86 999.00.00000.34300 DUE TO FUND 300 87,418.86
Total 503,799.39 503,799.39
Total All Journal Entries 14,377,836.23 14,377,836.23
Adjusting Journal Entries JE # 206
PBC AJE to reverse unavailable revenue.

Adjusting Journal Entries JE # 207
To adjust Net OPEB liability, and related deferred inflow/outflows Adjusting Journal Entries JE # 208
PBC for the addition of the Brightly subscription.
2 of 2

V
CITY OF FOUNTAIN VALLEY www.fountainvalley.gov
10200 SLATER AVE – FOUNTAIN VALLEY, CA 92708-4736 (714) 593-4400, FAX (714) 593-4498
December 15, 2025
Rogers, Anderson, Malody & Scott, LLP
This representation letter is provided in connection with your audit of the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Fountain Valley (the entity) which compromise the statement of financial position as of June 30, 2025, and the respective change in financial position and, where applicable, cash flows for the year then ended, and the related notes to the financial statements, for the purpose of expressing opinions on whether the financial statements of the various opinion units are presented fairly, in all material respects, in accordance with accounting principles generally accepted for governments in the United States of America (U.S. GAAP).

Certain representations in this letter are described as being limited to matters that are material. Items are considered material, regardless of size, if they involve an omission or misstatement of accounting information such that, in the light of surrounding circumstances, 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.

We confirm that, to the best of our knowledge and belief, having made such inquiries as we considered necessary for the purpose of appropriately informing ourselves as of December 15, 2025:

Financial Statements
 We have fulfilled our responsibilities, as set out in the terms of the audit engagement letter dated April 1, 2025, for the preparation and fair presentation of the financial statements of the various opinion units referred to above in accordance with U.S. GAAP.  The financial statements refer to above have been fairly presented in accordance with U.S. GAAP and include all properly classified funds, required supplementary information, and noted to the basic financial statements.
 We acknowledge our responsibility for the design, implementation, and maintenance of the system 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.  We acknowledge our responsibility for the design, implementation, and maintenance of internal control to prevent and detect fraud.
 The methods, data and significant assumptions used by us in making accounting estimates and their related disclosures, are appropriate to achieve recognition, measurement, or disclosure that is reasonable in the context of U.S. GAAP.
 All related party relationships and transactions have been appropriately accounted for and disclosed in accordance with the requirements of U.S. GAAP.  All events subsequent to the date of the financial statements and for which U.S. GAAP requires adjustment or disclosure have been adjusted or disclosed.

VI
 We acknowledge our responsibility for compliance with the laws, regulations, and provisions of contracts and grant agreements.
 The effects of all known actual or possible litigation and claims have been accounted for and disclosed in accordance with U.S. GAAP.
 All component units, as well as joint ventures with an equity interest, if any, are included and other joint ventures and related organizations are properly disclosed.  All funds and activities are properly classified.
 All funds that meet the quantitative criteria in GASB Statement No. 34, Basic Financial Statements—and Management's Discussion and Analysis—for State and Local Governments, GASB Statement No. 37, Basic Financial Statements—and Management's Discussion and Analysis—for State and Local Governments: Omnibus as amended, and GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, for presentation as major are identified and presented as such and all other funds that are presented as major are considered important to financial statement users.
 All components of net position, nonspendable fund balance, and restricted, committed, assigned, and unassigned fund balance are properly classified and, if applicable, approved.  Our policy regarding whether to first apply restricted or unrestricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position/fund balance are available is appropriately disclosed and net position/fund balance is properly recognized under the policy.
 All revenues within the statement of activities have been properly classified as program revenues, general revenues, contributions to term or permanent endowments, or contributions to permanent fund principal.
 All expenses have been properly classified in or allocated to functions and programs in the statement of activities, and allocations, if any, have been made on a reasonable basis.  All interfund and intra-entity transactions and balances have been properly classified and reported.  Special items and extraordinary items have been properly classified and reported.  Deposit and investment risks have been properly and fully disclosed.  Capital assets, including infrastructure assets, are properly capitalized, reported, and if applicable, depreciated.
 Nonexchange and exchange financial guarantees, either written or oral, under which it is more likely than not that a liability exists have been properly recorded, or if we are obligated in any manner, are disclosed.
 We have reviewed, approved, and taken responsibility for the financial statements and related notes.
 We have reviewed and approved the various adjusting journal entries that were proposed by you for recording in our books and records and reflected in the financial statements.  We have evaluated all of our lease and subscription agreements and have given you our assessment as to whether each agreement is subject to GASB Statement No. 87, Leases and GASB Statement No. 96, Subscription Based Information Technology Arrangements.  With regard to investments and other instruments reported at fair value:
 The underlying assumptions are reasonable and they appropriately reflect management’s intent and ability to carry out its stated courses of action.  The measurement methods and related assumptions used in determining fair value are appropriate in the circumstances and have been consistently applied.  The disclosures related to fair values are complete, adequate, and in accordance with U.S.

GAAP.
 There are no subsequent events that require adjustments to the fair value measurements and disclosures included in the financial statements.
 With regard to pensions and OPEB:

VII
 We believe that the actuarial assumptions and methods used to measure pension and OPEB liabilities and costs for financial accounting purposes are appropriate in the circumstances.  Increases in benefits, elimination of benefits and all similar amendments have been disclosed in accordance with U.S. GAAP and are included in the most recent actuarial valuation, or disclosed as a subsequent event.
 We have conducted a comprehensive risk assessment and disclosed all material concentrations and constraints in accordance with GASB Statement No. 102, Certain Risk Disclosures. These disclosures provide sufficient detail to enable users of financial statements to understand the nature of the circumstances disclosed and the government’s vulnerability to the risk of a substantial impact associated with the concentration or constraint, if applicable.  We have evaluated the concentrations and constraints, including those that occur subsequent to the statement of net position date but before the financial statements are issued and have been properly disclosed in the financial statements as subsequent events.  With respect to preparation of the financial statements, we have performed the following:
 Made all management decisions and performed all management functions;  Assigned a competent individual to oversee the services;  Evaluated the adequacy of the services performed;
 Evaluated and accepted responsibility for the result of the service performed; and  Established and maintained internal controls, a process to monitor the system of internal controls.

Information Provided
 We have provided you with:
 Access to all information, of which we are aware that is relevant to the preparation and fair presentation of the financial statements of the various opinion units referred to above, such as records, documentation, meeting minutes, and other matters;  Additional information that you have requested from us for the purpose of the audit; and  Unrestricted access to persons within the entity from whom you determined it necessary to obtain audit evidence.
 The financial statements and any other information included in the annual report are consistent with one another, and the other information does not contain any material misstatements.  All information provided in electronic form are true representations of the original documents.  All transactions have been recorded in the accounting records and are reflected in the financial statements.
 We have disclosed to you the results of our assessment of the risk that the financial statements may be materially misstated as a result of fraud.
 We have provided to you our analysis of the entity’s ability to continue as a going concern, including significant conditions and events present, concentrations and constraints, and we believe that our use of the going concern basis of accounting is appropriate.  We have no knowledge of any fraud or suspected fraud that affects the entity and involves:
 Management;
 Employees who have significant roles in internal control; or  Others where the fraud could have a material effect on the financial statements.  We have no knowledge of any instances, that have occurred or are likely to have occurred, of fraud and noncompliance with provisions of laws and regulations that have a material effect on the financial statements or other financial data significant to the audit objectives, and any other instances that warrant the attention of those charged with governance, whether communicated by employees, former employees, vendors (contractors), analysts, regulators, or others.

VIII
 We have no knowledge of any instances that have occurred or are likely to have occurred, of noncompliance with provisions of contracts and grant agreements that has a material effect on the determination of financial statement amounts or other financial data significant to the audit objectives.
 We have no knowledge of any instances that have occurred or are likely to have occurred of abuse that could be quantitatively or qualitatively material to the financial statements or other financial data significant to the audit objectives.
 We have a process to track the status of audit findings and recommendations.  We have identified for you all previous audits, attestation engagements, and other studies related to the audit objectives and whether related recommendations have been implemented.  We have provided views on your reported audit findings, conclusions, and recommendations, as well as our planned corrective actions, for the report.  We have disclosed to you all known actual or possible litigation, claims, and assessments whose effects should be considered when preparing the financial statements.  We have disclosed to you the identity of all the entity’s related parties and the nature of all the related party relationships and transactions of which we are aware.  There have been no communications from regulatory agencies concerning noncompliance with or deficiencies in accounting, internal control, or financial reporting practices.  The entity has no plans or intentions that may materially affect the carrying value or classification of assets and liabilities.
 We have disclosed to you all significant estimates and material concentrations known to management that are required to be disclosed in accordance with GASB Statement No. 62 (GASB62), Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. Significant estimates are estimates at the balance sheet date that could change materially within the next year. Concentrations refer to volumes of business, revenues, available sources of supply, or markets or geographic areas for which events could occur that would significantly disrupt normal finances within the next year.  We have identified and disclosed to you the laws, regulations, and provisions of contracts and grant agreements that could have a direct and material effect on financial statement amounts, including legal and contractual provisions for reporting specific activities in separate funds.  We have disclosed to you all nonexchange financial guarantees, under which we are obligated and have declared liabilities and disclosed properly in accordance with GASB Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees, for those guarantees where it is more likely than not that the entity will make a payment on any guarantee.  There are no:
 Violations or possible violations of laws or regulations, or provisions of contracts or grant agreements whose effects should be considered for disclosure in the financial statements or as a basis for recording a loss contingency, including applicable budget laws and regulations.  Unasserted claims or assessments that our lawyer has advised are probable of assertion and must be disclosed in accordance with GASB-62.
 Other liabilities or gain or loss contingencies that are required to be accrued or disclosed by GASB-62.
 Continuing disclosure consent decree agreements or filings with the Securities and Exchange Commission and we have filed updates on a timely basis in accordance with the agreements (Rule 240, 15c2-12).

IX
 The entity has satisfactory title to all owned assets, and there are no liens or encumbrances on such assets nor has any asset or future revenue been pledged as collateral, except as disclosed to you.
 We have complied with all aspects of grant agreements and other contractual agreements that would have a material effect on the financial statements in the event of noncompliance.

Use of a Specialist
 We agree with the findings of specialists in evaluating the entity’s net pension and net other postemployment benefit liabilities and related deferred amounts and have adequately considered the qualifications of the specialist in determining the amounts and disclosures used in the financial statements and underlying accounting records. We did not give or cause any instructions to be given to specialists with respect to the values or amounts derived in an attempt to bias their work, and we are not otherwise aware of any matters that have had an impact on the independence or objectivity of the specialists.

Cybersecurity
 There have been no cybersecurity breaches or other cyber events whose effects should be considered for disclosure in the financial statements, as a basis for recording a loss contingency, or otherwise considered when preparing the financial statements.

Supplementary Information in Relation to the Financial Statements as a Whole With respect to supplementary information accompanying the financial statements:
 We acknowledge our responsibility for the presentation of the supplementary information in accordance with accounting principles generally accepted in the United States of America.  We believe the supplementary information, including its form and content, is fairly presented in accordance with accounting principles generally accepted in the United States of America.  The methods of measurement or presentation have not changed from those used in the prior period.
 We believe any significant assumptions or interpretations underlying the measurement or presentation of the supplementary information, and the basis for our assumptions and interpretations, are reasonable and appropriate in the circumstances.  When the supplementary information is not presented with the audited financial statements, management will make the audited financial statements readily available to the intended users of the supplementary information no later than the date of issuance by the entity of the supplementary information and the auditor’s report thereon.
 We acknowledge our responsibility to include the auditor’s report on the supplementary information in any document containing the supplementary information and that indicates the auditor reported on such supplementary information.
 We acknowledge our responsibility to present the supplementary information with the audited financial statements or, if the supplementary information will not be presented with the audited financial statements, to make the audited financial statements readily available to the intended users of the supplementary information no later than the date of issuance by the entity of the supplementary information and the auditor’s report thereon.

Required Supplementary Information
With respect to the required supplementary information accompanying the financial statements:

X
 We acknowledge our responsibility for the presentation of the required supplementary information in accordance with U.S. GAAP.
 We believe the required supplementary information, including its form and content, is measured and fairly presented in accordance with U.S. GAAP.
 The methods of measurement or presentation have not changed from those used in the prior period.
 We believe the significant assumptions or interpretations underlying the measurement or presentation of the required supplementary information, and the basis for our assumptions and interpretations, are reasonable and appropriate in the circumstances.

Accounting Estimates and Related Disclosures
 The significant judgments made in making the accounting estimates have taken into account all relevant information of which we are aware.
 We have consistently and appropriately selected and applied methods, assumptions, and data when making accounting estimates.
 The assumptions we used in making and disclosing accounting estimates appropriately reflect our intent and ability to carry out specific courses of action on behalf of the entity, when relevant to the accounting estimates and disclosures.
 The disclosures related to accounting estimates, including those disclosures describing estimation uncertainty, are complete and are reasonable in the context of the applicable financial reporting framework.
 We have obtained and applied appropriate specialized skills and expertise in making accounting estimates, if needed.
 We are not aware of any events subsequent to the date of the financial statements that require adjustment to our accounting estimates and related disclosures included in the financial statements.

City Manager

Finance Director

Tel. 909-889-0871 | www.ramscpa.net | 735 E. Carnegie Dr. Suite 100, San Bernardino, CA 92408

CERTIFIED PUBLIC ACCOUNTANTS
-1-

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON

COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL

STATEMENTS PERFORMED IN ACCORDANCE WITH

GOVERNMENT AUDITING STANDARDS
Independent Auditor’s Report
To the Honorable City Council
City of Fountain Valley, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards), the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Fountain Valley (the entity), as of and for the year ended June 30, 2025, and the related notes to the financial statements, which collectively comprise the entity’s basic financial statements, and have issued our report thereon dated December 15, 2025.

Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the entity’s internal control over financial reporting (internal control) as a basis for designing procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we do not express an opinion on the effectiveness of the entity’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses.

However, material weaknesses or significant deficiencies may exist that were not identified.

-2-
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the entity’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

San Bernardino, California
December 15, 2025

Tel. 909-889-0871 | www.ramscpa.net | 735 E. Carnegie Dr. Suite 100, San Bernardino, CA 92408

CERTIFIED PUBLIC ACCOUNTANTS
-1-
Independent Accountant’s Report
To the Honorable City Council
City of Fountain Valley, California
We have performed the procedures enumerated below to the accompanying Appropriations Limit Worksheet of the City of Fountain Valley, California (the City) for the year ended June 30, 2025.

The management of the City is responsible for the accompanying Appropriations Limit Worksheet.

The City has agreed to and acknowledged that the procedures performed are appropriate to meet the intended purpose of meeting the requirements of Section 1.5 of Article XIII-B of the California Constitution. These procedures, which were suggested by the League of California Cities and presented in the publication entitled Agreed-upon Procedures Applied to the Appropriations Limitation Prescribed by Article XIII-B of the California Constitution, were performed solely to assist you in meeting the requirements. This report may not be suitable for any other purpose.

The procedures performed may not address all the items of interest to a user of this report and may not meet the needs of all users of this report and, as such, users are responsible for determining whether the procedures performed are appropriate for their purposes.

The procedures and the associated findings are as follows:

1. We obtained the completed worksheets and compared the limit and annual adjustment factors included in those worksheets to the limit and annual adjustment factors that were adopted by resolution of the City Council. We also compared the population and inflation options included in the aforementioned documents to those that were selected by a recorded vote of the City Council.

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

2. For the accompanying Appropriations Limit Worksheet, we added last year’s limit to total adjustments and agreed the resulting amount to this year’s limit.

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

3. We agreed the current year information presented in the accompanying Appropriations Limit Worksheet to the other documents referenced in number one above.

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

4. We agreed the prior year appropriations limit presented in the accompanying Appropriations Limit Worksheet to the prior year appropriations limit adopted by the City Council during the prior year.

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

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We were engaged by the City to perform this agreed-upon procedures engagement and conducted our engagement in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an examination or review, the objective of which would be the expression of an opinion or conclusion, respectively, on accompanying Appropriations Limit Worksheet for the year ended June 30, 2025.

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

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

This report is intended solely for the information and use of the City Council and management of the City and is not intended to be and should not be used by anyone other than these specified parties. However, this report is a matter of public record and its distribution is not limited.

San Bernardino, California
December 15, 2025

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City of Fountain Valley

APPROPRIATIONS LIMIT WORKSHEET
2024 - 2025
Change in California Per Capita Personal Income 3.62%
Change in Population for the County 0.31%
Change in California Per Capita Personal Income
Converted to a Ratio 1.0362
Change in Population for the County
Converted to a Ratio 1.0031
Calculation of Factor for Ratio of Change
(1.0362 x 1.0031) 1.0394
2023 - 2024 limit $ 173,756,745
2024 - 2025 limit
($173,756,745 x 1.0394) $ 180,604,884 *
*allow for rounding

CITY OF FOUNTAIN VALLEY

CITY COUNCIL

COUNCIL ACTION REQUEST
To: Honorable Mayor and Agenda Date: January 20, 2026
Members of the City Council
SUBJECT: Approve the agreement with Hoag Corporate Health for a 3-year term to provide NFPA 1582-compliant annual firefighter medical evaluations, replacing the current provider Concentra.

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
The Hoag First Responder Program provides an integrated approach to firefighter health, including comprehensive clinical screening, fitness and nutrition assessments, and personalized health reporting reviewed one-on-one with each participant. The program is staffed by board-certified physicians and specialists with significant experience treating firefighter populations and offers direct access to Hoag’s nationally recognized centers of excellence for specialty care when follow-up is required.

Based on Hoag’s demonstrated experience with first responder populations, clinical depth, continuity of care, and alignment with firefighter health and wellness objectives, staff recommend transitioning to Hoag Corporate Health from our current provider, Concentra. The proposed change is intended to enhance the quality, consistency, and clinical oversight of firefighter physicals while maintaining full compliance with NFPA 1582 and applicable occupational health standards. This transition will require the city to give Concentra notice of termination for the firefighter wellness physicals only. All other sections of the Concentra contract will remain in full effect.

DISCUSSION:

Agreement with Hoag Corporate Health
January 20, 2026

The purpose of the Fire Department’s annual wellness and medical evaluation program is to deliver NFPA 1582-compliant preventive medical care that supports early identification of health risks, reduces injury and illness, and helps mitigate long-term liability for both firefighters and the City. Firefighters are exposed to elevated cardiovascular, cancer, orthopedic, and respiratory risks, making the quality and consistency of annual medical evaluations critical to both employee safety and organizational risk management.

The City’s current provider delivers basic occupational health services but has demonstrated limitations in continuity of care, consistency of examinations, and familiarity with the unique medical demands of the fire service. These limitations have led to variable evaluation experiences, fragmented follow-up care, and reduced confidence among participants in the program's overall effectiveness.

Hoag Corporate Health, a division of Hoag Hospital, offers a comprehensive firefighter-focused wellness and medical evaluation program specifically designed to meet and exceed NFPA 1582 standards. Hoag has extensive experience providing first responder physicals and currently partners with large and mid-sized fire agencies throughout Southern California. The program is delivered at a dedicated medical facility equipped with advanced diagnostic and exercise testing capabilities and is staffed by board-certified physicians and clinical specialists with demonstrated experience treating firefighter populations.

The Hoag program provides an integrated evaluation model that includes comprehensive clinical screening, cardiovascular and pulmonary testing, cancer screening protocols, musculoskeletal and neurological assessments, and job-specific fitness evaluations. In addition to medical screening, the program incorporates fitness, movement analysis, and nutrition components intended to identify injury risks and support long-term firefighter performance and health. Each participant receives a clear, individualized health report reviewed in a one-on-one consultation, with streamlined coordination for follow-up care when indicated.

A key benefit of the Hoag model is its integration within a full hospital system, allowing direct access to specialty care and diagnostic services without the delays or fragmentation commonly associated with standalone occupational health clinics. This continuity improves clinical oversight, reduces administrative burden on employees, and enhances the City’s ability to manage medical risk proactively.

Staff evaluated feasible alternatives, including maintaining the current provider. However, based on Hoag’s demonstrated expertise with firefighter wellness programs, depth of clinical resources, continuity of care, and alignment with the Fire Department’s health and wellness objectives, staff determined that transitioning to Hoag Corporate Health provides a more effective and comprehensive approach to annual firefighter medical evaluations.

FISCAL REVIEW
Staff seeks to enter into an agreement with Hoag Corporate Health as the provider for the Fire Department’s annual firefighter wellness and medical examinations. Rather than issuing a

Agreement with Hoag Corporate Health
January 20, 2026

separate Request for Proposal (RFP), staff recommend utilizing the results of a competitive RFP previously conducted by the City of Huntington Beach for substantially similar services.

The City of Huntington Beach issued an RFP for annual firefighter wellness examinations, and Hoag Corporate Health was selected based on its qualifications, demonstrated experience with fire service wellness programs, and overall pricing. Municipal Code Section 2.36.070(5) permits the City to utilize a cooperative procurement process, commonly referred to as “piggybacking,” based on another public agency’s competitive solicitation.

Utilizing the Huntington Beach RFP allows the City to avoid duplicative procurement efforts and results in measurable savings of staff time, administrative resources, and associated costs. Staff has reviewed the City of Huntington Beach’s RFP, evaluation process, and resulting contract terms and determined that the scope of services is compatible with the Fire Department’s operational and clinical requirements. The City’s agreement with Hoag Corporate Health will be executed on substantially similar terms.

From a cost perspective, the City’s current provider, Concentra, represents a higher peremployee cost for the annual wellness exam and requires bloodwork. Concentra’s current total cost is $1,751 per firefighter, compared to $1,405 per firefighter under the Hoag Corporate Health model. This represents a measurable per-exam cost savings while maintaining full compliance with NFPA 1582 requirements.

In addition to lower per-exam costs, the Hoag Corporate Health program provides a broader and more integrated scope of clinical services, including enhanced diagnostic capabilities, continuity of care, and access to specialty services through a hospital-based system.

The move to Hoag Health results in both immediate cost savings and improved service quality, providing greater overall value to the City while supporting long-term fiscal responsibility and proactive risk management. No additional funds are needed, as the fire department’s current budget for firefighter physicals is adequate.

ATTORNEY REVIEW
The Attorney(s) for the City has reviewed and approved the agreements.

ALTERNATIVES
Alternative No. 1: Approve the agreement with Hoag Corporate Health for a 3-year term to provide NFPA 1582-compliant preventive annual medical evaluations with enhanced clinical integration, continuity of care, and long-term program flexibility.

Alternative No. 2: Do not approve the agreement and direct the fire department to continue with the current provider.

Agreement with Hoag Corporate Health
January 20, 2026

RECOMMENDATION
Staff recommend Alternative No. 1 to approve the agreement with Hoag Corporate Health.

Prepared by: Nick Fasullo, Fire Captain
Reviewed by: Tim Saiki, Battalion Chief
Reviewed by: Vanessa Lassooy, Attorney
Fiscal review by: Ryan Smith, Finance Director
Approved by: Maggie Le, City Manager
Attachments:

1. Hoag Corporate Health Contract

2. Exhibit A – Scope of Work and Costs

3. HBFD RFP

Rev 10/25

AGREEMENT FOR CONSULTANT SERVICES
CON –
Annual Firefighters Wellness Exams
This AGREEMENT is made and effective as of the EFFECTIVE DATE, by and between the City of Fountain Valley, a municipal corporation ("CITY") and Hoag Executive Health ("CONSULTANT"). In consideration of the mutual covenants and conditions set forth herein, the parties agree as follows:

1. TERM
This AGREEMENT shall commence on February 1, 2026 (“EFFECTIVE DATE”) and remain and continue in effect until all tasks described herein are completed but in no event later than January 31, 2029 , unless sooner terminated or extended pursuant to the provisions of this AGREEMENT. Notwithstanding this limit on term, some duties and obligations may survive the termination, lapse, or completion of this AGREEMENT.

2. SERVICES
CONSULTANT shall perform the tasks described and set forth in Exhibit A, attached hereto and incorporated herein as though set forth in full. CONSULTANT shall complete the tasks according to the schedule of performance which is also set forth in Exhibit A.

3. NOTICE TO PROCEED
CONSULTANT shall not perform any work or be entitled to any compensation under this AGREEMENT until a written Notice to Proceed is issued by CITY. The Notice to Proceed shall not issue unless and until CONSULTANT submits proof, satisfactory to CITY, of its procurement of appropriate insurance required by this AGREEMENT. The failure of CONSULTANT to submit proof of appropriate insurance within 10 days of the EFFECTIVE DATE is a material breach and shall constitute cause for immediate termination of this AGREEMENT by CITY.

4. PERFORMANCE
CONSULTANT shall at all times faithfully, competently, and to the best of their ability, experience, and talent perform all tasks described herein. CONSULTANT shall employ, at a minimum, generally accepted standards and practices utilized by persons engaged in providing similar services as are required of CONSULTANT hereunder in meeting its obligations under this AGREEMENT.

5. CITY MANAGEMENT
Human Resources Director or their designee shall represent CITY in all matters pertaining to the administration of this AGREEMENT, including review and approval of all

Rev 10/25
products submitted by CONSULTANT, but not including the authority to enlarge the tasks to be performed or change the compensation due to CONSULTANT. The City Manager shall be authorized to act on CITY’S behalf and to execute all necessary documents that enlarge the tasks to be performed or change CONSULTANT's compensation, subject to Section 6 hereof.

6. PAYMENT
(a) CITY agrees to pay CONSULTANT in accordance with the payment rates, terms, and schedule of payment set forth in Exhibit A, attached hereto and incorporated herein by this reference as though set forth in full. This amount shall not exceed Three Hundred Thousand Dollars ($300,000.00) (“TOTAL CONTRACT SUM”) for the total term of this AGREEMENT unless additional payment is approved as provided in this AGREEMENT.
(b) CONSULTANT shall not be compensated for any services rendered in connection with its performance of this AGREEMENT that are in addition to those set forth herein, unless such additional services are authorized in advance and in writing by the City Manager. This written authorization requirement cannot be waived.

CONSULTANT shall be compensated for any additional services in the amounts and in the manner as agreed to by the City Manager and CONSULTANT at the time CITY’s written authorization is given to CONSULTANT for the performance of said additional services. The City Manager’s authority to approve additional compensation is subject to Fountain Valley Municipal Code section 2.36.110. Approval of additional compensation that exceeds the City Manager’s authority as specified in Fountain Valley Municipal Code section 2.36.110 must be obtained from the City Council. (c) CONSULTANT shall submit reasonably detailed invoices monthly for actual services performed and, as applicable, equipment and materials acquired.

Invoices shall be submitted on or about the first business day of each month, for services provided in the previous month. Payment shall be made within thirty (30) days of receipt of each invoice as to all non-disputed fees. If the CITY disputes ant of CONSULTANT’s fees it shall give written notice to CONSULTANT within 30 days of receipt of an invoice of any disputed fess set forth on the invoice.

7. PUBLIC WORK
Notice is provided pursuant to Labor Code Section 1781 that all or a portion of the work contemplated in this AGREEMENT may constitute a “public work” as defined in Chapter 1, Part 7, and Division 2 of the Labor Code, to which Section 1771 applies.

If all or a portion of the work contemplated under this AGREEMENT constitutes “public work,” then CONSULTANT shall pay prevailing wages, unless exempt, on those portions of the work which require payment of prevailing wages under the prevailing wage laws (Labor Code, §§ 1720 et seq.), and shall comply with the following:
(a) Prevailing Wage Rates. Pursuant to Labor Code Section 1773.2, copies of the prevailing rate of per diem wages can be found at

Rev 10/25
http://www.dir.ca.gov/OPRL/PWD/index.htm and are on file at City Hall, which shall be made available to any interested party upon request. CONSULTANT shall post a copy of the determination of the director of the prevailing rate of per diem wages at each job site. Said per diem wages are deemed to include employer payments for health and welfare, pension, vacation and travel time, and subsistence pay, all in accordance with Section 1773.1 of the Labor Code.
(b) Payroll Records. The provisions of Section 1776 of the Labor Code regarding the preparation, maintenance, and filing of payroll records are applicable to this AGREEMENT. CONSULTANT and each subconsultant shall keep accurate payroll records showing the name, address, social security number, work classification, straight time, and overtime hours worked each day and week, and the actual per diem wages paid to each journeyman, apprentice, worker, or other employee employed by them in connection with the public work. Certified payroll records shall be on forms provided by the Division of Labor Standards Enforcement or contain the same information. CONSULTANT’S AND ANY SUBCONSULTANT’S PAYROLL RECORDS SHALL BE SUBMITTED TO CITY ON A WEEKLY BASIS. CONSULTANT SHALL BE RESPONSIBLE FOR SUBMITTAL OF SUBCONSULTANT’S PAYROLL RECORDS. Additionally, CONSULTANT or subconsultant has ten (10) days in which to comply subsequent to receipt of a written notice requesting the records enumerated in Section 1776, subdivision (a), of the Labor Code. In the event that CONSULTANT or subconsultant fails to comply within the ten (10) day period, they shall, as a penalty to CITY, forfeit One Hundred Dollars ($100.00) for each calendar day, or portion thereof, for each worker, until strict compliance is effectuated. CITY may deduct this penalty from any monies due or that may become due CONSULTANT under this AGREEMENT.
(c) Penalty. CONSULTANT and any subconsultant under CONSULTANT shall, as a penalty to CITY, forfeit not more than Two Hundred Dollars ($200.00) for each calendar day, or portion thereof, for each worker paid (either by CONSULTANT or any subconsultant under CONSULTANT) less than the prevailing rate set forth herein on the work provided for in this AGREEMENT. CITY may deduct the penalty from any monies due or that may become due CONSULTANT under this AGREEMENT. The difference between the prevailing wage rates and the amount paid to each worker for each calendar day, or portion thereof, for which each worker was paid less than the prevailing wage rate shall also be paid to each worker by CONSULTANT or subconsultant, in accordance with Section 1775 of the Labor Code of the State of California.
(d) Apprentices. If applicable, the provisions of Labor Code Section 1777.5 requiring the use of apprentices in certain ratios to journeymen are hereby imposed upon CONSULTANT.
(e) Legal Day’s Work. In the performance of this AGREEMENT, not more than eight (8) hours shall constitute a day’s work, and CONSULTANT shall not require more than eight (8) hours of labor in a day from any person employed by them hereunder except as provided in Labor Code Section 1815. CONSULTANT shall conform to

Rev 10/25
Article 3, Chapter 1, Part 7 (Sections 1810 et seq.), of the Labor Code of the State of California, and it is agreed that CONSULTANT shall forfeit to CITY as a penalty the sum of Twenty-Five Dollars ($25.00) for each worker employed in the execution of this AGREEMENT by CONSULTANT or any subconsultant for each calendar day during which any worker is required or permitted to labor more than eight (8) hours in any one (1) calendar day and forty (40) hours in any one (1) week in violation of said article. CITY may deduct this penalty from any monies due or that may become due pursuant to this AGREEMENT.

8. SUSPENSION OR TERMINATION OF AGREEMENT WITHOUT CAUSE (a) CITY may at any time, for any reason, with or without cause, suspend or terminate this AGREEMENT, or any portion hereof, by serving upon CONSULTANT, at least thirty (30) days prior, written notice. CITY shall not be obligated to explain its reasons for termination. Upon receipt of said notice, CONSULTANT shall immediately cease all work under this AGREEMENT, unless the notice provides otherwise.

If CITY suspends or terminates a portion of this AGREEMENT such suspension or termination shall not make void or invalidate the remainder of this AGREEMENT. (b) In the event this AGREEMENT is suspended or terminated pursuant to this section, CITY shall pay to CONSULTANT the actual value of the work performed up to the time of suspension or termination, provided that the work performed is of value to CITY and consistent with the AGREEMENT. Upon suspension or termination of the AGREEMENT pursuant to this section, CONSULTANT will, as a precondition to being compensated, submit an invoice to CITY detailing work performed up to the time of suspension or termination.

9. DEFAULT OF CONSULTANT
(a) CONSULTANT's failure to comply with the provisions of this AGREEMENT shall constitute a material default. In the event that CONSULTANT is in default for cause under the terms of this AGREEMENT, CITY shall have no obligation or duty to continue compensating CONSULTANT for any work performed after the date of default and can terminate this AGREEMENT immediately by written notice to CONSULTANT. If such failure by the CONSULTANT to make progress in the performance of work hereunder arises out of causes beyond CONSULTANT's control, and without fault or negligence of CONSULTANT, it shall not be considered a default. (b) As an alternative to the procedure for immediate termination for default set forth in subparagraph (a), if CITY determines that CONSULTANT is in default in the performance of any of the terms or conditions of this AGREEMENT, CITY may in its discretion cause to be served upon CONSULTANT a written notice of the default and demand to cure. CONSULTANT shall have ten (10) calendar days after service upon it of said notice to cure the default by rendering a satisfactory performance. In the event that CONSULTANT fails to cure its default within such period of time, CITY shall have the right, notwithstanding any other provision of this AGREEMENT, to terminate this AGREEMENT without further notice and without prejudice to any other remedy to which it may be entitled at law, in equity, or under this AGREEMENT.

Rev 10/25

10. OWNERSHIP OF DOCUMENTS
(a) CONSULTANT shall maintain complete and accurate records with respect to the plans, specifications, estimates, drawings, design calculations, letters, reports, testing results, and other such information including as-built records as required by CITY that relate to the performance of services under this AGREEMENT.

CONSULTANT shall maintain adequate records of services provided in sufficient detail to permit an evaluation of services. All such records shall be maintained in accordance with generally accepted accounting principles and shall be clearly identified and readily accessible. CONSULTANT shall provide free access to the representatives of CITY or its designees at reasonable times to such books and records; shall give CITY the right to examine and audit said books and records; shall permit CITY to make copies and transcripts therefrom as necessary; and shall allow inspection of all work, data, documents, proceedings, and activities related to this AGREEMENT. Such records, together with supporting documents, shall be maintained for a period of three (3) years after receipt of final payment. (b) Upon completion of, or in the event of termination, or suspension of this AGREEMENT, all original documents, plans, specifications, engineer’s estimates, computer files, and other documents prepared in the course of providing the services to be performed pursuant to this AGREEMENT shall become the sole property of CITY and may be used, reused, or otherwise disposed of by CITY without the permission of CONSULTANT. With respect to computer files, CONSULTANT shall make available to CITY, upon reasonable written request by CITY, the necessary computer software and hardware for purposes of accessing, compiling, transferring, and printing computer files.

11. INDEMNIFICATION
(a) Indemnification for Professional Liability. When the law establishes a professional standard of care for CONSULTANT’s services, to the fullest extent permitted by law, CONSULTANT shall indemnify, protect, defend, and hold harmless CITY and any and all of its officials, officers, employees, and agents (“INDEMNIFIED PARTIES”) from and against any and all losses, liabilities, damages, costs, and expenses, including attorney’s fees and costs to the extent the same are caused in whole or in part by any negligent or wrongful act, error, or omission of CONSULTANT, its officers, agents, employees, or subconsultants (or any entity or individual that CONSULTANT shall bear the legal liability thereof) in the performance of professional services under this AGREEMENT. With respect to the design of public improvements, CONSULTANT shall not be liable for any injuries or property damage resulting from the reuse of the design at a location other than that specified in this AGREEMENT without the written consent of CONSULTANT.

For all Consultant performances under this Agreement that are within the provision of design services as defined under California Civil Code Section 2782.8, the following shall apply: Notwithstanding any clause or provision in this Agreement or any other applicable Agreement to the contrary all specifically relating to design services and related performances to these design services, as specified, in California Civil Code