City Council/Public Financing Authority
November 15, 2022

Financial Update & FY 2021/22Year-End Budget AdjustmentsCity Council MeetingNovember 15, 2022 1 Presentation Overview•Financial Update•FY 2021/22 Year-End Budget Adjustments•What’s on the Budget Horizon? 2 Financial UpdateThe City is estimated to end FY2021/22 with a $5.5 million surplus primarily due to a stronger recovery in sales tax and transient occupancy tax than anticipatedRecent economic indicators in 2022 signal cautionThese economic factors are creating headwinds for expansion, investment, and consumer demandConsumers are saving less, drawing from savings, and increasing credit usageState unemployment September 2022 is 3.9% after 16.1% COVID peak (May 2020) although ratio of job openings to job seekers starting to decline (July 2.0 to Aug 1.87)3 Interest Rates
• Fed raised rates 6 times in 2022 to 3.75%-4.00%• Inverted yield curve Inflation
• 9.1% June 2022• 8.2% Sept 2022
GDP
• 1Q2022: -1.6%• 2Q2022: -0.6%• 3Q2022: +2.6%
Market Index
• YTD to 3Q2022• Bond: -14.6%• US Stock: -23.9%• Int’l Stock: -26.5% General Fund (Fund 100) Projections
4 (in thousands)Actual FY20/21Projected* FY21/22Projected FY22/23Revenues$236,970 $256,246 $293,257 Expenditures less UAL198,533232,135 259,292 CalPERS UAL28,3024,891 4,891 POB Payment-13,688 13,556 Total Expenditures226,834250,714 277,739 Restricted AES(4,900)HB Recovery Reserves(13,472)Surplus$5,235 $5,532 $2,045 * FY 2021/22 projected numbers are subject to change as the annual audit is currently in process.

CalPERS UpdateFY2021/22 CalPERS return of -7.5% (original estimate -6.1%) requiring escalating UAL payments by the CityOctober 18 – City Council approved $3 million to fund the Section 115 Trust to address CalPERS’ unfavorable returnSection 115 Trust balance as of June 30, 2022: $15.4MCalPERS Gains & Losses amortized over 20 years with a 5 year ramp-upProjections assumes CalPERS earns 6.8% in FY23/24 going forward which is CalPERS’ discount rate5YearsCalPERS Plan Return1 Year -7.5%5 Years* 6.7%10 Years* 7.7%20 Years* 6.9%30 Years* 7.7%Decrease UAL PaymentsIncrease UAL PaymentsCalPERS ReturnCalPERS ReturnCalPERS’ investment policy focuses on long-term plan returnsPOB is financially advantageous as long as CalPERS long-term return is > 2.925%* Based on original est. -6.1% return CalPERS UAL Payment Projection
66 -4 9 15 20 25 26 26 26 26 6 -4 8 12 16 21 20 20 20 20 6 -4 7 10 13 16 15 15 15 15 051015202530 6/30/2023 6/30/2024 6/30/2025 6/30/2026 6/30/2027 6/30/2028 6/30/2029 6/30/2030 6/30/2031 6/30/2032 6/30/2033Millions3.4% Return6.8% Return10.2% ReturnCalPERS UAL Payments based on projected FY22/23 CalPERS Returns scenarios Section 115 Trust Projected Balance Scenarios
7-$60-$50-$40-$30-$20-$10$0$10$20$30$40$506/30/2022 6/30/2023 6/30/2024 6/30/2025 6/30/2026 6/30/2027 6/30/2028 6/30/2029 6/30/2030 6/30/2031 6/30/2032 6/30/2033MillionsScenario 1: 3.4%Scenario 2: 6.8%Scenario 3: 10.2%Note: Assumes CalPERS hits their 6.8% target return in FY23/24 going forwardSection 115 Trust Overdrawn with 3.4% & 6.8% CalPERS Return in FY22/23Section 115 Trust Funds Adequate with 10.2% CalPERS Return in FY22/23

General Fund Long-Term Financial PlanScenario 1: 3.4% CalPERS Return FY22/23 8 (in thousands)Projected FY21/22Projected FY22/23Projected FY23/24ProjectedFY24/25ProjectedFY25/26ProjectedFY26/27Revenues$256,246 $293,257 $267,829 $272,742 $277,760 $282,885 Expenditures less UAL232,135 259,292 247,848 253,062 257,025 263,136 CalPERS UAL4,891 4,891 5,000 5,000 9,400 14,630 POB Payment13,688 13,556 13,276 12,989 12,687 12,537 Total Expenditures250,714 277,739 266,124 271,050 279,112 290,304 HB Recovery Reserves(13,472)Surplus$5,532 $2,045 $1,705 $1,691 ($1,352) ($7,419)Scenario 1 requires use of Section 115 Trust reserves (per UAL Policy) starting in FY25/26Insufficient fundsprojected to be available in Section 115 Trust to structurally balance the budget starting FY29/30 Assumes CalPERS earns 6.8% in FY23/24 going forward General Fund Long-Term Financial PlanScenario 2: 6.8% CalPERS Return FY22/23 9 (in thousands)Projected FY21/22Projected FY22/23Projected FY23/24ProjectedFY24/25ProjectedFY25/26ProjectedFY26/27Revenues$256,246 $293,257 $267,829 $272,742 $277,760 $282,885 Expenditures less UAL232,135 259,292 247,848 253,062 257,025 263,136 CalPERS UAL4,891 4,891 5,000 5,000 8,270 12,380 POB Payment13,688 13,556 13,276 12,989 12,687 12,537 Total Expenditures250,714 277,739 266,124 271,050 277,982 288,054 HB Recovery Reserves(13,472)Surplus$5,532 $2,045 $1,705 $1,691 ($222) ($5,169)Scenario 2 requires use of Section 115 Trust reserves (per UAL Policy) starting in FY25/26Insufficient fundsprojected to be available in Section 115 Trust to structurally balance the budget starting FY30/31 Assumes CalPERS earns 6.8% in FY23/24 going forward General Fund Long-Term Financial PlanScenario 3: 10.2% CalPERS Return FY22/23 10 (in thousands)Projected FY21/22Projected FY22/23Projected FY23/24ProjectedFY24/25ProjectedFY25/26ProjectedFY26/27Revenues$256,246 $293,257 $267,829 $272,742 $277,760 $282,885 Expenditures less UAL232,135 259,292 247,848 253,062 257,025 263,136 CalPERS UAL4,891 4,891 5,000 5,000 7,140 10,120 POB Payment13,688 13,556 13,276 12,989 12,687 12,537 Total Expenditures250,714 277,739 266,124 271,050 276,852 285,794 HB Recovery Reserves(13,472)Surplus$5,532 $2,045 $1,705 $1,691 $908 ($2,909)Scenario 3 requires use of Section 115 Trust reserves (per UAL Policy) in FY26/27 to FY32/33 (7 years)Sufficient fundsprojected to be available in Section 115 Trust to structurally balance the budget Assumes CalPERS earns 6.8% in FY23/24 going forward FY 2021/22 Year-End Budget Adjustments11
Year-End Budget Adjustment Requests
12 Year-end budget adjustments are requested in 12 separate funds:1. General Fund (100)2. Traffic Impact (206)3. Gas Tax (207)4. Measure M (213)5. Revolving Loan Fund (215)6. Infrastructure (314)7. Equipment Replacement (324)8. Workers’ Compensation (551)9. Hotel/Motel BID (709)10. HOME Program (854)11. Highway Safety Improvement Program (995)12. EPIC Challenge (1240)Adequate funding is available for all requested budget adjustments General Fund Adjustments
13 Infrastructure Fund Transfer$2M transfer to the Infrastructure Fund (314) to comply with Section 617 of the City Charter that requires the City to spend 15% of General Fund revenue on infrastructure and address rising labor and material costsEquipment Replacement Fund Transfer$2Mtransfer to the Equipment Fund (324) to ensure adequate funding for essential capital equipment needs and address rising equipment costsHOME Fund Transfer$6Ktransfer to the HOME Fund (240) to reimburse the HOME Fund for prior year administrative expenditures that were ineligible under the grant program General Fund Surplus with Year End Adjustments
14 (in thousands)Projected* FY21/22Revenues$256,246 Expenditures less UAL232,135 CalPERS UAL4,891 POB Payment13,688 Total Expenditures250,714 Surplus5,532 Infrastructure Transfer(2,000)Equipment Transfer(2,000)HOME Fund Transfer(6)Surplus with Recommended Actions$1,526 * FY 2021/22 projected numbers are subject to change as the annual audit is currently in process.

Other Fund Adjustments
15 Workers’ Compensation Fund (551)$1.22M to fund the cost of claims paid during FY 2021/22 due rising medical costs and an expanded list of injuries that are presumed to be work related under California law, including cancer, post-traumatic stress, and long-term impacts of COVID. $3M General Fund transfer approved on Oct 18. Appropriations is need in the Workers’ Comp Fund 551.Hotel/Motel Business Improvement District Fund (709)$1.96M to align budget with actual FY 2021/22 revenues and expenditures. The Hotel/Motel BID Fund is a pass-thru fund in which the City collects self-assessed revenues of 4% from the participating hotels and motels and submits them to Visit Huntington Beach per the BID’s agreement.

Other Fund Adjustments
16 Community Development$45K Revolving Loan Fund transfer to CDBG Fund to properly code funding & $822K HOME Fund transfer to the proper grant yearPublic Works$371K transfers to close out grants in Highway Safety Improvement Program Fund. Grants include Bolsa Chica/Pearce Traffic Signals, Goldenwest/Heil Signal Modifications, Gothard/Center Signal Modifications, Gothard/Slater Signal Modifications, Newland/Ellis Signal Modifications, Signal Interconnect – Newland, and Newland/Slater Signal Modifications.Non-Departmental$3K Epic Challenge Grant Fund transfer to Surf City “3” Cable Channel Fund to correct miscoding of charges and close out EPIC Challenge Grant Fund Other Recommendations
17 Public Works - Oak View Neighborhood Cleanup and Beautification Project$5MFY22/23 appropriation for Caltrans grant funding to be received under the Clean California Local Grant Program.Police – Professional Services Contract ExtensionRequest for approval of Amendment No. 3 to Agreement between the City of Huntington Beach and Winbourne Consulting, LLC for Consulting Services for the Police Department’s Computer Aided Dispatch and Records Management System (CAD/RMS) to extend the contract a fifth year to January 10, 2024. No additional funding is required for this contract.

What’s on the Budget Horizon?In February 2023, we will return to Council with a Mid-Year FY2022/23 Update and Final Year-End Audit Results for FY2021/22The following details the Budget Development Calendar for FY2023/24:
18Proposed Date ItemDecember 2022 – May 2023 FY 2023/24 Budget Development ProcessMay 16, 2023 FY 2023/24 Proposed Budget Study Session with City CouncilJune 6, 2023 FY 2023/24 Budget Adoption: City Council Public HearingJune 20, 2023 FY 2023/24 Budget Adoption: Alternate DateJuly 1, 2023 Fiscal Year 2023/24 Begins Summary of Recommended ActionsApprove appropriations and/or transfers of $12.4M to complete the year-end closing process for FY2021/22 Approve $5M appropriation for Oak View grant and Police CAD/RMS contract extension19 FundA/TDescription Amount TotalGeneral FundTInfrastructure Transfer$2,000,000$4,006,411TEquipment Transfer2,000,000THOME Fund Transfer6,411Other FundsAInfrastructure Fund Appropriation2,000,000$8,416,727AEquipment Fund Appropriation2,000,000AWorkers’ Compensation1,215,774AHotel/Motel BID1,959,378TCommunity Development867,110TPublic Works371,345TNon-Departmental$3,120Total $12,423,138A – Appropriations $7.2MT – Transfers $5.2MEstimated General Fund FY21/22 surplus after appropriation: $1.5M (subject to change) Questions?