Tim Scott, CBO, ICC – Non-Structural Plan Review
BPR
Plans Examiner / Building Inspector County of Sacramento 2000 – 2003 Tim provided plan reviews and building inspection services for the County of Sacramento Building Department. Tim was responsible for a range of projects from small residential remodels to large complex commercial and industrial projects.
General Building Contractor Self Employed 1993 – 2000 As a self-employed general contractor Tim was responsible for coordination of all activities associated with a small business including client relations and managing all phases of construction for wood framed residential and commercial projects.
Carpenter / Foreman Timberline Builders 1983 - 1993 Tim began working for Timberline Builders as a carpenter and worked his way up to the position of foreman where he supervised a crew of carpenters. Tim was responsible for quality assurance as well as the productivity of the crew.
PROJECT EXPERIENCE
Supervising Plan Examiner / Assistant Building Official City of Elk Grove 2003 - 2008 As the Assistant Building Official and Supervising Plans Examiner Tim was instrumental in developing and implementing policies and procedures in the development of the City of Elk Grove’s Building Department.
EXHIBIT A
DocuSign Envelope ID: 7DD2076C-55F7-4347-AFAC-3C772D986673
BPR
EDUCATION
AS, Paralegal Studies
MTI College
AS, General Studies
Cuyamaca College
PROFESSIONAL REGISTRATIONS
AND CERTIFICATIONS
CSFM Plans Examiner 1A, 1B, 1C
CSFM Fire Inspector 1
Hazardous Materials First
Responder
Fire Alarm Plan Review
Fire Prevention 3B
Fire Inspector 1A, 1B, 1C
Fire Inspector 2A, 2B, 2C
Melissa Vink, CSFM
NON-STRUCTURAL PLAN REVIEW
Melissa is a results driven professional with over 15 years of experience in the fire service, including seven years as a hospital-based fire inspector. She was appointed as a Designated Campus Fire Marshal from the California State Fire Marshal’s Office and is highly efficient in performing fire inspection and plan review services for a wide variety of clients and project types.
PROFESSIONAL HISTORY
Fire Inspector / Plans Examiner | BPR Consulting Group | 2022 - Present
Melissa performs fire inspection and fire plan review services for various municipal clients. Reviews commercial and residential buildings to ensure compliance with applicable fire codes and ordinances. Reviews plans and specifications for building construction projects to ensure compliance with applicable codes and ordinances as well as calculations for fire alarm and extinguishing systems.
Fire Inspector / Plans Examiner | Consulting Firm | 2021 - 2022 Responsibilities included performing visual inspections of fire components in new construction and tenant improvements; reviewing new construction plans and tenant improvement plans to ensure compliance with local, state and federal fire and life safety laws; and writing detailed plan review and inspection reports for clients. Melissa performed fire alarm and fire sprinkler inspections along with other required inspections on new construction and tenant improvements. MELISSA worked closely with various agencies to ensure inspections and plan review submittals were completed in an efficient and timely manner and conducted research of various codes and statutes to ensure proper enforcement of fire and life safety compliance. Responsibilities also included attending pre-construction meetings for various jurisdictions to establish expectations for fire and life safety inspections during construction.
Fire Inspector II / Designated Campus Fire Marshal (DCFM) | UC Davis Health Fire Marshal’s Office | 2016 - 2021
As Fire Inspector II / DCFM, Melissa performed monthly, quarterly and annual existing building inspections for fire and life safety code compliance. This included the hospital as well as outlying clinics, office buildings and warehouses. Melissa managed the fire extinguisher inspection and maintenance program. She also wrote and submitted for Hospital Administration approval, fire safety policies and procedures for the Health System based on research conducted from the California Fire Code, Title 19 and Health and Safety Codes; once approved, policies were implemented on the UCDH Fire Prevention website as well as the UC Davis Health Policy and Procedures website. Created, facilitated, integrated and maintained 300+ fire and evacuation plans in accordance with current California Fire Code, Health and Safety Code and Title 19, as well as Joint Commission and CMS requirements. Melissa assisted in scheduling and performing annual kitchen hood testing, annual fire
EXHIBIT A
DocuSign Envelope ID: 7DD2076C-55F7-4347-AFAC-3C772D986673
Melissa Vink - Non-Structural Plan Review
BPR
alarm testing and quarterly/semi-annual fire sprinkler testing. Assisted with review of new construction and tenant improvement plans for fire and life safety code compliance in non-OSHPD regulated facilities. Managed the fire drill program for the hospital, outpatient clinics, and no-patient office buildings. Conducted fire drills on a quarterly and annual basis. Assisted with staff training of emergency Paraslydes, which included: product research, creation of the Paraslyde training manual and staff hands-on training. Melissa also responded to evacuation/relocation emergencies within the hospital and other medical center facilities as needed. She also researched and conducted audience appropriate fire safety training sessions for up to 300 employees and wrote detailed inspection and plan review reports.
Fire Inspector 1 | UC Davis Health Fire Prevention Department | 2014 - 2016 As Fire Inspector I, Melissa Organized and prepared detailed inspection reports for the Joint Commission and Center for Medicare and Medicaid Services (CMS) audits. She served as Public Education Coordinator for the Fire Prevention department, including fire extinguisher training and emergency evacuation training. As the designated Safety Coordinator, created the fire prevention departmental safety plan which was used as the policy for emergencies within the Fire Prevention office. She created and approved permits, and performed inspections for each, for hazardous materials, special event and hot works requests. Melissa assisted with fire alarm, smoke control and fire sprinkler testing, weekly hospital rounds inspections, monthly kitchen hood inspections, monthly and annual building inspections, wet/dry standpipe inspections, FDC visual inspections and audio-visual device testing. She also managed the fire extinguisher program which included cataloging the number and type of each fire extinguisher and researching the California Fire Code and National Fire Protection Association standards for proper size and type of extinguisher in all UCDH buildings.
Administrative Assistant III | UC Davis Health Fire Prevention Department | 2010 - 2014 In this role, Melissa streamlined the fire inspection and maintenance programs which contributed to increasing the annual inspection and maintenance of fire extinguishers from 2K to 6500 within 12 months. Responsibilities included collecting, organizing and reviewing all weekly & monthly payroll sheets and backup documents; hiring, training and supervising the department's temporary office assistant; assisting in department-wide organizational transition, and obtaining, analyzing and auditing monthly and annual reporting of expenses and account status per university policies. Melissa assisted in the organization of inspection and testing binders for the Joint Commission as well as attended several successful Joint Commission surveys for fire and life safety compliance.
Administrative Assistant II | UC Davis Health Fire Prevention Department | 2007 - 2010 Melissa collected and compiled data for monthly, quarterly and annual reports for the UC Davis Medical Center as well as the State Fire Marshal’s Office; logged all inspections in the company database, including findings, results and inspection date; and managed office personnel calendars and coordinated all inspections, fire drills and departmental meetings. In the role she also assisted with monthly inspections of fire extinguishers within the hospital and various medical center facilities.
EXHIBIT A
DocuSign Envelope ID: 7DD2076C-55F7-4347-AFAC-3C772D986673
BPR
PROFESSIONAL LICENSES &
CERTIFICATIONS
CA Certified Firefighter, 1986, 011770
CA Fire Prevention 1A, 1990
CA Fire Prevention 1B, 1993
CA Fire Prevention 1C, 1992
CA Fire Prevention 2A, 2003
CA Fire Prevention 2B, 2006
CA Fire Prevention 3A, 2001
CA Fire Prevention 3B, 2000
CA Fire Investigation 1A, 1997
CA Fire Investigation 1A, 1997
CA Fire Investigation 1B, 1995
CA Fire Instructor 1A, 2007
CA Fire Instructor 1B, 2007
Hazardous Materials 1A, 1987
Hazardous Materials 1B, 1987
CA Hazardous Materials 1C, 1987
CA Hazardous Materials 1D, 1987
Emergency Medical Technical,
County of Sacramento, D2828
International Code Council – 8092477
ICC Fire Plans Examiner
RUSSELL BLAIR, ICC
NON-STRUCTURAL PLAN REVIEW
Russ is a Fire and Life Safety plans examiner with more than 40 years of experience within the fire protection and life safety service as a career member of the fire service. He has managed and participated in a wide range of projects including plan review, inspections, hazard analysis, fire investigation, fire suppression, hazardous materials response, emergency medical services, policy development, and curriculum development.
Russ participated in the development and implementation of one of the first accredited Fire Inspector Academies in California. He has also instructed at the California Regional Fire Academy, specifically on the subject of fire protection systems and fire alarm systems.
Russ is a four-time graduate of the National Fire Academy in Emmitsburg, Maryland, where he specialized in the Fire Prevention Management Curriculum. The courses included Management of Fire Prevention Programs; Code Management: A Systems Approach; Fire Service Communications; and Interpersonal Dynamics.
Additionally, Russ previously served as a Fire Services Representative on the California State Fire Marshal’s Automatic Extinguishing System Advisory Committee. He has also served on the Planning Commission for the City of Citrus Heights.
PROFESSIONAL HISTORY
Fire Plans Examiner | BPR Consulting Group | 2022-Present As a Fire Plans Examiner, Russ reviews plans and their specifications for code compliance and safety for numerous construction projects in California.
Fire Plans Examiner | Consulting Firm | 2012 – 2022
Review plans and specifications for building construction projects to ensure compliance with applicable fire codes and ordinances.
Fire and Life Safety Consultant | Self Employed | 2009 – 2014 Sacramento Metropolitan Fire District | 1994 – 2014
Pomona Fire Department | 1990 – 1994
Northrop Fire Department | 1983 – 1990
SAF Fire Department | 1978 - 1982
EXHIBIT A
DocuSign Envelope ID: 7DD2076C-55F7-4347-AFAC-3C772D986673
BPR
EDUCATION
BS, Business and General
Management, San Francisco State
University
AA, Business Administration, College
of San Mateo
Coursework, Electrical Engineering
California Polytechnic State
University, San Luis Obispo
CERTIFICATIONS
International Code Council 8005399
ICC Certified Building Official
ICC Building Code Specialist
ICC Plumbing Inspector UPC
ICC Building Inspector
ICC Building Plans Examiner
ICC Plumbing Inspector
MARK MEYERS, CBO, ICC
NON-STRUCTURAL PLAN REVIEW
For 25 years, Mark served as a Building Official, Deputy Building Official, Building Inspector, Plans Examiner and Permit Coordinator for the City and County of Madera and the City of Clovis. He has implemented permit tracking software for multiple jurisdictions, prepared operating budgets and managed all facets of building department activities. He recently servedas an Inspection Manager, supervising inspection and clerical staff, for the UC Merced 2020 Project, helping to design and implement the inspection program to fit the University’s evolving needs.
PROFESSIONAL HISTORY
Building OfficialProject Manager BPR Consulting Group 2021 – Present
Mark provides Building Official services for several Cities and Counties throughout California. In addition, Mark provides supervision for inspection staff and clerical staff for the Cities and Counties where he works. Marks responsibilities also includes meeting with clients to ensure that expectations are being met and maintaining client relationships.
Inspection Manager Consultant 2016 – 2021
Mark supervised inspection staff and clerical staff for the UC Merced 2020 Project, working with client staff for the design and implementation of the inspection program to fitthe changing needs of UC Merced.
Building Official City of Clovis2008 – 2015
Mark supervised 9 staff and was responsible for all building inspections. His duties included supervision and training of office staff and implementing new training programs for building inspectors. Mark designed and implemented a new computerized permit tracking and issuance program for the Planning and Development Services Department.
This system included complete integration with the City’s well-developed GIS systems. All permit processing was done manually before new permit tracking system was implemented. The program interfaces with the Tax Collector and Assessor’s Office. Mark formulated a million-dollar budget and presented it annually. He worked regularly with the Fire, Planning, and Engineering Departments.
Deputy Building Official City of Clovis 2006 – 2008
Mark supervised 14 staff responsible for building inspection processes and building permit fee revision. He trained office staff and implemented new training programs for building inspectors. Mark designed and implemented new computerized permit fees to better comply with state laws and to track time for each inspection type.
Permit Coordinator County of Madera 2000 – 2006
Mark was responsible for all building inspection processes and coordinating building permit issuance. He performed all the duties of a Building Official, and supervised and trained a staff of 20 employees, as well as implementing new training programs for building inspectors. Mark designed and implemented a new computerized permit tracking and issuance program for the Resource Management Agency. Mark coordinated and supervised the remodel of a 37,000 square foot retail building into an office complex for the Resource Management Agency and moved four
EXHIBIT A
DocuSign Envelope ID: 7DD2076C-55F7-4347-AFAC-3C772D986673
Mark Meyers, CBO, ICC – Non-Structural Plan Review
BPR
departments into one building. Mark’s duties allowed him to work regularly with the Environmental Health, Fire, Planning, Engineering and General Services, Public Works, Roads and Transportation Departments.
Building Inspector Plans Examiner Acting Chief Building Official City of Madera | 1991 – 2000
As a building inspector, Mark inspected residential and commercial buildings, and was responsible for enforcing all building codes per State and local codes. As a plans examiner, Mark regularly worked with the planning department. He formulated the budget for the Building Department and regularly presented staff reports to the City Council. He also did preliminary work on designing a computerized tracking program for the issuance of permits for the Building Department. Mark was eventually designated Acting Chief Building Official.
PROJECT EXPERIENCE
2020 Project Expansion University of California, Merced 2016 - 2021 Inspection Manager | Mark supervised inspection staff and clerical staff for the UC Merced 2020 Project, working with client staff for the design and implementation of the inspection program to fit the changing needs of UC Merced.
Table Mountain RancheriaFriant, CA 2018 – 2021
Building Official | Mark served as the Building Official for the Table Mountain Casino and Hotel Expansion providing guidance to the Tribe for code alternatives and manages the inspection and plan review team for the project.
EXHIBIT A
DocuSign Envelope ID: 7DD2076C-55F7-4347-AFAC-3C772D986673
BPR
CERTIFICATIONS
IAPMO Certified Plumbing Inspector,
030666
IAPMO Certified Mechanical
Inspector, 090146
CA LEED Certified, LEED AP BD+C,
10436985
Certified Access Specialist, CASp-439
International Code Council, 1061008
ICC Building Code Official
ICC CA Residential Building,
Plumbing, Mechanical,
Combination, Electrical Inspector
ICC Certified Building Official
ICC CA Commercial Building,
Plumbing, Electrical, Combination,
Mechanical Inspector
ICC Building, Electrical,
Combination, Mechanical , Plumbing
Inspector
ICC CA Combination Inspector
ICC Mechanical UMC
ICC Building Plans Examiner
ICC Plumbing Inspector UPC
ICC CA Building Plans Examiner
ICC Combination Inspector – Legacy
ICC Building Code Specialist
ICC Commercial Combination
Inspector
PROFESSIONAL AFFILIATIONS
International Code Council,
RICK WALTERS, CASp, LEED, CBO, ICC
NON-STRUCTURAL PLAN REVIEW
Rick has over 30 years of experience in the construction industry with over 30 of those years in the Building Inspection industry. Rick has experience as a building official and inspector. He has provided senior inspector services in disaster zones for floods and wildfires which required communication with the National Guard, elected officials and law enforcement. Additionally, Rick is experienced in inspection management, council meetings, planning meetings, city and county design review meetings, field inspections, permit tracking and issuance, record keeping, construction techniques, and office procedures.
Rick has provided inspection services for over 25 different City, County, State and Military installations. He inspected services of a Wildfire Disaster Zone involving over 100 structures and provided Flood Zone inspections for over 1,100 homes. He provided Chief Building Official services to the Cities of Dixon, Calistoga, Yountville, St. Helena, Gridley, Auburn and Woodland.
PROFESSIONAL HISTORY
Chief Building Official | Certified Access Specialist | Senior Inspector / BPR Consulting Group / 2021 - Present
Rick provides Building Official, building inspection, plan review, CASp review and inspection services for several clients in Northern California.
Chief Building Official | Certified Access Specialist | Senior Inspector / Interwest Consulting Group / 2014 - 2021
Performed Building Official, building inspection and plan review services for various Northern California municipalities, as well as providing CASp plan review and inspection services.
Inspection Services / Bureau Veritas | Beale Air Force Base, CA / 2012 - 2014
Rick provides full inspection services for military housing at Beale Air Force Base. Inspections of single family homes and duplexes include foundation, framing, mechanical, plumbing, electrical, and final inspections. Daily and weekly reports are compiled listing any deficiencies or items needing repair/replacement.
Fill-In Building Inspection Services / Bureau Veritas, CA / 2011 - 2012 Rick has provided fill-in building inspection services during staff vacations, sick-time, and periods of high-workload for the Cities of West Sacramento and Napa. He has inspected residential and commercial structures for compliance with all applicable building codes and local ordinances.
Building Inspection Services Manager / City of Woodland, CA / 2008 - 2011 Rick oversaw the inspection program for the City of Woodland. He managed and directed the inspectors on staff as well as performed inspections for residential, commercial, and industrial facilities.
EXHIBIT A
DocuSign Envelope ID: 7DD2076C-55F7-4347-AFAC-3C772D986673
DATE: July 11, 2023
TO: Mayor and Members of the City Council
FROM: Tammi Royales, Director of Finance
VIA: Greg Humora, City Manager
SUBJECT: City of La Mesa Housing Asset Fund Financial Statements and Addendum to the Annual Progress Report for the Year Ended June 30, 2022 Pursuant to Senate Bill 341, the City of La Mesa in its capacity as Housing Successor Agency is required to conduct and provide to its governing body an independent financial audit of the Low- and Moderate-Income Housing Asset Fund. SB 341 also requires that the housing successor post the specified information on its Internet Web site.
Attached please find the audited financial statements and addendum to the annual progress report for the Housing Asset Fund of the City of La Mesa for fiscal year ended June 30, 2022. The audited financial statements are prepared by the City’s outside audit firm Rogers, Anderson, Malody & Scott, reviewed by City staff, and report the revenues, expenditures, and ending fund balance of the Housing Asset Fund. Included in the financial statements are the Notes to the Financial Statements that provide additional detailed information about the Housing Asset Fund. No exceptions were noted and the financial statements were prepared in accordance with generally accepted accounting principles.
The Addendum to the Annual Progress Report provides additional information related to the Housing function as required by SB341.
Pursuant to SB341, this information will be posted in the La Mesa Successor Agency section of the Community Development Department on our City website at http://www.cityoflamesa.us.
Attachments:
A: Housing Asset Fund Audited Financial Statements for fiscal year ended June 30, 2022
B: Housing Asset Fund Addendum to the Annual Progress Report for fiscal year ended June 30, 2022
Housing Asset Fund of the City of La Mesa
Addendum to the Annual Progress Report
For Fiscal Year Ended June 30, 2022
1 Independent Accountant’s Disclaimer Report Applied to the Preparation of the Addendum to the Annual Progress Report of the Housing Successor of the City of La Mesa
To Management of the
Housing Successor of the City of La Mesa
La Mesa, California
We have prepared the accompanying Addendum to the Annual Progress Report (“Addendum to the APR”) of the Housing Asset Fund of the City of La Mesa (Housing Successor) as of June 30, 2022 and for the year then ended in accordance with the reporting provisions of the California Health & Safety Code Section 34176.1 as amended by Senate Bill 341 (Chapter 796, Statutes of 2013, effective January 2014) (“SB 341”), and as amended by Senate Bill 107 (Chapter 325, Statutes of 2015, effective January 2016) HSC Section 34176.1(f). Management of the Housing Successor is responsible for the preparation and fair presentation of the Addendum to the APR in accordance with the reporting provisions of SB 341, and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the Addendum to the APR.
The accompanying Addendum to the APR of the Housing Successor as of June 30, 2022 and for the year then ended was not subjected to an audit, review, or compilation engagement by us and, accordingly, we do not express an opinion, conclusion, nor provide any assurance on it.
This Addendum to the APR is intended solely for the information and use of management of the Housing Successor of the City of La Mesa and is not intended to be and should not be used by anyone other than this specified party.
San Bernardino, California
May 22, 2023
2 Housing Successor of the City of La Mesa
Addendum to the Annual Progress Report
For Fiscal Year Ended June 30, 2022
1) The amount the City, County, or City and County received pursuant to subparagraph (A) of paragraph (3) of subdivision (b) of Section 34191.4.
The Housing Asset Fund received $1,021,154 in proceeds deemed as an enforcement obligation pursuant to subparagraph (A) of paragraph (3) of subdivision (b) of Section 34191.4.
2) The amount deposited to the Low and Moderate Income Housing Asset Fund, distinguishing between amounts deposited pursuant to subparagraphs (B) and (C) of paragraph (3) of subdivision (b) of Section 34191.4, amounts deposited for other items listed on the Recognized Obligation Payment Schedule from other amounts deposited.
The Housing Asset Fund incurred a loss of $59,177 from the use of money and property, and received $93,546 of reimbursements for consulting services relating to Old PD Site development project. None of these amounts were deposited for items listed on the Recognized Obligation Payment Schedule.
3) A statement of the balance in the fund as of the close of the fiscal year, distinguishing any amounts held for items listed on the Recognized Obligation Payment Schedule from other amounts.
The balance in the Housing Asset Fund as of June 30, 2022, was $11,035,584. Items listed on the Recognized Obligation Payment Schedule amounted to $365,420 and represents the remaining receivable for Deferred Set Aside amounts owed to Central Project Area to be paid from RPTTF.
4) A description of expenditures from the fund by category, including, but not limited to, expenditures:
a. For monitoring and preserving the long-term affordability of units subject to affordability restrictions or covenants entered into by the redevelopment agency or the housing successor and administering the activities described in paragraphs (2) and (3) of subdivision (a), The Housing Asset Fund's expenditures related to this category for the year ended June 30, 2022, were $222,110 in administrative expenditures. b. For homeless prevention and rapid re-housing services for the development of housing described in paragraph (2) of subdivision (a), and The Housing Asset Fund had no expenditures related to homeless prevention and rapid re-housing services for the year ended June 30, 2022.
3 c. For the development of housing pursuant to paragraph (3) of subdivision (a).
The Housing Asset Fund had no expenditures related to the development of housing for the year ended June 30, 2022.
5) As described in paragraph (1) of subdivision (a), the statutory value of real property owned by the housing successor, the value of loans and grants receivable, and the sum of these two amounts.
The statutory value of real property owned by the Housing Asset Fund as of June 30, 2022 was $14,415,000. The Housing Asset Fund had no notes or loans receivable as of June 30, 2022.
The sum of the statutory value of real property and the value of loans and notes receivable was $14,415,000.
6) A description of any transfers made pursuant to paragraph (2) of subdivision (c) in the previous fiscal year and, if still unencumbered, in earlier fiscal years and a description of and status update on any project for which transferred funds have been or will be expended if that project has not yet been placed in service.
No transfers occurred pursuant to paragraph (2) of subdivision (c) in the previous fiscal year or earlier fiscal years in the Housing Asset Fund. 7) A description of any project for which the housing successor receives or holds property tax revenue pursuant to the Recognized Obligation Payment Schedule and the status of that project.
The Housing Asset Fund received no such property tax revenue for the fiscal year ended June 30, 2022.
8) For interests in real property acquired by the former redevelopment agency prior to February 1, 2012, a status update on compliance with Section 33334.16. For interests in real property acquired on or after February 1, 2012, a status update on the project.
As of June 30, 2022, the Housing Asset Fund did not hold any property acquired prior to February 1, 2012.
As of June 30, 2022, the Housing Asset Fund held the Campina Court Apartments as property acquired after February 1, 2012. The ground lease for the Campina Court Apartments was transferred from the La Mesa Family Housing Partnership, L.P. to USA Property Fund.
As of June 30, 2022, the Housing Asset Fund also held the Old Police Station Site as property acquired after February 1, 2012. The purpose for the retention of the asset was to develop affordable housing for persons of low or moderate income. This development was extended for five years by Resolution 2017-030.
4 9) A description of any outstanding obligations pursuant to Section 33413 that remained to transfer to the housing successor on February 1, 2012, of the housing successor's progress in meeting those obligations, and of the housing successor's plans to meet unmet obligations. In addition, the housing successor shall include in the report posted on its internet web site the implementation plans of the former redevelopment agency.
As of June 30, 2022, there were no outstanding obligations pursuant to Section 33413 that remained to be transferred to the Housing Asset Fund on February 1, 2012. 10) The information required by subparagraph (B) of paragraph (3) of subdivision (a). of Section 34176.1
As of June 30, 2022, the City complied with these requirements through submission of the annual General Plan Implementation Report, which includes an Annual Element Progress Report on Housing Element Implementation.
11) The percentage of units of deed-restricted rental housing restricted to seniors and assisted individually or jointly by the housing successor, its former redevelopment agency, and its host jurisdiction within the previous 10 years in relation to the aggregate number of units of deed-restricted rental housing assisted individually or jointly by the housing successor, its former redevelopment agency, and its host jurisdiction within the same time period.
The percentage of units of deed-restricted rental housing restricted to seniors and assisted is 24%.
12) The amount of any excess surplus, the amount of time that the successor agency has had excess surplus, and the housing successor's plan for eliminating the excess surplus.
The Housing Asset Fund did not have an excess surplus as of June 30, 2022, or at any point during the fiscal year ended June 30, 2022. See Attachment A. 13) An inventory of homeownership units assisted by the former redevelopment agency or the housing successor that are subject to covenants or restrictions or to an adopted program that protects the former redevelopment agency’s investment of monies from the Low and Moderate Income Housing Fund pursuant to subdivision (f) of Section 33334.3.
a. The number of those units.
The Housing Successor Fund assisted with 3 loans pursuant to subdivision (f) of Section 33334.3.
b. In the first report pursuant to this subdivision, the number of units lost to the portfolio after February 1, 2012, and the reason or reasons for those losses. For all subsequent reports, the number of the units lost to the portfolio in the last fiscal year and the reason for those losses.
The Housing Successor Fund had no units lost to the portfolio after February 1, 2012, as of June 30, 2022.
5 c. Any funds returned to the housing successor as part of an adopted program that protects the former redevelopment agency’s investment of monies from the Low and Moderate Income Housing Fund.
The Housing Successor Fund did not receive any funds in return as part of an adopted program that protects the former redevelopment agency’s investment of monies from the Low and Moderate Income Housing Fund for the year ended June 30, 2022.
d. Whether the housing successor has contracted with any outside entity for the management of the units and, if so, the identity of the entity.
The Housing Successor has not contracted with any outside entity for the management of the units as of June 30, 2022.
Attachment A
6 Former Redevelopment Agency of the City of La Mesa
Excess Surplus Calculation
Opening fund balance - July 1, 2021 10,202,171 $
Less unavailable amounts:
Encumbrances (Section 33334.12(g)(2)) 10,018 $
Land Held for Resale 8,350,000 (8,360,018)
Available Low & Mod Funds 1,842,153
Limitation (Greater of $1,000,000 or four years of deposits) Amounts deposited for the preceding 4 years fiscal years ended:
June 30, 2021 922,494 $
June 30, 2020 585,894
June 30, 2019 652,042
June 30, 2018 137,556
Total amounts deposited for the preceding 4 fiscal years 2,297,986 Base limitation 1,000,000
Greater amount 2,297,986
Computed Excess Surplus - $
Low & Moderate Income Housing
Funds - All Project Areas
CITY OF LA MESA, CALIFORNIA
HOUSING ASSET FUND
AUDITED FINANCIAL STATEMENTS
JUNE 30, 2022
City of La Mesa, California
Housing Asset Fund
June 30, 2022
Table of Contents
PAGE
Independent Auditor’s Report 1
Financial Statements
Balance Sheet 4
Statement of Revenues, Expenditures, and Changes in Fund Balance 5 Notes to the Financial Statements 6
-1-
Independent Auditor's Report
To the Honorable City Council
City of La Mesa
La Mesa, California
Report on the Audit of the Financial Statements
Opinion
We have audited the accompanying financial statements of the Housing Asset Fund (the Fund) of the City of La Mesa, California (City), as of and for the year ended June 30, 2022, and the related notes to the financial statements, as listed in the table of contents.
In our opinion, the accompanying financial statements present fairly, in all material respects, the respective financial position of the Fund as of June 30, 2022, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Fund and to meet our other ethical
responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Management’s Responsibility for the Financial Statements The Fund’s management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
-2-
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Fund’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
Auditor’s Responsibility for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
Exercise professional judgment and maintain professional skepticism throughout the audit.
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control. Accordingly, no such opinion is expressed.
Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Fund’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit.
Other Matters
Management has omitted management’s discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of that basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of the financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. Our opinion on the basic financial statements is not affected by this omitted information.
-3-
Emphasis of Matter
As discussed in Note 1, the financial statements present only the Housing Asset Fund and do not purport to, and do not present fairly the financial position of the City of La Mesa, California, as of June 30, 2022, the changes in its financial position, or, where applicable, its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Also as discussed in Note 1 to the financial statements, the City adopted provisions of Governmental Accounting Standards Board Statement No. 87, Leases. Our opinion is not modified with respect to these matters.
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated May 22, 2023 on our consideration of the Fund’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 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 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 Fund’s internal control over financial reporting and compliance.
San Bernardino, California
May 22, 2023
City of La Mesa, California
Housing Asset Fund
Balance Sheet
June 30, 2022
The accompanying notes are an integral part of these financial statements. -4-
Assets
Cash and investments 2,691,055 $
Accounts receivable 2,690
Loans receivable 225,000
Due from Successor Agency 365,420
Lease receivable 341,580
Property held for resale 8,350,000
Total assets 11,975,745 $
Liabilities, Deferred Inflows of Resources and Fund Balance Liabilities
Salaries payable 10,018 $
Total liabilities 10,018
Deferred inflows of resources
Unavailable revenue - housing loans 590,420
Leases 339,723
Total liabilities 930,143
Fund balance
Restricted 11,035,584
Total fund balance 11,035,584
Total liabilities, deferred inflows of resources and fund balance 11,975,745 $
City of La Mesa, California
Housing Asset Fund
Statement of Revenues, Expenditures, and Changes in Fund Balance For the year ended June 30, 2022
The accompanying notes are an integral part of these financial statements. -5-
Revenues
Use of money and property (59,177) $
Intergovernmental 1,021,154
Other revenues 93,546
Total revenues 1,055,523
Expenditures
Current:
Community development 222,110
Total expenditures 222,110
Net change in fund balance 833,413
Fund balance, beginning of year 10,202,171
Fund balance, end of year 11,035,584 $
City of La Mesa, California
Housing Asset Fund
Notes to the Financial Statements
For the year ended June 30, 2022
-6-
Note 1 – Organization and Summary of Significant Accounting Policies The City of La Mesa was incorporated in 1912, under the laws of the State of California and enjoys all the rights and privileges applicable to a general law city. It is governed by an elected fivemember City Council.
The following is a summary of the significant accounting policies of the City of La Mesa as they pertain to the Housing Asset Fund. Only the Housing Asset Fund information is included herein and these financial statements, therefore, do not purport to represent the financial position or results of operations of the City of La Mesa, California.
Basis of Accounting
These fund financial statements are reported using the modified-accrual basis of accounting.
Under the modified-accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e. when they are both measurable and available). “Measurable” means the amount of the transaction can be determined, and “available” means collectible within the current period or soon enough thereafter (within 60 days) to be used to pay liabilities of the current period. Expenditures are generally recognized in the accounting period in which the liability is incurred, if measurable.
Use of Estimates in the Preparation of Financial Statements The financial statements have been prepared in accordance with generally accepted accounting principles and necessarily include amounts based on estimates and assumptions by management.
Actual results could differ from those amounts.
Implementation of New GASB Pronouncement
Governmental Accounting Standards Board has issued Statement No. 87, Leases. The objective of this Statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. This Statement increases the usefulness of governments’ financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments’ leasing activities.
City of La Mesa, California
Housing Asset Fund
Notes to the Financial Statements
For the year ended June 30, 2022
-7-
Note 2 – Cash and Investments
Cash at June 30, 2022, consisted of the following:
Amount
Pooled cash and investments 2,691,055 $
The City follows the practice of pooling cash and investments for all funds except for funds required to be held by outside fiscal agents under the provisions of bond indentures.
For more information on the City’s cash and investments as of June 30, 2022, please see the City of La Mesa’s audited financial statements. The Fund’s cash and investments are held in this pool.
Note 3 – Capital Assets
The Housing Asset Fund owns the Campina Court Apartment property, with a historical cost of $6,065,000. This amount is included in the City’s government-wide financial statements and is not reported at the fund level.
Note 4 – Lease Receivable
On July 1, 2021, the Housing Asset Fund entered into a 568 month lease as lessor for the use of Campina. An initial lease receivable was recorded in the amount of $347,055. As of June 30, 2022, the value of the lease receivable is $341,580. The lessee is required to make annual fixed payments of $8,460. The lease has an interest rate of 2.5800%.
City of La Mesa, California
Housing Asset Fund
Notes to the Financial Statements
For the year ended June 30, 2022
-8-
Note 5 – Property Held for Resale
On November 25, 2008, the City entered into a Purchase and Sale Agreement with the Redevelopment Agency (Agency) to sell certain real property located at 8181 Allison Avenue, La Mesa, California at the appraised value of $8,350,000 for the purposes of increasing, improving, and preserving the community's supply of housing available at affordable cost to persons and families of low or moderate income. The Agency made an initial payment of $1,000,000 at closing and issued a promissory note to the City for $7,350,000.
The outstanding balance was transferred from the Agency to the Successor Agency on February 1, 2012, as part of the dissolution of the Redevelopment Agency. At June 30, 2022, the outstanding balance of the advances from the City to the Successor Agency relating to this transaction was $5,300,000.
On August 23, 2012, the City of La Mesa acting as Successor Agency filed the Recognized Obligation Payment Schedule (ROPS III) for the January through June 2013 time period. As it had been for all previous ROPS, included on the ROPS III was the outstanding loan balance ($5,300,000 at June 30, 2012) for the Police Station Land Sale between the General Fund and the Successor Agency and the related annual debt service ($750,000 per year). The Department of Finance denied the debt on the ROPS III as an enforceable obligation, despite approving it on all previous ROPS, stating:
HSC section 34171 (d) defines enforceable obligations. Based on our review and application of the law, Item No.5 - a loan agreement between the City of La Mesa (City) and the Agency in the amount of $5.3 million is not an enforceable obligation. The loan was used to purchase the land under the police station. HSC section 34171 (d) (2) states that agreements between the City and the Agency are not enforceable.
The City requested a Meet and Confer with the Department of Finance, which was held on November 21, 2012. On December 19, 2012, the City received a determination from the Department of Finance that upheld the original determination to deny both the outstanding loan balance and related annual debt service as enforceable obligations. However, on December 7, 2017, the Oversight Board for the Successor Agency approved a repayment schedule in accordance with the maximum repayment amounts specified in the Dissolution Law including H&S Code Section 34191.4(b)(3) until the loan is repaid in full. On January 23, 2018, the Department of Finance issued a Determination Letter, approving the loan balance of $5,300,000. Repayments of this loan will begin after other deferrals listed on the ROPS are repaid.
City of La Mesa, California
Housing Asset Fund
Notes to the Financial Statements
For the year ended June 30, 2022
-9-
Note 6 – Fund Balance
The following classifications describe the relative strength of the spending constraints placed on the purposes for which resources can be used:
Nonspendable – amounts that are not in a spendable form (such as inventory) or are required to be maintained intact.
Restricted – amounts constrained to specific purposes by their providers (such as grantors, bondholders and higher levels of government), through constitutional provisions or by enabling legislation.
Committed – amounts constrained to specific purposes by a government itself, using the highest level of decision-making authority; to be reported as committed, amounts cannot be used for any other purpose unless the government takes the same highest-level action to remove or change the constraint.
Assigned – amounts a government intends to use for a specific purpose; intent can be expressed by the governing body or by an official or body to which the governing body delegates the authority.
Unassigned – amounts that are for any purpose; positive amounts are reported only in a general fund.
The City Council, as the governing body of the Housing Asset Fund, establishes (and modifies or rescinds) fund balance commitments by passage of an ordinance or resolution. The Director of Finance has the authority, granted by the Council, to assign City resources. When both restricted and unrestricted resources are available for use when an expenditure is incurred, it is the Housing Asset Fund’s policy to use restricted resources first, then unrestricted resources as they are needed. It is also the Housing Asset Fund’s policy to consider committed amounts as being reduced first, followed by assigned amounts and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of those unrestricted fund balance classifications could be used.
The Housing Asset Fund’s governmental fund balances at June 30, 2022, are presented below:
Housing
Asset Fund
Restricted for:
Low and moderate income housing 11,035,584 $
Total fund balance 11,035,584 $
Note 7 – Loans Receivable
The loans receivable to the Housing Asset Fund are loans originally made from low and moderate income housing loans for three properties located on Lubbock Avenue. The loans are secured by trust deeds on the individual properties and are payable upon sale or transfer of the property by the original property owner.
City of La Mesa, California
Housing Asset Fund
Notes to the Financial Statements
For the year ended June 30, 2022
-10-
Note 8 – Due From Successor Agency
Beginning in fiscal year 1985-1986 and continuing through fiscal year 2010-2011 and the dissolution of redevelopment, the former La Mesa Community Redevelopment Agency had deferred the deposit of tax increment funds totaling $3,148,381 into the Low and Moderate Income Housing Funds of the Redevelopment Agency as housing set-aside funds pursuant to the authority provided in the Redevelopment Law. After the Redevelopment Agency was dissolved and the Successor Agency and Housing Successor Agency were established, the deferred housing set-aside funds remained an unpaid obligation of the Successor Agency to the Housing Successor Agency.
In December 2017, the Oversight Board for the Successor Agency to the La Mesa Community Redevelopment Agency approved the repayments of deferred housing set-aside funds in the amount of $3,148,381 owed to the Low and Moderate Income Housing Fund, now the Housing Asset Fund, as an enforceable obligation and authorized the inclusion of the obligation on the Successor Agency’s Recognized Obligation Payment Schedule (ROPS) beginning with the ROPS 18-19. The Oversight Board also approved the repayment schedule for the first payment in the amount of $541,221 to be requested on the ROPS 18-19. In January 2018, the California Department of Finance approved the repayment schedule for the deferred housing set-aside funds to the Housing Asset Fund for inclusion on the 2018-2019 Recognized Obligation Payment Schedule and all future ROPS until the obligation is retired.
As of June 30, 2022, the total remaining deferred enforcement obligation is $365,420.
DATE: July 11, 2023
TO: Mayor and Members of the City Council
FROM: Tammi Royales, Director of Finance
VIA: Greg Humora, City Manager
SUBJECT: Single Audit of Federally Assisted Grant Programs for the Year Ending June 30, 2022
The Single Audit reports on the City’s expenditures incurred that are reimbursable under federal programs of federal awards in compliance with Title 2, US Code of Federal Regulations, Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Local governments are required to obtain an audit according to the federal Single Audit Act Amendments of 1996 (31 U.S.C. 7501-7507). To ensure this requirement is met, the City contracts with an outside for an independent audit each fiscal year. The City contracted with the independent accounting firm of Rogers, Anderson, Malody & Scott to perform the Fiscal Year 2021-22 Single Audit. The audit is performed in accordance with Generally Accepted Governmental Auditing Standards and is an assessment of internal controls over federal programs, a test of how those controls are working, and a test of compliance with federal requirements.
The City received an unmodified opinion, meaning the Report on Schedule of Expenditures for Federal Awards was fairly stated in all material respects and no deficiencies were noted in internal control. There was one instance of noncompliance identified in ARPA reporting stating the City was late with a quarterly report, which has been corrected. There was one instance of noncompliance in the Community Development Block Grant (CDBG) that pertained to an outdated reference in a subrecipient contract. A corrective action plan has been drafted and is being implemented.
There was one instance of noncompliance in the Community Development Block Grant (CDBG) that pertained to a non-reporting of a quarter with no activity. A corrective action plan has been drafted and is being implemented. There was one instance of noncompliance identified in ARPA reporting where expenditures from an allowed date time frame was submitted. A corrective action plan has been drafted and implemented.
Attached is a copy of the Single Audit of Federally Assisted Grant Programs (Single Audit) for the Year Ending June 30, 2022.
Attachment:
A. Single Audit Report on Federal Awards Year Ended June 30, 2022
City of La Mesa
La Mesa, California
Single Audit Report on Federal Awards
Year Ended June 30, 2022
CITY OF LA MESA
Single Audit Report on Federal Awards
Year Ended June 30, 2022
Table of Contents
Page
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
1 Report on Compliance for Each Major Federal Program; Report on Internal Control Over Compliance; and Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance
3 Schedule of Expenditures of Federal Awards
7 Notes to the Schedule of Expenditures of Federal Awards
8 Schedule of Findings and Questioned Costs
9 Summary Schedule of Prior Audit Findings
16
-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 La Mesa
La Mesa, California
We have audited, in accordance with 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, the financial statements of the governmental activities, the businesstype activities, each major fund, and the aggregate remaining fund information of the City of La Mesa (the City) as of and for the year ended June 30, 2022 and the related notes to the financial statements, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated May 22, 2023.
Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City’s internal control over financial reporting (internal control) as a basis for designing audit 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 City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’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 City’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.
-2-
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 may exist that have not been identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City’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 determination of financial statement amounts. 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 City’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 City’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
San Bernardino, California
May 22, 2023
-3-
REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL
PROGRAM; REPORT ON INTERNAL CONTROL OVER
COMPLIANCE; AND REPORT ON SCHEDULE OF
EXPENDITURES OF FEDERAL AWARDS IN ACCORDANCE
WITH THE UNIFORM GUIDANCE
Independent Auditor’s Report
To the Honorable City Council
City of La Mesa
La Mesa, California
Report on Compliance for Each Major Federal Program
Opinion on Each Major Federal Program
We have audited the City of La Mesa’s (the City) compliance with the types of compliance requirements identified as subject to audit in the OMB Compliance Supplement that could have a direct and material effect on each of the City’s major federal programs for the year ended June 30, 2022. The City’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs.
In our opinion, the City complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2022.
Basis for Opinion on Each Major Federal Program
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America (GAAS); the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards); and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Our responsibilities under those standards and the Uniform Guidance are further described in the Auditor’s Responsibilities for the Audit of Compliance section of our report.
-4-
We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on compliance for each major federal program. Our audit does not provide a legal determination of the City’s compliance with the compliance requirements referred to above.
Responsibilities of Management for Compliance
Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules and provisions of contracts or grant agreements applicable to the City’s federal programs.
Auditor’s Responsibilities for the Audit of Compliance
Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on the City’s compliance based on our audit. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS, Government Auditing Standards, and the Uniform Guidance will always detect material noncompliance when it exists. The risk of not detecting material noncompliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Noncompliance with the compliance requirements referred to above is considered material, if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about the City’s compliance with the requirements of each major federal program as a whole.
In performing an audit in accordance with GAAS, Government Auditing Standards, and the Uniform Guidance, we:
Exercise professional judgment and maintain professional skepticism throughout the audit.
Identify and assess the risks of material noncompliance, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the City’s compliance with the compliance requirements referred to above and performing such other procedures as we considered necessary in the circumstances.
Obtain an understanding of the City’s internal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control over compliance. Accordingly, no such opinion is expressed.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit.
-5-
Other Matters
The results of our auditing procedures disclosed instances of noncompliance which are required to be reported in accordance with the Uniform Guidance and which are described in the accompanying schedule of findings and questioned costs as items 2022-001, 2022-002, and 2022-003. Our opinion on each major federal program is not modified with respect to these matters. Government Auditing Standards requires the auditor to perform limited procedures on the City’s response to the noncompliance findings identified in our compliance audit described in the accompanying schedule of findings and questioned costs.
Report on Internal Control Over Compliance
Our consideration of internal control over compliance was for the limited purpose described in the Auditor’s Responsibilities for the Audit of Compliance section above and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies in internal control over compliance and therefore, material weaknesses or significant deficiencies may exist that were not identified. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses.
However, as discussed below, we did identify certain deficiencies in internal control over compliance that we consider to be significant deficiencies.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. We consider the deficiencies in internal control over compliance described in the accompanying schedule of findings and questioned costs as items 2022-004 and 2022-005 to be significant deficiencies.
Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed. Government Auditing Standards requires the auditor to perform limited procedures on the City’s response to the internal control over compliance findings identified in our audit described in the accompanying schedule of findings and questioned costs. The City’s response was not subjected to the other auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.
The City is responsible for preparing a corrective action plan to address each audit finding included in our auditor’s report. The City’s corrective action plan was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on it.
-6-
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.
Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance
We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of and for the year ended June 30, 2022, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements. We issued our report thereon, dated May 22, 2023, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the Uniform Guidance and is 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 and certain additional procedures including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole.
San Bernardino, California
June 8, 2023 (except for our report on the Schedule of Expenditures of Federal Awards, for which the date is May 22, 2023).
CITY OF LA MESA
Schedule of Expenditures of Federal Awards
Year Ended June 30, 2022
See accompanying notes to the schedule of expenditures of federal awards. -7-
Federal Grantor / Pass-through Grantor/Program Title
Assistance
Listing
Program Identification
Number
Federal
Expenditures
Amounts
provided to
Subrecipients
U.S. Department of Housing and Urban Development
Direct Award
CDBG-Entitlement Grants Cluster:
Community Development Block Grant 14.218 B-18-MC-06-0551 43,169 $ - $ Community Development Block Grant 14.218 B-19-MC-06-0551 327,316 - COVID-19 Community Development Block Grant 14.218 B-20-MW-06-0551 386,034 386,034 Community Development Block Grant 14.218 B-21-MC-06-0551 64,663 30,000 Total AL 14.218 / CDBG-Entitlement Grants Cluster 821,182 416,034 Total - U.S. Department of Housing and Urban Development 821,182 416,034 U.S. Department of Justice
Direct Award
COVID-19 Bureau of Justice Assistance Coronavirus
Emergency Supplemental Funding Program 16.034
Bureau of Justice Assistance
2020-VD-BX-1453 367 -
Total AL 16.034 - 367
Direct Award
Equitable Sharing Funds (Asset Forfeiture Funds) 16.922 Unknown 406 - Total AL 16.922 - 406
Total - U.S. Department of Justice 773 -
U.S. Department of Transportation
Passed through the State of California Department of Transportation Highway Bridge Program 20.200 BRLS-5207(036) 57,677 -
Total AL 20.200 - 57,677
Passed through the State of California Department of Transportation Highway Planning and Construction Cluster:
Highway Safety Improvement Program 20.205 HSIPL-5207(043) 86,962 - Total AL 20.205 / Highway Planning and Construction Cluster 86,962 - Passed through the San Diego Association of Governments (SANDAG) Transit Services Programs Cluster:
Federal Transit Administration (New Freedom) 20.521 5001083 87,777 - Total AL 20.521 / Transit Services Programs Cluster 87,777 - Passed through the State of California Department of Transportation 2020-2021 STEP Bike & Ped 20.608 PS21008 1,330 -
2020-2021 STEP Grant 20.608 PT21035 23,585 -
Total AL 20.608 - 24,915
Total - U.S. Department of Transportation 257,331 -
U.S. Department of the Treasury
Direct Assistance
COVID-19 State and Local Fiscal Recovery Funds 21.027 CSLFRF 690,348 - Total AL 21.027 - 690,348
Total - U.S. Department of the Treasury 690,348 -
Total Expenditures of Federal Awards $ 416,034 1,769,634 $
CITY OF LA MESA
Notes to the Schedule of Expenditures of Federal Awards Year Ended June 30, 2022
-8-
(1) Summary of Significant Accounting Policies Applicable to the Schedule of Expenditures of Federal Awards
(a) Scope of Presentation
The accompanying Schedule of Expenditures of Federal Awards (Schedule) includes the federal activity of the City of La Mesa (City) under programs of the federal government for the year ended June 30, 2022. The information on this Schedule is prepared in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance).
Because the Schedule presents only a selected portion of the operations of the City, it is not intended to and does not present the financial position, changes in net position or cash flows, where applicable, of the City. (b) Basis of Accounting
The expenditures reported on the Schedule are reported on the modified accrual basis of accounting. Such expenditures are recognized following, the cost principles contained in Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts shown of the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years.
(c) Subrecipients
The City passes certain federal awards received from the U.S. Department of Housing and Urban Development. The City has certain compliance responsibilities, such as monitoring its subrecipients to help assure they use these subawards as authorized by laws, regulations, and the provisions of contracts or grant agreements, and that subrecipients achieve the award’s performance goals.
(d) De Minimis Indirect Cost Rate
The City did not elect to use the 10% de minimis indirect cost rate allowed under the Uniform Guidance.
CITY OF LA MESA
Schedule of Findings and Questioned Costs
Year Ended June 30, 2022
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SECTION I. SUMMARY OF AUDITOR’S RESULTS
Financial Statements
audited were prepared in accordance with GAAP: unmodified Internal control over financial reporting:
Material weakness(es) identified? Yes X No
Significant deficiency(ies) identified? Yes X None Reported Noncompliance material to financial
statements noted? Yes X No
Federal Awards
Internal control over major federal programs:
Material weakness(es) identified? Yes X No
Significant deficiency(ies) identified? X Yes None Reported Any audit findings disclosed that
are required to be reported in
accordance 2 CFR 200.516(a) X Yes No
Identification of major federal programs:
Assistance Listing
14.218
21.027
Dollar threshold used to distinguish
between type A and type B programs: 750,000 $
Auditee qualified as low-risk auditee? X Yes No
Name of Federal Program
Type of report the auditor issued on whether the financial statements Type of auditor's report issued on compliance for major federal programs: unmodified COVID-19 State and Local Fiscal Recovery Funds
Community Devlopment Block Grant
CITY OF LA MESA
Schedule of Findings and Questioned Costs (continued)
Year Ended June 30, 2022
-10-
SECTION II. FINANCIAL STATEMENT FINDINGS
No matters to be reported.
SECTION III. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS 2022-001 – Reporting
Noncompliance
Federal Program
COVID-19 State and Local Fiscal Recovery Funds, Assistance Listing No. 21.027 Criteria
Per the Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance (as approved and documented under OMB PRA number – OMB # 1505-0271), quarterly Project and Expenditure Reports are due to Treasury by the last day of the month following the end of the period covered, and the funds may be used to cover eligible costs incurred between March 3, 2021 and December 31, 2024.
Condition
During the audit, we noted one Project and Expenditure report was submitted after the required deadline and the reports were including expenditures outside the required period of performance.
Cause
The City failed to submit the report in a timely manner and misunderstood the requirements relating to period of performance.
Effect
The City could jeopardize future grant funding due to program noncompliance.
Questioned Costs
No questioned costs.
Context/Sampling
The entire population of 3 Project and Expenditure reports was selected for testing. Upon review of the expenditure details for the program, we noted 407 transactions out of a population of 588 were for costs incurred prior to the period of performance. The total value of these expenditures was $222,367 out of $912,715 originally allocated.
CITY OF LA MESA
Schedule of Findings and Questioned Costs (continued)
Year Ended June 30, 2022
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2022-001 – Reporting (continued)
Noncompliance
Recommendation
We recommend the City establish a system to track required reports and their deadlines and evaluate its agreements to effectively determine period of performance requirements.
Views of Responsible Officials
See attached Corrective Action Plan.
2022-002 – Subaward Reporting Requirements for Federal Funding Accountability and Transparency Act (FFATA)
Noncompliance
Federal Program
COVID -19 Community Development Block Grant, Assistance Listing No. 14.218 Criteria
The requirements of 2 CFR Part 170 Appendix A state that direct recipients of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act (FFATA) Subaward Report System (FSRS) by the end of the month following the month in which the direct recipient awards such subawards.
Condition
During the audit, we identified three subgrants equal to or greater than $30,000 each which were awarded in fiscal year 2022. It was noted that FFATA subaward reporting was not submitted.
Cause
The City did not have controls in place to ensure FSRS reporting was completed in the required timeframe.
Effect
The City could jeopardize future grant funding due to program noncompliance.
Questioned Costs
No questioned costs.
CITY OF LA MESA
Schedule of Findings and Questioned Costs (continued)
Year Ended June 30, 2022
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2022-002 – Subaward Reporting Requirements for Federal Funding Accountability and Transparency Act (FFATA) (continued)
Noncompliance
Context/Sampling
The entire population of 3 subrecipient agreements was selected for testing.
Identification as a Repeat Finding
This is not a repeat finding.
Recommendation
We recommend the City implement a tracking system to remind staff of the various reports due and respective deadlines.
Views of Responsible Officials
See attached Corrective Action Plan.
2022-003 – Reporting
Noncompliance
Federal Program
COVID-19 Community Development Block Grant, Assistance Listing No. 14.218 Criteria
Per Title 2 CFR section 200.328, financial information and reports must be collected with the frequency required by the terms of the federal award. CDBG quarterly Cash on Hand financial reports are due within 30 days after the end of the reporting period.
Condition
During the audit, we noted one quarterly Cash on Hand report was submitted after the deadline.
Effect
The City submitted the report late and therefore fell out of compliance with the requirements of the granting agency.
Questioned Costs
No questioned costs.
CITY OF LA MESA
Schedule of Findings and Questioned Costs (continued)
Year Ended June 30, 2022
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2022-003 – Reporting (continued)
Noncompliance
Context/Sampling
The entire population of 4 Cash on Hand Quarterly Reports were selected for testing.
Identification as a Repeat Finding
This is not a repeat finding.
Recommendation
We recommend the City implement controls to ensure timely submission of required reports, including tracking of due dates.
Views of Responsible Officials
See attached Corrective Action Plan.
2022-004 – Reporting
Significant Deficiency
Federal Program
COVID-19 State and Local Fiscal Recovery Funds, Assistance Listing No. 21.027 Criteria
Per the Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance (as approved and documented under OMB PRA number – OMB # 1505-0271), quarterly Project and Expenditure Reports are due to Treasury by the last day of the month following the end of the period covered, and the funds may be used to cover eligible costs incurred between March 3, 2021 and December 31, 2024.
Condition
During the audit, we noted one Project and Expenditure report was submitted after the required deadline and the reports were including expenditures outside the required period of performance.
Cause
The City did not have effective controls in place to file the reports timely and determine period of performance requirements.
CITY OF LA MESA
Schedule of Findings and Questioned Costs (continued)
Year Ended June 30, 2022
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2022-004 – Reporting (continued)
Significant Deficiency
Effect
The City could jeopardize future grant funding due to program noncompliance.
Questioned Costs
No questioned costs.
Context/Sampling
The entire population of 3 Project and Expenditure reports was selected for testing. Upon review of the expenditure details for the program, we noted 407 transactions out of a population of 588 were for costs incurred prior to the period of performance. The total value of these expenditures was $222,367 out of $912,715 originally allocated.
Identification as a Repeat Finding
This is not a repeat finding.
Recommendation
We recommend the City establish a system to track required reports and their deadlines and evaluate its agreements to effectively determine period of performance requirements.
Views of Responsible Officials
See attached Corrective Action Plan.
2022-005 – Subaward Reporting Requirements for Federal Funding Accountability and Transparency Act (FFATA)
Significant Deficiency
Federal Program
COVID-19 Community Development Block Grant, Assistance Listing No. 14.218 Criteria
The requirements of 2 CFR Part 170 Appendix A state that direct recipients of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act (FFATA) Subaward Report System (FSRS) by the end of the month following the month in which the direct recipient awards such subawards.
CITY OF LA MESA
Schedule of Findings and Questioned Costs (continued)
Year Ended June 30, 2022
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2022-005 – Subaward Reporting Requirements for Federal Funding Accountability and Transparency Act (FFATA) (continued)
Significant Deficiency
Condition
During the audit, we identified three subgrants equal to or greater than $30,000 each which were awarded in fiscal year 2022. It was noted that FFATA subaward reporting was not submitted.
Cause
The City did not have controls in place to ensure FSRS reporting was completed in the required timeframe.
Effect
The City could jeopardize future grant funding due to program noncompliance.
Questioned Costs
No questioned costs.
Context/Sampling
The entire population of 3 subrecipient agreements was selected for testing.
Identification as a Repeat Finding
This is not a repeat finding.
Recommendation
We recommend the City implement a tracking system to remind staff of the various reports due and respective deadlines.
Views of Responsible Officials
See attached Corrective Action Plan.
CITY OF LA MESA
Summary Schedule of Prior Audit Findings
Year Ended June 30, 2022
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STATUS OF PRIOR YEAR FINDINGS:
SECTION II. FINANCIAL STATEMENT FINDINGS
No prior year findings.
SECTION III. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Finding 2021-001 Noncompliance
Corrective action no longer applicable as the City no longer receives funding from this grant.
Finding 2021-002 Noncompliance
Corrective action no longer applicable as the City no longer receives funding from this grant.
Finding 2021-003 Noncompliance
Corrective action no longer applicable as the City no longer receives funding from this grant.
Finding 2021-004 Significant Deficiency
Corrective action no longer applicable as the City no longer receives funding from this grant.
Finding 2021-005 Significant Deficiency
Corrective action no longer applicable as the City no longer receives funding from this grant.
June 8, 2023
Single Audit Report on Federal Awards Corrective Action Plan For the Fiscal Year Ended June 30, 2022
Rogers, Anderson, Malody & Scott, LLP
Certified Public Accountants
735 E. Carnegie Dr. Suite 100
San Bernardino, CA 92408
AUDIT FINDINGS
Finding Reference Number: 2022-001
Description of Finding: Per the Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance (as approved and documented under OMB PRA number – OMB #1505-0271), quarterly Project and Expenditure Reports are due to the Treasury by the last day of the month following the end of the period covered, and the funds may be used to cover eligible costs incurred between March 3, 2021 and December 31, 2024.
Statement of Concurrence of Non-compliance:
The City works in good faith to report in a timely manner on all grants as required. There was an issue with the login information and password that was not responded to until after the reporting date. The City was under the impression using the interim final rule that costs associated as of the beginning of the pandemic were applicable costs. As such, we agree with this finding.
Corrective Action:
The City has since reported on time, testing login information prior to the due date to ensure that there are no issues with login or password. We will be reviewing all costs associated during the applicable time frame and utilizing other related costs left off reporting and resubmitting to the US Treasury.
Finding Reference Number: 2022-002
Description of Finding: The requirements of 2 CFR Part 170 Appendix A state that direct recipients of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act (FFATA) Subaward Report System (FSRS) by the end of the month following the month in which the direct recipient awards such subawards.
Statement of Concurrence of Non-compliance:
The department in question did not understand that the award was within the scope of work that required it to be reported. As such, we agree with this finding.
Corrective Action:
The department representative has since filed this award in FSRS and will do so with all future awards as required.
Finding Reference Number: 2022-003
Description of Finding: Per Title 2 CFR section 200.328, financial information and reports must be collected with the frequency required by the terms of the federal award.
CDBG quarterly Cash on Hand financial reports are due within 30 days after the end of the reporting period.
Statement of Concurrence of Non-compliance:
During this period, there were zero cash amounts to report and the department personnel did not report. As such, we agree with this finding.
Corrective Action:
The employee understands that even if there is zero dollars to report, it must be reported regardless. This has been documented and will be done quarterly even if zero dollars.
Finding Reference Number: 2022-004
Description of Finding: Per the Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance (as approved and documented under OMB PRA number – OMB #1505-0271), quarterly Project and Expenditure Reports are due to the Treasury by the last day of the month following the end of the period covered, and the funds may be used to cover eligible costs incurred between March 3, 2021 and December 31, 2024.
Statement of Concurrence of Non-compliance:
The City works in good faith to report in a timely manner on all grants as required. There was an issue with the login information and password that was not responded to until after the reporting date. The City was under the impression using the interim final rule that costs associated as of the beginning of the pandemic were applicable costs. As such, we agree with this finding.
Corrective Action:
The City has since reported on time, testing login information prior to the due date to ensure that there are no issues with login or password. We will be reviewing all costs associated during the applicable time frame and utilizing other related costs left off reporting and resubmitting to the US Treasury.
Finding Reference Number: 2022-005
Description of Finding: The requirements of 2 CFR Part 170 Appendix A state that direct recipients of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act (FFATA) Subaward Report System (FSRS) by the end of the month following the month in which the direct recipient awards such subawards.
Statement of Concurrence of Non-compliance:
The department in question did not understand that the award was within the scope of work that required it to be reported. As such, we agree with this finding.
Corrective Action:
The department representative has since filed this award in FSRS and will do so with all future awards as required.
Name of Contact Person: Tammi Royales, Director of Finance, 619-667-1112, [email protected].
Projected Completion Date: Reference numbers 001 and 004 will be corrected with the next quarterly reporting period ending June 30, 2023. Reference numbers 002, 003, and 005 have been completed.
Sincerely yours,
Tammi J Royales
Director of Finance
DATE: July 11, 2023
TO: Mayor and Members of the City Council
FROM: Tammi Royales, Director of Finance
VIA: Greg Humora, City Manager
SUBJECT: Basic Financial Statements and Independent Auditor’s Report for the City of La Mesa for the Year Ending June 30, 2022
Attached is a copy of the Basic Financial Statements and Independent Auditor’s Report for the City of La Mesa for the Year Ending June 30, 2022. No exceptions were noted and the financial statements were prepared in accordance with generally accepted accounting principles. The annual audit was conducted in accordance with generally accepted auditing standards and procedures.
On June 13, 2023, the City’s Audit Committee met to review the results of the audit and draft financial statements. Rogers, Anderson, Malody & Scott presented the audit and indicated that the City has received an “unmodified” audit opinion from their firm. The Audit Committee approved forwarding the financial statements and audit on to the City Council.
This year’s financial statements include the City’s net pension liability and the addition of the net OPEB liability to the Government-wide financial statements. Detailed information about both the net pension and net OPEB liability is included in the Notes to the Financial Statements and the Required Supplementary Information (RSI).
Also included with the financial statements are two letters required by Government Auditing Standards, and one letter describing procedures used in verifying the calculation of the Appropriation Limit. These letters are intended to provide additional information related to the audit itself directly to the Council.
The first letter is the Auditor’s Communication with Those Charged with Governance.
The purpose of this letter is to allow the auditor to communicate directly with the City Council to explain the scope of the audit procedures performed, qualitative aspects of the City’s accounting practices, any significant difficulties encountered during the audit, and any other significant matters that are not communicated in the audited financial statements.
The second letter is the Report on Internal Control over Financial Reporting and on Compliance and Other Matters. This letter describes the scope of the auditor’s testing of internal control and compliance and the results of that testing.
The third letter is the Accountant’s Report on Agreed-Upon Procedures Applied to Appropriations Limit Worksheets. The purpose of this letter is to outline the procedures applied to the Appropriation Limit worksheets in order to check for accuracy in the calculation of the city’s Appropriation Limit (Gann Limit).
Staff recommends that the City Council and the City Council acting as the La Mesa Public Financing Authority accept and file the Basic Financial Statements and Audit Report for the City of La Mesa for the Year Ending June 30, 2022, as prepared and submitted by the firm of Rogers, Anderson, Malody & Scott.
Attachments:
A. Basic Financial Statements and Independent Auditor’s Report for the fiscal year ended June 30, 2022
B. Auditor’s Communication with Those Charged with Governance C. Report on Internal Control over Financial Reporting and on Compliance and Other Matters
D. Independent Accountant's Report on Agreed-Upon Procedures Applied to the Appropriations Limit Worksheet
City of La Mesa
La Mesa, California
Basic Financial Statements and
Independent Auditor’s Report
For the Year Ended June 30, 2022
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CITY OF LA MESA
Basic Financial Statements
For the Year Ended June 30, 2022
Table of Contents
Page
Independent Auditor's Report 1
Management's Discussion and Analysis (Required Supplementary Information) 4 Basic Financial Statements
Government-Wide Financial Statements:
Statement of Net Position 13
Statement of Activities 14
Fund Financial Statements:
Governmental Fund Financial Statements:
Balance Sheet 16
Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Position 17
Statement of Revenues, Expenditures, and Changes in Fund Balances 18 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-Wide Statement of Activities 19
Proprietary Fund Financial Statements:
Statement of Net Position 20
Statement of Revenues, Expenses, and Changes in Fund Net Position 21 Statement of Cash Flows 22
Fiduciary Fund Financial Statements:
Statement of Fiduciary Net Position 23
Statement of Changes in Fiduciary Net Position 24
Index to Notes to the Basic Financial Statements 25
Notes to the Basic Financial Statements 27
Required Supplementary Information
Budgetary Information 82
Budgetary Comparison Schedule – General Fund 83
Budgetary Comparison Schedule – Housing Asset Fund 84
Budgetary Comparison Schedule – Miscellaneous Grants Fund 85 Schedules of Changes in Net Pension Liability and Related Ratios 86 Schedule of Plan Contributions 89
Schedule of Changes in Net OPEB Liability and Related Ratios 92 Schedule of OPEB Contributions 93
CITY OF LA MESA
Basic Financial Statements
For the Year Ended June 30, 2022
Table of Contents
Page
Supplementary Information
Non-Major Governmental Funds:
Combining Balance Sheet 94
Combining Statement of Revenues, Expenditures,
and Changes in Fund Balances 100
Internal Service Funds:
Combining Statement of Net Position 106
Combining Statement of Activities, and Changes in Net Position 107 Combining Statement of Cash Flows 108
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Independent Auditor’s Report
To the Honorable Mayor and Members of City Council
of the City of La Mesa
City of La Mesa, California
Report on the Audit of the Financial Statements
Opinions
We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of La Mesa, California (the City), as of and for the year ended June 30, 2022, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.
In our opinion, the accompanying financial statements present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City, as of June 30, 2022, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Responsibilities of Management for the Financial Statements The City’s management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
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In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
Exercise professional judgment and maintain professional skepticism throughout the audit. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, no such opinion is expressed.
Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit.
Emphasis of Matter
As discussed in Note 1 to the financial statements, the City adopted provisions of Governmental Accounting Standards Board Statement No. 87, Leases. Our opinions are not modified with respect to this matter.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the required supplementary information, such as management’s discussion and analysis and schedules listed in the table of contents be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context.
We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for
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consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The other supplementary information listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements.
The accompanying other supplementary 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. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole.
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated May 22, 2023 on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.
San Bernardino, California
May 22, 2023
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CITY OF LA MESA
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2022
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As management of the City of La Mesa (City), we offer readers of these financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2022. We encourage readers to consider the information presented here in conjunction with the Basic Financial Statements and attached notes.
Financial Highlights
The total assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of resources (net position) by $169.2 million at the close of fiscal year 2021- 2022. Due to the implementation of GASB 68 and 75 and the additions of the City’s long-term net pension liability and Other Post-Employment Benefits (OPEB) liability onto the statement of net position, the City reported a negative unrestricted net position of $32.1 million. The City’s total net position increased $11.1 million from the prior fiscal year, including the prior period adjustment in the current year. The City adjusted the budget in anticipation of decline in revenues due to the ongoing pandemic.
At the close of the current fiscal year, the City’s governmental funds reported combined fund balances of $80.5 million, an increase of $5.9 million from the prior year. Approximately 49.8% of this amount or $40.1 million is available for spending at the government's discretion (unassigned fund balance).
At the end of the current fiscal year, the General Fund unrestricted fund balance (the total of the committed, assigned, and unassigned components of fund balance) was $42.8 million, or approximately 65.8% of budgeted general fund expenditures. The City’s capital assets (net of depreciation) decreased by $756k.
Overview of the Financial Statements
This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements include three components: 1) government-wide financial statements, 2) governmental fund financial statements, and 3) notes to the financial statements.
This report also contains other supplementary information in addition to the basic financial statements themselves.
Government-wide financial statements. The Government-wide Financial Statements report information about the City as a whole, using accounting methods similar to those used by private-sector companies. The Statement of Net Position includes all of the City’s assets and liabilities. All of the current year’s revenues and expenses are accounted for in the Statement of Activities, regardless of when cash is received or paid.
The two Government-wide Financial Statements report the City’s net position and how it has changed.
Net position – the difference between the City’s assets and liabilities – is one way to measure the City’s financial health, or position. Over time, increases or decreases in the City’s net position are an indicator of whether the City’s financial health is improving or deteriorating.
The Government-wide Financial Statements of the City are divided into two categories:
CITY OF LA MESA
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2022
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• Governmental activities – Most of the City’s basic services, such as police, fire, public works, community development, community services, and internal services are included here. Taxes, revenues from other governments and agencies, income from property and investments, grants and contributions, and charges for services finance most of these activities. • Business-type activities – The City charges fees to customers to cover the cost of certain services it provides. The City’s wastewater operations are the primary business-type activity.
The government-wide financial statements include the City (known as the primary government) and the La Mesa Public Financing Authority, a separate legal entity for which the City is financially accountable.
The Public Financing Authority, although legally separate, functions for all practical purposes as a department of the City, and therefore has been included as an integral part of the primary government.
Fund financial statements. The Fund Financial Statements provide more detailed information about the City’s most significant funds – not the City as a whole. Funds are accounting devices used by the City to keep track of specific sources of funding and spending for particular purposes.
Governmental funds. Most of the City’s basic services are included in governmental funds. These funds are used to account for (1) cash and other financial assets that can readily be converted to cash, and (2) balances left at year-end that are available for future spending. Consequently, the Governmental Funds Statements provide a detailed short-term view that helps the reader determine the amount of financial resources that can be spent in the near future to finance the City’s programs. The statements are presented on a modified accrual basis of accounting. Reconciliation between the long-term and shortterm focus of the Government-wide Financial Statements is provided following each statement.
Proprietary funds.
Services for which the City charges customers a fee are generally reported in proprietary funds.
Proprietary funds, like Government-wide Financial Statements, provide both long- and short-term financial information, and are presented on an accrual basis of accounting.
There are two types of propriety funds, enterprise funds and internal service funds:
Enterprise funds are used to report activities that provide business-type services, generally to external customers. City’s wastewater operations fall under these criteria. In both the Government-wide Financial Statements and the Fund Financial Statements, these funds are shown under business-type activities.
Internal service funds are used to report activities that provide services and supplies for the City’s other programs and activities, such as Employee Benefits, Workers’ Compensation Insurance, Equipment Replacement, and Liability Risk Insurance. Because these services predominantly benefit governmental rather than business-type functions, they have been included with governmental activities in the government-wide financial statements.
Fiduciary funds. Included in fiduciary funds are private purpose trust funds. The private purpose trust funds were established in the wake of the dissolution of redevelopment. The private purpose trust funds account for the City of La Mesa Successor Agency and the La Mesa Redevelopment Obligation Retirement Fund.
Notes to the financial statements. The notes provide additional information that is necessary to acquire a full understanding of the data provided in the government-wide and fund financial statements and can be found in the Notes to the Basic Financial Statements section.
CITY OF LA MESA
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2022
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Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning financial and budgetary information for the general fund and the City’s progress in funding its obligation to provide pension and OPEB benefits to its employees. Included in the required supplementary information is information related to the City’s implementation of GASB Pronouncements 68 and 75 and related schedules of changes in net pension liability net OPEB liability. All required supplementary information is found in the RSI section of this report.
Combining and individual fund statements and schedules for non-major governmental, internal service, and fiduciary funds are found in the supplementary information section of this report.
Government-wide Overall Financial Analysis
2022 2021 2022 2021 2022 2021
ASSETS
Current and other assets 137,426,324 $ 100,335,304 $ 6,544,956 $ 4,742,485 $ 143,971,280 $ 105,077,789 $ Intangible assets - right-to-use assets, net 477,240 - - - 477,240 - Capital assets, net 165,560,448 166,950,110 35,517,549 34,884,026 201,077,997 201,834,136 Total assets 303,464,012 267,285,414 42,062,505 39,626,511 345,526,517 306,911,925
DEFERRED OUTFLOWS OF RESOURCES
Pension related 13,694,057 15,144,926 662,871 648,676 14,356,928 15,793,602 OPEB related 1,476,550 1,242,875 200,014 168,360 1,676,564 1,411,235 Loss on refunding 426,531 456,997 - - 426,531 456,997
Total deferred outflow s of resources 15,597,138 16,844,798 862,885 817,036 16,460,023 17,661,834
LIABILITIES
Net Pension Liability 69, 100,042,463 978,899 3,169,065 4,589,157 73,147,964 104,631,620 Net OPEB liability 1,432,257 443,813 60,119 194,014 503,932 1,626,271 Other long-term liabilities outstanding 27,741,254 28,036,103 11,582,262 8,675,277 39,323,516 36,711,380 Other current liabilities 22, 17,763,783 742,992 1,402,002 1,522,721 24,144,994 19,286,504 Total liabilities 147,274,606 120,906,958 16,213,448 14,981,169 137,120,406 162,255,775
DEFERRED INFLOWS OF RESOURCES
Pension related 23,870,378 234,263 319,692 - 24,190,070 234,263 OPEB related 1,683,599 1,263,789 228,061 171,193 1,911,660 1,434,982 Unearned revenue 730,119 1,758,572 - - 730,119 1,758,572 Leases 28,787,401 - - - 28,787,401 -
Total deferred inflow s of resources 55,071,497 3,256,624 547,753 171,193 55,619,250 3,427,817
NET POSITION
Net investment in capital assets 143,675,693 143,127,744 22,827,894 25,308,485 166,503,587 168,436,229 Restricted 34,656,174 32,845,146 213,494 213,494 34,869,668 33,058,640 Unrestricted (35,249,171) (42,373,908) 3,122,801 (230,794) (32,126,370) (42,604,702) Total net position 143,082,696 $ 133,598,982 $ 26,164,189 $ 25,291,185 $ 169,246,885 $ 158,890,167 $ Cityw ide
Total
Governmental
Activities
Business-Type
Activities
Analyzing total net position over time may serve as a useful indicator of a government’s financial position. Increases or decreases in total net position indicate whether the financial position of the government is improving or deteriorating. As of June 30, 2022, the City’s total assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $169.2 million.
CITY OF LA MESA
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2022
‐7-
The largest portion of the City’s total citywide net position, $166.5 million and a decrease of $1.9 million over prior year, reflects its net investment in capital assets (e.g., land, buildings, machinery, equipment, vehicles, and infrastructure), less any related outstanding debt that was used to acquire those assets.
The City uses these capital assets to provide a variety of services to its citizens. Accordingly, these assets are not available for future spending. Although the City’s investment in capital assets is reported net of related debt, it should be noted that the resources used to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.
An additional portion of the City’s net position, $34.9 million and an increase of $1.8 million over the previous year, represents resources that are subject to external restrictions on how they may be used.
The increases include an addition of $625k to general government, $580k to public safety, $722 to community development, and $528k in capital projects. There was a loss of $618k in our Section 115 Trust.
The City’s Unfunded Accrued Liability in the California Public Employees Retirement System (CalPERS) as of June 30, 2022 had a Net Pension Liability of $26.5 million for miscellaneous and $47 million for safety. The total payments made to CalPERS was $10.7 million. The City’s net OPEB liability decreased $1.1 million, with a current balance of $504k. 2022 2021 2022 2021 2022 2021
REVENUES
Program revenues:
Charges for services 7,939,155 $ 5,462,021 $ 12,849,117 $ 12,418,128 $ 20,788,272 $ 17,880,149 $ Operating grants and contrib 6,743,355 6,783,831 80,647 52,695 6,864,478 6,796,050 Capital grants and contrib 2,841,618 2,637,108 - - 2,637,108 2,841,618 General revenues:
Property taxes 18,292,171 18,011,887 - - 18,292,171 18,011,887 Sales taxes 30,167,279 27,153,142 - - 30,167,279 27,153,142 Franchise taxes 1,871,986 2,062,295 - - 1,871,986 2,062,295 Other taxes 5,456,868 4,230,733 - - 5,456,868 4,230,733 Investment earnings (2,591,908) 904,479 (163,384) (4,321) (2,755,292) 900,158 Other 853,466 1,100,573 - - 853,466 1,100,573
Sale of assets - - (22,218) - (22,218) -
Transfers 2,146,300 1,672,570 (2,146,300) (1,672,570) - - Total revenues 73,556,256 70,182,673 10,597,862 10,793,932 84,154,118 80,976,605
EXPENDITURES
General government 9,264,707 7,561,189 - - 9,264,707 7,561,189 Police 21,938,671 24,851,419 - - 21,938,671 24,851,419
Fire 12,640,814 14,355,572 - - 12,640,814 14,355,572
Public works 13,835,151 15,479,378 - - 13,835,151 15,479,378 Community services 2,146,023 2,171,228 - - 2,146,023 2,171,228 Community development 4,855,472 3,451,332 - - 3,451,332 4,855,472 Interest on long-term debt 836,932 795,843 - - 795,843 836,932 Wastewater - - 9,724,858 11,864,202 9,724,858 11,864,202 Total expenditures 64,072,541 70,111,190 9,724,858 11,864,202 73,797,399 81,975,392 Change in net position 71,483 9,483,715 873,004 (1,070,270) 10,356,719 (998,787) Net position,
as previously stated 132,738,823 132,810,306 25,291,185 26,361,455 158,101,491 159,100,278 Prior period adjustment 788,675 - - - 788,675 -
Net position - beginning as restated 132,738,823 133,598,981 25,291,185 26,361,455 158,890,166 159,100,278 Net position - ending 143,082,696 $ 132,810,306 $ 26,164,189 $ 25,291,185 $ 169,246,885 $ 158,101,491 $ City of La Mesa Changes in Statement of Activities
Total
Governmental Business-Type
Activities Activities
Comparative Data as of June 30
CITY OF LA MESA
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2022
‐8-
Governmental activities. Most of the City’s basic services are included here. These services are funded primarily by taxes, revenues from other governments and agencies, income from property and investments, grants and contributions, and in some instances also by charges for services. Total governmental revenues
exceeded expenses by approximately
$9.5 million. Overall revenues were
up by 4.81 percent.
Sales taxes increased $3 million,
other taxes increased by $1.2 million
and property tax remained relatively
flat.
Charges for services increased $2.5
million.
Investment earnings decreased
significantly due to loss of fair market
valuation of investments.
When compared to the previous year,
total expenses were $6 million or 8.61
percent lower.
Police expenses decreased by $2.9
million. Fire decreased by $1.7 million.
Community Development decreased
$1.4 million, Public works decreased
$1.6 million, and general government
increased $1.7 million.
Citywide governmental expenses are
reported on an accrual basis and
include items such as depreciation,
long-term debt, interest payable, and
true pension expense that are not reported in the fund financial statements Business-type activities. The City charges fees to customers to cover the cost of certain services it provides. The business type activities for the City include Wastewater which provides engineering, construction, administration, and maintenance of the City’s wastewater system. Total revenues remained relatively flat, decreasing by $200k. Charges for services increased by $0.4 million and investment earnings decreased by $159k. Wastewater expenses decreased over the prior year by $2.1 million or 18.03 percent mainly due to the completion of Alvarado trunk sewer improvement project.
Financial Analysis of the City’s Funds
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements.
CITY OF LA MESA
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2022
‐9-
Governmental Funds. The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s short-term outlook. 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.
At June 30, 2022, the City’s governmental funds reported combined fund balances of $80.5 million, an increase of $5.92 million from the prior year. Approximately 49.8 percent of this amount or $40.1 million constitutes unassigned fund balance, which is available for spending at the government's discretion. The remainder of the fund balance is either not in spendable form ($5.4 million) or legally restricted for specific purposes ($35 million).
General Fund
The General Fund is the chief operating fund of the City. At the end of the current fiscal year, the total fund balance was $58.9 million, of which $42.7 million is considered unassigned fund balance and therefore available for discretionary use.
The remaining fund balance is made up of non-spendable fund balances of $5.4 million and restricted fund balances of $10.8 million.
Restricted fund balances are those resources that are subject to externally enforceable legal restrictions such as creditors, grantors, contributors and other governmental agencies. Restrictions also can arise when the authorization to raise revenues is conditioned upon the revenue being used for a particular purpose, pursuant to enabling legislation. At June 30, 2022, $7.37 million is restricted for the Section 115 Pension Trust Account and $3.4 million is restricted for encumbrances that remained outstanding at the end of the fiscal year.
Non-spendable fund balances are those assets that will never convert to cash (e.g., prepaid items and inventories of supplies), assets that will not convert to cash soon enough to affect the current period (e.g., the long-term portion of loans receivable), and resources that must be maintained intact pursuant to legal or contractual requirements. At June 30, 2022, the General Fund reported $5.3 million in advances to other funds comprising of the remaining balance owed by the former Redevelopment Agency for the old police station site. Other non-spendable items were $136,967 in inventories, and $2,099 in prepaid expenditures.
General Fund Budgetary Highlights
The final General Fund revenue budget for 2021-2022 totaled $52 million. The actual revenues were $60.3 million. Actual revenue plus transfers totaled $63.0 million for fiscal 2022, $8.0 million over budgeted amounts.
Almost all categories of General Fund
revenues were received either at or above
budgetary levels. Property taxes were
received slightly above at $16.7 million.
Sales tax and Prop L sales tax came in at
a combined total of $29.8 million, $5.6
million over budget. Other taxes
contributed $6.8 million and exceeded
budget by $1.5 million with cannabis
business tax accounting for the majority of
the increase. Use of money and property
CITY OF LA MESA
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2022
‐10-
and transfers from other funds were the only categories that came in under budget. This is mostly attributed to the Fair Market Value (FMV) unrealized loss on investments.
The final General Fund expenditure budget for 2021-2022, including prior year carry forward encumbrances, was $65.2 million. Actual expenditures and transfers out were $57.4 million, under budgeted appropriations by $7.5 million.
All categories of General Fund
expenditures were below budget. General
Government, Public Works and Community
Development were below budget by $3.4
million, $1.9 million and $0.7 million,
respectively. Safety was below budget by
$900k. These savings were the
continuation of the pandemic as the
disruption of the supply chain and lack of
personnel attributed to projects being
delayed.
Capital Asset, Intangible Right-to-Use Asset, and Debt Administration Capital assets. The City’s total investment in capital assets includes land, buildings, improvements, equipment, infrastructure, and construction in progress. This investment for its governmental and business type activities, net of accumulated depreciation, totaled $201.0 million at June 30, 2022, decreasing $800K from the previous year. Increases were primarily recorded Vehicles and Equipment and Infrastructure. Decreases were in Construction in Progress. 2022 2021 2022 2021 2022 2021
Land (including Right-of-way) 27,304,163 $ 27,304,163 $ - $ - $ 27,304,163 $ 27,304,163 $ Buildings and Improvements 32,668,252 33,648,916 - - 32,668,252 33,648,916 Vehicles and Equipment 7,350,960 6,683,050 1,199,277 1,391,142 8,550,237 8,074,192 Infrastructure 90,453,728 91,695,862 34,086,816 29,407,741 124,540,544 121,103,603 Construction in progress 7,783,345 7,618,119 231,456 4,085,143 8,014,801 11,703,262 Total 165,560,448 $ 166,950,110 $ 35,517,549 $ 34,884,026 $ 201,077,997 $ 201,834,136 $ City of La Mesa's Capital Assets
(net of depreciation)
Total
Governmental
Activities
Business-Type
Activities
2022 2021 2022 2021 2022 2021
Intangible right-to-use asset 477,241 $ - $ - $ - $ 477,241 $ - $ City of La Mesa's Intangible Right-to-Use Assets
(net of amortization)
Governmental Business-Type
Activities Activities Total
Additional information on the City’s capital assets and intangible right-to-use assets can be found in Note 6 in the Notes to Basic Financial Statements section of this report.
CITY OF LA MESA
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2022
‐11-
Long-term debt. At June 30, 2022, the City had long-term debt totaling $38.2 million, an increase of $1.8 million. Of the total long-term indebtedness, $18.6 million is general obligation refunding bond debt, $2.0 million is Certificates of Participation, $4.3 million is for vested leave time due City employees, and $500k is TransNet Commercial Paper loan for the financing of the West La Mesa Capital Improvement project.
The State Water Resources revolving fund loan is utilized for funding of wastewater projects. The outstanding loan balance increased by $3.1 million
2022 2021 2022 2021 2022 2021
Compensated absences 4,284,393 $ 3,885,126 $ - $ - $ 4,284,393 $ 3,885,126 $ General obligation refunding bonds 18,664,915 19,538,910 - - 18,664,915 19,538,910 Certificates of Participation 2,065,000 2,395,000 - - 2,065,000 2,395,000 TransNet Commercial Paper 499,988 999,992 - - 499,988 999,992 State Revolving Fund Loan - - 12,689,655 9,574,063 12,689,655 9,574,063 Total 25,514,296 $ 26,819,028 $ 12,689,655 $ 9,574,063 $ 38,203,951 $ 36,393,091 $ City of La Mesa's Outstanding Debt
Total
Governmental Business-Type
Activities Activities
Additional information on the City’s long-term debt including compensated absences can be found in Note 7 and Note 10 in the Notes to Basic Financial Statements section of this report.
Economic Factors and Next Year’s Budget
Total assessed valuation in the City continues to increase in the current economic environment as market values rise and new construction remains robust even during the pandemic at the time. The projected increase is reflected in the 2021-2023 biennial budget. Base sales tax revenues were budgeted at $14.1 million in fiscal year 2021-2022 and are expected to increase for fiscal year 2022-2023.
2021-2022 was the thirteenth full year of collections for the Proposition L sales tax. This tax measure was passed by La Mesa voters on November 4, 2008 and became effective on April 1, 2009. Actual revenues for fiscal year 2021-2022 were above budgetary projections by $2.4 million. Proceeds from the tax measure are being used to maintain reserves and City services that otherwise would have had to be reduced.
Cannabis business tax revenues were approved by the voters in November 2018 and implemented in July 2019. Revenue exceeded expectations by $1.4 million for 2021-2022. Budget projections for 2021-2023 were increased to $2 million each year.
Due to Covid-19, the City waived various fees to help mitigate the negative financial impact to our residents and businesses such as business licenses and parking fees. All business operations are back to normal and reflected in budgeted revenues for fiscal year 2022-2023. California Public Employees Retirement System (CalPERS) employer contribution rates continue to be the primary driver of increases in citywide operating costs, far exceeding any other category of expenditures in terms of percentage increase and real dollar costs. Previous changes that had a significant impact on the City’s pension costs include changes to the employer contribution methodology phased in reductions to the discount rate. Beginning in 2021, CalPERS implemented a new amortization which requires that future gains and losses be amortized over a fixed 20 year
CITY OF LA MESA
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2022
‐12-
period. Adjustments to the discount rate and other foreseeable changes to valuation were factored in the fiscal year 2023 biennial budget.
To help offset the impact of the CalPERS retirement rates, the City established a Section 115 Retirement Trust Fund in 2015 and has subsequently deposited a total of $5.5 million from General Fund Reserves. Combined with investment earnings, the balance in this fund is $7.37 million as of June 30, 2022. The City’s expectation is that these contributions and accumulated interest earnings will be used to soften the impact now that we have peaked and will continue for the next three fiscal years.
All of these factors were considered in the City’s 2022-2023 mid-biennium budget.
REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of the City’s finances 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 La Mesa Finance Department, attention Tammi Royales, Director of Finance at P.O. Box 937, 8130 Allison Avenue, La Mesa, CA 91944.
BASIC FINANCIAL STATEMENTS
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GOVERNMENT–WIDE FINANCIAL STATEMENTS
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CITY OF LA MESA
Statement of Net Position
June 30, 2022
The accompanying notes are an integral part of these financial statements. -13-
Governmental Business-Type
Activities Activities Total
Assets
Current assets:
Cash and investments $ 6,264,675 76,507,965 $ 82,772,640 $ Receivables:
Accounts, net 66,787 8,024,126 8,090,913
Loans - 756,582 756,582
Grants - 975,630 975,630
Interest - 185,840 185,840
Lease - 29,458,882 29,458,882
Inventory - 136,967 136,967
Prepaid items - 2,099 2,099
Advances to other agency - 5,300,000 5,300,000
Land held for resale - 8,350,000 8,350,000
Total current assets 6,331,462 129,698,091 136,029,553
Noncurrent assets:
Restricted cash and investments 213,494 7,728,233 7,941,727 Intangible assets - right-to-use assets, net 477,241 - 477,241 Capital assets:
Nondepreciable 231,456 35,087,508 35,318,964
Depreciable, net 35,286,093 130,472,940 165,759,033
Total capital assets 35,517,549 165,560,448 201,077,997 Total noncurrent assets 35,731,043 173,765,922 209,496,965 Total assets 42,062,505 303,464,013 345,526,518
Deferred Outflows of Resources
Pension related 662,871 13,694,057 14,356,928
OPEB related 200,014 1,476,550 1,676,564
Loss on refunding - 426,531 426,531
Total deferred outflows of resources 15,597,138 862,885 16,460,023 Liabilities
Current liabilities:
Accounts payable 144,883 3,693,811 3,838,694
Salaries payable 29,254 666,633 695,887
Deposits - 3,383,103 3,383,103
Interest payable 120,472 376,908 497,380
Unearned revenue - 9,769,468 9,769,468
Compensated absences payable - due within one year 2,870,000 - 2,870,000 Long-term liabilities - due within one year 288,081 - 288,081 Long-term debt - due within one year 1,107,393 1,694,988 2,802,381 Total current liabilities 1,402,002 22,742,992 24,144,994 Non-current liabilities:
Claims and judgments payable - 5,947,934 5,947,934
Compensated absences payable - 1,414,393 1,414,393
Long-term liabilities - due in more than one year 844,012 - 844,012 Long-term debt - due in more than one year 19,534,915 11,582,262 31,117,177 Net pension liability 3,169,065 69,978,899 73,147,964
Net OPEB liability 60,119 443,813 503,932
Total noncurrent liabilities 14,811,446 98,163,966 112,975,412 Total liabilities 16,213,448 120,906,958 137,120,406
Deferred Inflows of Resources
Pension related 319,692 23,870,378 24,190,070
OPEB related 228,061 1,683,599 1,911,660
Unearned revenue - housing loans - 730,119 730,119
Leases - 28,787,401 28,787,401
Total deferred inflows of resources 55,071,497 547,753 55,619,250 Net Position
Net investment in capital assets 22,827,894 143,675,693 166,503,587 Restricted for:
Investment in Section 115 - 7,365,660 7,365,660
General government - 3,050,634 3,050,634
Public safety - 870,912 870,912
Capital projects - 7,722,333 7,722,333
Community services - 114,266 114,266
Community development - 12,192,588 12,192,588
Debt service 213,494 3,339,781 3,553,275
Total restricted 213,494 34,656,174 34,869,668
Unrestricted (deficit) 3,122,801 (35,249,171) (32,126,370) Total net position $ 26,164,189 143,082,696 $ 169,246,885 $
CITY OF LA MESA
Statement of Activities
For the Year Ended June 30, 2022
The accompanying notes are an integral part of these financial statements. -14-
Operating Capital Total
Charges for Contributions Contributions Program
Functions/Programs Expenses Services and Grants and Grants Revenues Primary government:
Governmental activities:
General government 9,264,707 $ 506,909 $ 1,227,522 $ - $ 1,734,431 $ Police 21,938,671 599,214 916,552 - 1,515,766
Fire 12,640,814 458,400 1,411,746 - 1,870,146
Public works 13,835,151 1,341,648 2,628,139 2,637,108 6,606,895 Community services 2,146,023 1,138,072 131,336 - 1,269,408 Community development 3,451,332 3,894,912 468,536 - 4,363,448 Interest on long-term debt 795,843 - - - -
Total governmental activities 64,072,541 7,939,155 6,783,831 2,637,108 17,360,094 Business-type activities:
Wastewater 9,724,858 12,849,117 80,647 - 12,929,764
Total business-type activities 9,724,858 12,849,117 80,647 - 12,929,764 Total primary government 73,797,399 $ 20,788,272 $ 6,864,478 $ 2,637,108 $ 30,289,858 $ General revenues:
Taxes:
Property taxes
Sales taxes
Franchise taxes
Motor vehicle license
Other taxes
Total taxes
Investment earnings
Miscellaneous
Sale of assets
Transfers
Total general revenues and transfers
Change in net position
Net position, as previously stated
Prior period adjustment
Net position, beginning of year, as restated
Net position, end of year
Program Revenues
-15-
Governmental Business-Type
Activities Activities Total
$ - (7,530,276) $ (7,530,276) $
- (20,422,905) (20,422,905)
- (10,770,668) (10,770,668)
- (7,228,256) (7,228,256)
- (876,615) (876,615)
- 912,116 912,116
- (795,843) (795,843)
- (46,712,447) (46,712,447)
3,204,906 - 3,204,906
3,204,906 - 3,204,906
3,204,906 (46,712,447) (43,507,541)
18,292,171 - 18,292,171
30,167,279 - 30,167,279
1,871,986 - 1,871,986
- 68,828 68,828
5,388,040 - 5,388,040
- 55,788,304 55,788,304
(163,384) (2,591,908) (2,755,292)
- 853,466 853,466
(22,218) - (22,218)
(2,146,300) 2,146,300 -
(2,331,902) 56,196,162 53,864,260
873,004 9,483,715 10,356,719
25,291,185 132,810,306 158,101,491
- 788,675 788,675
25,291,185 133,598,981 158,890,166
$ 26,164,189 143,082,696 $ 169,246,885 $
and Changes in Net Position
Net (Expense) Revenue
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FUND FINANCIAL STATEMENTS
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GOVERNMENTAL FUND FINANCIAL STATEMENTS
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CITY OF LA MESA
Balance Sheet
Governmental Funds
June 30, 2022
The accompanying notes are an integral part of these financial statements. -16-
Non-Major
General Housing Asset Transportation Miscellaneous Governmental Fund Fund CIP Grants Funds Totals
Assets
Cash and investments 41,063,157 $ 2,691,055 $ - $ 9,501,252 $ 12,170,201 $ 65,425,665 $ Restricted:
Cash and investments - - - - 142,039 142,039
Investment in Section 115 Trust 7,365,660 - - - - 7,365,660 Receivables:
Accounts 7,374,831 2,689 - - 493,598 7,871,118
Loans 26,463 590,420 - - 139,699 756,582
Grants 15,761 - - - 959,869 975,630
Interest 185,840 - - - - 185,840
Lease 28,749,614 341,580 - - 367,688 29,458,882
Due from other funds 2,384,873 - - - - 2,384,873
Inventory - 136,967 - - - 136,967
Prepaid items 2,099 - - - - 2,099
Advances to other governments 5,300,000 - - - - 5,300,000 Land held for resale - 8,350,000 - - - 8,350,000
Total assets 92,605,265 $ 11,975,744 $ - $ 9,501,252 $ 14,273,094 $ 128,355,355 $ Liabilities
Liabilities:
Accounts payable 1,485,163 $ - $ 322,095 $ 5,864 $ 282,803 $ 2,095,925 $ Salaries payable 630,221 10,018 - - 20,852 661,091
Deposits 3,383,103 - - - 3,383,103
Due to other funds - - 1,276,201 - 1,108,672 2,384,873
Unearned revenue - - - 9,769,468 - 9,769,468
Total liabilities 5,498,487 10,018 1,598,296 9,775,332 1,412,327 18,294,460 Deferred Inflows of Resources
Unearned revenue - housing loans - 590,420 - - 139,699 730,119 Leases 28,122,846 339,723 - 324,832 28,787,401
Total deferred inflows of resources 28,122,846 930,143 - - 464,531 29,517,520 Fund Balances
Non-spendable:
Inventory - 136,967 - - - 136,967
Prepaids 2,099 - - - - 2,099
Advances to other governments 5,300,000 - - - - 5,300,000 Restricted for:
Investment in Section 115 Trust 7,365,660 - - - - 7,365,660 General government - - - - 669,427 669,427
Public safety - - - - 870,912 870,912
Capital outlays 3,427,328 - - - 4,295,005 7,722,333
Community services - - - - 2,495,473 2,495,473
Community development - 11,035,583 - - 1,157,005 12,192,588 Debt service - - - - 3,712,190 3,712,190
Unassigned (deficit) 42,751,878 - (1,598,296) (274,080) 40,075,726 (803,776) Total fund balances 58,983,932 11,035,583 (1,598,296) 12,396,236 (274,080) 80,543,375 Total liabilities, deferred inflows of
resources and fund balances 92,605,265 $ 11,975,744 $ - $ 9,501,252 $ 14,273,094 $ 128,355,355 $ Major Funds
CITY OF LA MESA
Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Position
June 30, 2022
The accompanying notes are an integral part of these financial statements. -17-
Fund balances of governmental funds 80,543,375 $
Position are different because:
Capital assets used in governmental activities are not current financial resources. Therefore, they are not reported in the Governmental Funds Balance Sheet. The capital assets and intangible right-to-use assets were adjusted as follows:
Nondepreciable 35,087,508
Depreciable, net 130,472,940
Total capital assets 165,560,448
Intangible right-to use,net 477,241
Accrued interest payable for the current portion of interest due on longterm debt has not been reported in the governmental funds. (372,409) Internal service funds were used by management to charge the costs of certain activities, such as employee benefits, workers' compensation, equipment replacement and liability risk, to individual funds. The assets and liabilities of the internal service funds were included in the governmental activities in the Government-Wide Statement of Net Position, less capital assets net of accumulated depreciation. 2,785,751 Deferred inflows and outflows of resources have not been reported in the governmental funds:
Deferred inflows - pension related (23,870,378)
Deferred inflows - OPEB related (1,683,599)
Deferred outflows - pension related 13,694,057
Deferred outflows - OPEB related 1,476,550
Deferred outflows - loss on refunding 426,531
Long-term liabilities were not due and payable in the current period.
Therefore, they were not reported in the Governmental Funds Balance Sheet:
Compensated absences (4,284,393)
Long-term liabilities - due within one year (1,698,944) Long-term liabilities - due in more than one year (19,548,822) Net pension liability (69,978,899)
Net OPEB liability (443,813)
Total long-term liabilities (95,954,871)
Net position of governmental activities 143,082,696 $
Amounts reported for governmental activities in the Statement of Net
CITY OF LA MESA
Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds
For the Year Ended June 30, 2022
The accompanying notes are an integral part of these financial statements. -18-
Non-Major
General Housing Asset Transportation Miscellaneous Governmental Fund Fund CIP Grants Funds Totals
Revenues:
Property taxes 16,687,577 $ - $ - $ - $ 1,604,594 $ 18,292,171 $ Other taxes 36,521,606 - - - 508,377 37,029,983
Licenses and permits 2,163,310 - 185,105 - 146,895 2,495,310 Fines and forfeitures 462,540 - - - 109,046 571,586
Use of money and property (283,463) (59,177) (23,006) - 263,452 (102,194) Intergovernmental 2,139,554 1,021,154 - 727,083 6,343,382 10,231,173 Charges for services 2,557,339 - - - 447,939 3,005,278
Other revenues 142,126 93,546 - - 29,759 265,431
Total revenues 60,390,589 1,055,523 162,099 727,083 9,453,444 71,788,738 Expenditures:
Current:
General government 7,350,118 - - - 1,016,736 8,366,854
Police 21,796,432 - - 656,708 687,769 23,140,909
Fire 13,541,283 - - - 245 13,541,528
Public works 8,751,602 - - - - 8,751,602
Community development 2,441,496 222,110 - 266,533 754,463 3,684,602 Community services 1,949,538 - - - 123,705 2,073,243
Capital outlay 20,169 - 3,072,697 - 965,925 4,058,791
Debt service:
Principal retirement 2,306 - - - 1,640,004 1,642,310
Interest and fiscal charges 123 - - - 889,828 889,951
Total expenditures 55,853,067 222,110 3,072,697 923,241 6,078,675 66,149,790 Excess (deficiency) of revenues
over (under) expenditures 4,537,522 833,413 (2,910,598) (196,158) 3,374,769 5,638,948 Other financing sources (uses):
Transfers in 2,644,716 - 1,611,519 - 1,240,769 5,497,004 Transfers out (1,583,148) - - - (3,656,456) (5,239,604) Proceeds from lease 20,169 - - - - 20,169
Total other financing sources (uses) 1,081,737 - 1,611,519 - (2,415,687) 277,569 Net change in fund balances 5,619,259 833,413 (1,299,079) (196,158) 959,082 5,916,517 Fund balances (deficit), beginning of year 53,364,673 10,202,170 (299,217) (77,922) 11,437,154 74,626,858 Fund balances (deficit), end of year 58,983,932 $ 11,035,583 $ (1,598,296) $ (274,080) $ 12,396,236 $ 80,543,375 $ Major Funds
CITY OF LA MESA
Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-Wide Statement of Activities
For the Year Ended June 30, 2022
The accompanying notes are an integral part of these financial statements. -19-
Net change in fund balances - total governmental funds 5,916,517 $ differs because:
Governmental funds report capital outlays as expenditures. However, in the Government-Wide Statement of Activities, the costs of those assets are allocated over their estimated useful lives as depreciation and amortization expense. This was the amount by which depreciation and amortization expense exceeded capital outlays in the current period (net of internal service funds). (1,469,779)
The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of the governmental funds.
Neither transaction, however, has any effect on net position. Also, governmental funds report the effect of premiums, discounts, and similar items when the debt is first issued, whereas these amounts are deferred and amortized, in the statement of activities.
Principal repayments 1,642,310
Amortization of premium and loss on refunding, net 33,529 Issuance of new debt (20,169)
Changes in pension and OPEB related items 5,778,889
Accrued interest for debt service. This is the net change in accrued interest for the current period. 60,579
Compensated absences expense was reported in the Statement of Activities, but does not require the use of current financial resources and, therefore, the change in compensated absences is not reported as an expenditure in governmental funds. (399,267)
Internal service funds were used by management to charge the costs of certain activities, such as employee benefits, workers' compensation, equipment replacement and liability risk, to individual funds. The net revenue of the internal service funds was reported with governmental activities. (2,058,894)
Change in net position of governmental activities 9,483,715 $ Amounts reported for governmental activities in the Statement of Activities
PROPRIETARY FUND FINANCIAL STATEMENTS
CITY OF LA MESA
Statement of Net Position
Proprietary Funds
June 30, 2022
The accompanying notes are an integral part of these financial statements. -20-
Governmental
Activities
Internal
Wastewater Service Funds
Assets
Current assets:
Cash and investments $ 11,082,300 6,264,675 $
Accounts receivable, net 153,008 66,787
Total current assets 11,235,308 6,331,462
Noncurrent assets:
Restricted cash and investments 213,494 220,534
Intangible Assets 3,291,866 -
Intangible assets - right-to-use assets, net - 459,246
Capital assets:
Nondepreciable - 231,456
Depreciable, net 3,276,789 35,286,093
Total capital assets, net 35,517,549 3,276,789
Total noncurrent assets 35,731,043 7,248,435
Total assets 18,483,743 42,062,505
Deferred Outflows of Resources
Pension related 662,871 -
OPEB related 200,014 -
Total deferred outflows of resources 862,885 -
Liabilities
Current liabilities:
Accounts payable 1,597,886 144,883
Salaries payable 5,542 29,254
Interest payable 4,499 120,472
Long-term liabilities - due in one year - 284,125
Notes payable - due within one year 1,107,393 -
Total current liabilities 1,892,052 1,402,002
Noncurrent liabilities:
Long-term liabilities - due in more than one year - 830,105 Notes payable - due in more than one year 11,582,262 -
Claims payable 5,947,934 -
Net pension liability - 3,169,065
Net OPEB liability - 60,119
Total noncurrent liabilities 14,811,446 6,778,039
Total liabilities 8,670,091 16,213,448
Deferred Inflows of Resources
Pension related - 319,692
OPEB related 228,061 -
Total deferred inflows of resources 547,753 -
Net Position
Net investment in capital assets 22,827,894 5,913,671
Restricted 220,534 213,494
Unrestricted 3,679,447 3,122,801
Total net position $ 9,813,652 26,164,189 $
CITY OF LA MESA
Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Funds
For the Year Ended June 30, 2022
The accompanying notes are an integral part of these financial statements. -21-
Governmental
Activities
Internal Service
Wastewater Funds
Operating revenues:
Charges for services 12,849,117 $ 7,172,300 $
Other operating revenues 23,117 538,460
Total operating revenues 12,872,234 7,710,760
Operating expenses:
Salaries and payroll 958,774 354,624
Professional services 7,393,673 6,863,458
Supplies, materials and miscellaneous 142,277 7,013
Insurance premiums and settlements - 3,045,522
Maintenance expenses 134,492 -
Depreciation 885,440 631,622
Amortization 51,028 -
Total operating expenses 9,514,656 10,953,267
Operating income (loss) 3,357,578 (3,242,507)
Nonoperating revenues (expenses):
Investment income (loss) (163,384) (378,782)
Interest (expense) (210,202) (25,080)
Intergovernmental 57,530 -
Gain (loss) on disposal of assets (22,218) (301,425)
Total nonoperating revenues (expenses) (338,274) (705,287) Transfers:
Transfers in 1,888,900 -
Transfers out - (2,146,300)
Total transfers 1,888,900 (2,146,300)
Change in net position 873,004 (2,058,894)
Net position, beginning of year 25,291,185 11,872,546
Net position, end of year 26,164,189 $ 9,813,652 $
CITY OF LA MESA
Statement of Cash Flows
Proprietary Funds
For the Year Ended June 30, 2022
The accompanying notes are an integral part of these financial statements. -22-
Governmental
Activities
Internal
Wastewater Service Funds
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers/other funds $ 7,595,061 13,003,923 $ Cash payments to suppliers for goods and services (2,208,679) (7,980,764) Cash payments to employees for services (360,172) (2,224,540) Insurance premiums and settlements (6,470,476) -
Other operating revenues 396,860 -
Net Cash Provided by (Used for) Operating Activities (1,047,406) 2,798,619
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Intergovernmental - 57,530
Transfers in 1,888,900 -
Transfers out - (2,146,300)
Net Cash Provided by (Used for) Noncapital and Related Financing Activities (2,088,770) 1,888,900
CASH FLOWS FROM CAPITAL AND RELATED FINANCING
ACTIVITIES
Acquisition of capital assets (1,031,159) (1,541,181)
Issuance of notes payable - 3,999,793
Payment of interest (25,080) (185,238)
Payments on notes/leases payable (284,508) (885,679)
Net Cash Used for Capital and Related Financing Activities (1,340,747) 1,387,695
CASH FLOWS FROM INVESTING ACTIVITIES
Investment income (378,782) (163,384)
Net Cash Provided by (Used for) Investing Activities (378,782) (163,384) Net Increase (Decrease) in Cash and Cash Equivalents (878,035) 1,934,160 Cash and Cash Equivalents - beginning of the year 12,180,869 4,544,009 Cash and Cash Equivalents - end of the year $ 11,302,834 6,478,169 $
RECONCILIATION TO STATEMENT OF NET POSITION
Cash and cash equivalents - current $ 11,082,300 6,264,675 $ Cash and cash equivalents - restricted 220,534 213,494
Total cash and cash equivalents $ 11,302,834 6,478,169 $ Reconciliation of operating income (loss) to net cash provided by (used for) operating activities:
Operating income (loss) $ (3,242,507) 3,357,578 $
Adjustments to reconcile operating income (loss) to net cash provided by (used for) operating activities:
Depreciation expense 631,622 885,440
Amortization expense 51,028 -
Changes in assets and liabilities:
Accounts receivable 281,161 131,689
Deferred outflows of resources - (45,849)
Accounts payable 117,882 (310,322)
Claims payable 1,118,956 -
Salaries and benefits payable (5,548) (42,490)
Deferred inflows of resources - 376,560
Net pension liability - (1,420,092)
Net OPEB liability - (133,895)
Net Cash Provided by (Used for) Operating Activities $ (1,047,406) 2,798,619 $ Noncash Financing Activities
Acquisition of right to use asset $ (510,274) - $
Lease liability 510,274 -
FIDUCIARY FUND FINANCIAL STATEMENTS
CITY OF LA MESA
Statement of Fiduciary Net Position
Fiduciary Funds
June 30, 2022
The accompanying notes are an integral part of these financial statements. -23-
Successor
Agency
Cash and investments $ 1,213,565
Restricted cash and investments 507,674
Capital assets not being depreciated:
Land 160,000
Total assets 1,881,239
Liabilities:
Accounts payable 60
Salaries payable 1,488
Advance from other governments 5,300,000
Due to other governments 1,212,018
Long term liabilities:
Due within one year 465,000
Due in more than one year 490,000
Total liabilities 7,468,566
Held in trust for successor agency $ (5,587,327)
Net Position (Deficit)
Assets
Liabilities
CITY OF LA MESA
Statement of Changes in Fiduciary Net Position
Fiduciary Funds
For the Year Ended June 30, 2022
The accompanying notes are an integral part of these financial statements. -24-
Successor
Agency
RPTTF Distribution $ 1,709,672
Investment Income 101
Total additions 1,709,773
Administrative expenses 184,895
Contributions to other agencies 1,021,154
Interest 67,563
Total deductions 1,273,612
Change in net position 436,161
Net position (deficit), beginning of year (6,023,488)
Net position (deficit), end of year (5,587,327) $
Additions
Deductions
CITY OF LA MESA
Index to Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-25-
Page
Note 1 – Summary of Significant Accounting Policies 27
A. Description of the Reporting Entity 27
B. Basis of Accounting and Measurement Focus 27
C. Fund Classifications 30
D. Use of Restricted/Unrestricted Net Position 31
E. Cash, Cash Equivalents and Investments 31
F. Restricted Cash and Investments 32
G. Inventories 32
H. Interfund Transactions 32
I. Capital Assets 32
J. Compensated Absences 33
K. Long-Term Debt 33
L. Interest Payable 33
M. Property Taxes 34
N. Pension Plan 34
O. Other Postemployment Benefits (OPEB) 35
P. Net Position 35
Q. Fund Balances 35
R. Use of Estimates 36
S. Implementation of New GASB Pronouncement 36
Note 2 – Cash and Investments 37
A. Cash Deposits 37
B. Investments 37
C. Risk Disclosures 38
D. Summary of Investments to Maturity 40
E. Fair Value Measurements 40
Note 3 – Loans Receivable 41
A. Fund Financial Statements 41
Note 4 – Lease Receivable 42
Note 5 – Interfund Transactions 43
A. Advances From/To Other Governments 43
B. Due To/From Other Funds 43
C. Transfers In and Out 44
Note 6 – Capital Assets and Intangible Right-to-use Assets 45 A. Government-Wide Financial Statements 45
B. Fund Financial Statements 48
CITY OF LA MESA
Index to Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-26-
Page
Note 7 – Long-Term Debt 48
A. Governmental Activities Long-Term Debt 48
B. Business-Type Activities Long-Term Debt 51
Note 8 – Financed Purchase 52
Note 9 – Lease Liability 53
Note 10 – Compensated Absences 55
Note 11 – Other Post Employment Benefits 55
Note 12 – Other Required Disclosures 60
Note 13 – Risk Management 60
Note 14 – Defined Benefit Pension Plans 61
A. General Information about the Pension Plans 61
B. Net Pension Liability 63
C. Changes in Net Pension Liability 67
D. Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions 69
E. Payable to the Pension Plan 72
Note 15 – Retirement Enhancement Plan 72
A. PARS Retirement Enhancement Plan 72
B. Net Pension Liability 74
C. Changes in the Net Pension Liability 76
D. Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions 78
E. Payable to the Pension Plan 78
Note 16 – Commitments and Contingencies 79
Note 17 – Related Party Transactions 79
Note 18 – Successor Agency 80
Note 19 – Successor Agency Long-Term Debt 80
Note 20 – Risk, Uncertainties & Contingencies 81
Note 21 – Prior Period Adjustment 81
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-27-
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The basic financial statements of the City of La Mesa, California (City) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental agencies.
The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant of the City's accounting policies are described below.
A. Description of the Reporting Entity
The basic financial statements of the City include the financial activities of the City and its component units. The component units discussed below are included in the City's reporting entity through a blended presentation because of the significance of their operational and financial relationship with the City. Although these component units are legally separate from the City, they are reported as part of the primary government because their boards consist of all members of the City Council.
Blended Component Units
The La Mesa Public Financing Authority (Financing Authority) - The City established the Financing Authority on April 11, 2006, by and among the City and the La Mesa Community Redevelopment Agency (Members). The Financing Authority was created for the purpose of providing financing for public capital improvements to be owned by any of the Members. The Financing Authority was included within the scope of the reporting entity of the City because its governing body is composed in its entirety of council members of the City. There were no separate financial statements prepared for the Financing Authority.
B. Basis of Accounting and Measurement Focus
The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures or expenses, as appropriate. 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.
Government - Wide Financial Statements
The City's government-wide financial statements include a Statement of Net Position and a Statement of Activities and Changes in Net Position. These statements present summaries of governmental and business-type activities for the City accompanied by a total column. Fiduciary activities of the City are not included in these statements.
These basic financial statements are presented on an "economic resources" measurement focus and the accrual basis of accounting. Accordingly, all of the City's assets and liabilities, including capital assets, as well as infrastructure assets and long-term liabilities, are included in the accompanying Statement of Net Position. The Statement of Activities presents changes in net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned, while expenses are recognized in the period in which the liability is incurred.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-28-
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) B. Basis of Accounting and Measurement Focus, (continued) Certain types of transactions are reported as program revenues for the City in three categories:
Charges for services
Operating grants and contributions
Capital grants and contributions
Certain eliminations have been made as prescribed by generally accepted accounting principles in regards to interfund activities, payables and receivables. All internal balances in the Statement of Net Position have been eliminated except those representing balances between the governmental activities and the business-type activities, which are presented as internal balances and eliminated in the total primary government column. In the Statement of Activities and Changes in Net Position, internal service fund transactions have been eliminated; however, those transactions between governmental and business-type activities have not been eliminated. The following interfund activities have been eliminated:
Due to/from other funds
Advances to/from other funds
Transfers in/out
The City applies all applicable GASB pronouncements (including all NCGA Statements and Interpretations currently in effect).
Governmental Fund Financial Statements
Governmental fund financial statements include a Balance Sheet and a Statement of Revenues, Expenditures and Changes in Fund Balances for all major governmental funds and non-major funds aggregated. An accompanying schedule is presented to reconcile and explain the differences in net position as presented in these Statements to the Net Position presented in the government-wide financial statements. The City has presented all major funds that met the applicable criteria.
All governmental funds are accounted for on a spending or "current financial resources" measurement focus and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the Balance Sheet. The Statement of Revenues, Expenditures and Changes in Fund Balances presents increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-29-
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) B. Basis of Accounting and Measurement Focus, (continued) Governmental Fund Financial Statements, (continued)
Revenues are recorded when received in cash, except for those revenues subject to accrual (generally 60 days after year-end) which are recognized when due. The primary revenue sources, which have been treated as susceptible to accrual by the City, are property tax, sales tax, intergovernmental revenues and other taxes. Expenditures are recorded in the accounting period in which the related fund liability is incurred.
Unavailable revenues arise when potential revenues do not meet both the "measurable" and "available" criteria for recognition in the current period. Unearned revenues arise when the government receives resources before it has a legal claim to them, as when grant monies are received prior to incurring qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met or when the government has a legal claim to the resources, the unavailable revenue is removed from the Combined Balance Sheet and revenue is recognized.
Proprietary Fund Financial Statements
Proprietary fund financial statements include a Statement of Net Position, a Statement of Revenues, Expenses and Changes in Fund Net Position, and a Statement of Cash Flows for each major proprietary fund.
A separate column representing internal service funds is also presented in these statements.
However, internal service balances and activities have also been combined with the governmental activities in the Government-Wide Financial Statements.
Proprietary funds are accounted for using the "economic resources" measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included on the Statement of Net Position. The Statement of Revenues, Expenses and Changes in Net Position present increases (revenues) and decreases (expenses) in total net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned, while expenses are recognized in the period in which the liability is incurred.
Operating revenues in the proprietary funds are those revenues that are generated from the primary operations of the fund. All other revenues are reported as non-operating revenues. Operating expenses are those expenses that are essential to the primary operations of the fund. All other expenses are reported as non-operating expenses.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-30-
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) B. Basis of Accounting and Measurement Focus, (continued) Fiduciary Fund Financial Statements
Fiduciary fund financial statements include a Statement of Fiduciary Net Position and Statement of Changes in Fiduciary Net Position. The City's fiduciary funds represent Private Purpose Trust Funds which act in a fiduciary capacity for assets held for the payment of recognized obligations of the former redevelopment agency. They are accounted for in essentially the same manner as proprietary funds.
C. Fund Classifications
The City reports the following major governmental funds:
General Fund
The General Fund is the City’s primary operating fund and accounts for all financial resources of the general government, except those required to be accounted for in another fund.
Housing Asset Fund
The Housing Asset Fund holds the housing assets which were received from the City’s former RDA Low and Moderate Income Fund. The redevelopment agency was dissolved per Assembly Bill X1 26 which dissolved redevelopment agencies in California. All revenues received in this fund are to be used in conjunction with promoting low and moderate income housing activities. The fund did not qualify as major for fiscal year ending June 30, 2022, however, management elected to maintain and present it as major
Transportation CIP Fund
The Transportation CIP Fund is used for transportation related capital improvement projects. The fund did not qualify as major for fiscal year ending June 30, 2022, however, management elected to maintain and present it as major.
Miscellaneous Grants Fund
The Miscellaneous Grants Fund is used for reporting of grants that are not public safety or community services related. This includes, but is not limited to, COVID-19 relief grants.
The City reports the following major enterprise funds:
Wastewater Fund
The Wastewater Fund accounts for the operation and maintenance of the City’s wastewater system.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-31-
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) C. Fund Classifications, (continued)
Additionally, the City reports the following fund types:
Internal Service Funds
Internal service funds account for the financing of equipment and fleet, risk management services, and benefit services to other departments on a cost reimbursement basis.
Private Purpose Trust Fund
The Private Purpose Trust Fund holds the assets of the Successor Agency which were received from the City’s former redevelopment agency. The redevelopment agency was dissolved per Assembly Bill X1 26 which dissolved redevelopment agencies in California.
D. Use of Restricted/Unrestricted Net Position
When an expense is incurred for purposes for which both restricted and unrestricted net position is available, the City's policy is to apply restricted net position first.
E. Cash, Cash Equivalents and Investments
The City pools its available cash for investment purposes. The City's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturity of three months or less from the date of acquisition. Cash and cash equivalents are combined with investments and displayed as Cash and Investments.
In accordance with generally accepted accounting principles, highly liquid market investments with maturities of one year or less at time of purchase are stated at amortized cost. All other investments are stated at fair value. Market value is used as fair value for those securities for which market quotations are readily available.
The City participates in an investment pool managed by the State of California titled Local Agency Investment Fund (LAIF) which has invested a portion of the pool funds in Structured Notes and Asset-backed Securities. LAIF’s investments are subject to credit risk with the full faith and credit of the State of California collateralizing these investments. In addition, these Structured Notes and Asset-backed Securities are subject to market risk as to change in interest rates.
For purposes of reporting cash flows, the City considers each fund's share in the cash and investments pool to be cash and cash equivalents including cash with fiscal agents.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-32-
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) E. Cash, Cash Equivalents and Investments, (continued)
In accordance with generally accepted accounting principles, certain disclosure requirements, if applicable for deposit and investment risk are specified for the following areas:
Interest Rate Risk
Credit Risk
Overall
Custodial Credit Risk
Concentration of Credit Risk
Foreign Currency Risk
F. Restricted Cash and Investments
Certain restricted cash and investments are held by fiscal agents for the redemption of bonded debt and for acquisition and construction of capital projects. Cash and investments are also restricted for deposits held for others within the enterprise funds.
G. Inventories
Inventory is valued at the lower of cost (first-in, first-out) or market value and consists of expendable supplies held for consumption. Inventories are recorded using the consumption (capitalization) method.
H. Interfund Transactions
Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to/from other funds" (i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the noncurrent portion of interfund loans).
Any residual balances outstanding between the governmental activities and business-type activities are reported in the Government-Wide Financial Statements as "internal balances." I. Capital Assets
The City's assets are capitalized at historical cost or estimated historical cost. City policy has set the capitalization threshold for reporting general capital assets at $8,000 and for reporting infrastructure assets at $25,000. Gifts or contributions of capital assets are reported at acquisition value when received. Depreciation is recorded on a straight-line basis over the useful lives of the assets as follows:
Buildings and Improvements 40 years
Improvements other than buildings 12 – 50 years
Machinery and Equipment 5 – 20 years
Infrastructure 20 – 60 years
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-33-
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) I. Capital Assets, (continued)
The City defines infrastructure as the basic physical assets that allow the City to function. The assets include the streets, sewer collection and treatment system, park and recreation lands and improvement system, storm water conveyance system, and buildings combined with the site amenities, such as parking and landscaped areas used by the City in the conduct of its business.
Each major infrastructure system can be divided into subsystems. For example, the street system can be subdivided into pavement, curb and gutters, sidewalks, medians, streetlights, traffic control devices (signs, signals and pavement markings), landscaping and land. These subsystems were not delineated in the basic financial statements. The appropriate operating department maintains information regarding the subsystems.
J. Compensated Absences
The City accounts for compensated absences (unpaid vacation, sick leave and compensatory time) in accordance with generally accepted accounting principles. In governmental fund types, compensated absences are recorded as expenditures in the year paid, as it is the City's policy to liquidate any unpaid vacation or sick leave at June 30 from future resources rather than currently available expendable resources. Accordingly, the entire unpaid liability for the governmental fund types is recorded in the Government-Wide Financial Statements.
K. Long-Term Debt
In the Government-Wide Financial Statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bond issuance costs are expensed in the period incurred. Bonds payable are reported net of the applicable bond premium or discount.
In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financial sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.
L. Interest Payable
In the Government-Wide Financial Statements, interest payable on long-term debt is recognized as the liability is incurred for governmental fund types and proprietary fund types.
In the fund financial statements, propriety fund types recognize the interest payable when the liability is incurred.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-34-
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) M. Property Taxes
Under California law, property taxes are assessed and collected by the counties at 1% of assessed value, plus other increases approved by the voters. The property taxes are pooled and are then allocated to the cities based on complex formulas. Accordingly, the City accrues only those taxes which are received within 60 days after year-end.
The City's property taxes are levied and collected by the San Diego County Treasurer. Property taxes (secured and unsecured) are levied on July 1 based on the previous March 1 assessed values as determined by the San Diego County Assessor. Secured taxes are due in two equal installments on November 1 and February 1 following the levy date and become delinquent on December 10 and April 10 following the levy date. Unsecured taxes are due on July 1 and become delinquent August 31 following the levy date.
N. Pension Plan
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.
GASB 68 requires that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used.
Valuation Date (VD) June 30, 2020
Measurement Date (MD) June 30, 2021
Measurement Period (MP) July 1, 2020 to June 30, 2021
The City additionally reports a PARS Retirement Enhancement Pension Plan for which the following actuarial valuation timeframes are used:
Valuation Date (VD) January 1, 2021
Measurement Date (MD) June 30, 2021
Measurement Period (MP) July 1, 2020 to June 30, 2021
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-35-
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) O. Other Postemployment Benefits (OPEB)
For purposes of measuring the net OPEB liability, deferred outflows and inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the City’s plan (OPEB Plan) and additions to/deductions from the OPEB Plan’s fiduciary net position have been determined on the same basis. For this purpose, benefit payments are reported at fair value.
GASB 75 requires that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used:
Valuation Date (VD) June 30, 2021
Measurement Date (MD) June 30, 2021
Measurement Period (MP) July 1, 2020 to June 30, 2021
P. Net Position
In the Government-Wide Financial Statements, net position are 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 external creditors, grantors, contributors, laws or regulations of other governments.
Unrestricted Net Position - This amount is all net position that do not meet the definition of "net investment in capital assets" or "restricted net position." Q. Fund Balances
In accordance with generally accepted accounting principles, the following classifications describe the relative strength of the spending constraints placed on the purposes for which resources can be used:
Nonspendable – amounts that are not in a spendable form (such as inventory) or are required to be maintained intact.
Restricted – amounts constrained to specific purposes by their providers (such as grantors, bondholders and higher levels of government), through constitutional provisions or by enabling legislation.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-36-
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) Q. Fund Balances (continued)
Committed – amounts constrained to specific purposes by a government itself, using the highest level of decision-making authority; to be reported as committed, amounts cannot be used for any other purpose unless the government takes the same highest level action to remove or change the constraint.
Assigned – amounts a government intends to use for a specific purpose; intent can be expressed by the governing body or by an official or body to which the governing body delegates the authority.
Unassigned – amounts that are for any purpose; positive amounts are reported only in a general fund.
The City Council, establishes (and modifies or rescinds) fund balance commitments by passage of an ordinance or resolution. The Director of Finance has the authority, granted by the Council, to commit City resources. When both restricted and unrestricted resources are available for use when an expenditure is incurred, it is the City’s policy to use restricted resources first, then unrestricted resources as they are needed. It is also the City’s policy to consider committed amounts as being reduced first, followed by assigned amounts and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of those unrestricted fund balance classifications could be used.
R. Use of Estimates
The preparation of the basic financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. In addition, estimates affect the reported amount of expenses. Actual results could differ from these estimates and assumptions.
S. Implementation of New GASB Pronouncement
Governmental Accounting Standards Board has issued Statement No. 87, Leases. The objective of this Statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. This Statement increases the usefulness of governments’ financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments’ leasing activities.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-37-
2. CASH AND INVESTMENTS
The following is a summary of cash and investments at June 30,2022:
Fiduciary
Funds
Governmental Business-Type Statement of
Activities Activities Fiduciary Assets Total
Cash and investments 76,507,965 $ 6,264,675 $ 1,213,565 $ 83,986,205 $ Restricted:
Cash and investments 362,573 213,494 1,083,741 507,674
Investments in Section 115 Trust 7,365,660 - - 7,365,660 Total $ 6,478,169 84,236,198 $ 1,721,239 $ 92,435,606 $ Government-Wide
Statement of Net Position
Cash, cash equivalents, and investments consisted as follows, at June 30,2022:
Cash and cash equivalents:
Petty Cash $ 1,250
Demand Deposit 1,232,032
Total cash and cash equivalents 1,233,282
Investments:
Local Agency Investment Fund 40,213,047
Investment in Section 115 Trust 7,365,660
Negotiable Certificates of Deposit 15,140,452
U.S. Government Obligations 27,975,490
Money Market 507,675
Total Investments 91,202,324
Total cash and investments $ 92,435,606
A. Cash Deposits
As of June 30, 2022, none of the City's cash deposits with financial institutions in excess of federal depository insurance limits was held in uncollateralized accounts.
B. Investments
The City is authorized by State statutes and in accordance with the City's Investment Policy (Policy) to invest in the following:
Certificates of Deposit
Negotiable Certificates of
Deposit
U.S. Treasury Obligations
U.S. Agency Securities
Bankers Acceptances
California Local Agency Investment
Fund (LAIF)
Repurchase Agreements
Mutual Funds
Commercial Paper
Municipal Securities
Corporate Notes
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-38-
2. CASH AND INVESTMENTS, (continued)
B. Investments, (continued)
The Policy, in addition to State statutes, establishes that funds on deposit in banks must be federally insured or collateralized and investments shall: (1) have maximum maturity not to exceed five years; (2) be laddered and based on cash flow forecasts; and (3) be subject to limitations to a certain percent of the portfolio for each of the authorized investments.
The City's investments with Local Agency Investment Fund (LAIF) at June 30, 2022 included a portion of the pooled funds invested in Structured Notes and Assets-Backed Securities. These investments included the following:
Structured Notes are debt securities (other than asset-backed securities) whose cash flow characteristics (coupon rate, redemption amount, or stated maturity) depend upon one or more indices and/or that have embedded forwards or options.
Asset-Backed Securities, the bulk of which are mortgage-backed securities, entitle their purchasers to receive a share of the cash flows from a pool of assets such as principal and interest repayments from a pool of mortgages (such as CMO's) or credit card receivables.
As of June 30, 2022, the City had $40,213,047 invested in LAIF. This balance is the fair market value; in accordance with Generally Accepted Accounting Principles, investments should be stated at fair value using the aggregate method.
C. Risk Disclosures
Interest Rate Risk
As a means of limiting its exposure to fair value losses arising from rising interest rates, the City's investment policy requires structuring the portfolio in a way so that securities mature to meet the City’s cash requirements for ongoing obligations; investing primarily in shorter term securities; and not paying a premium for any secondary market security which includes a call feature. The City is in compliance with this provision of the Policy.
Credit Risk
The City's Policy limits investments in commercial paper to the highest grade of stand alone or enhanced (prime) commercial paper as rated by Moody's Investor Service, Standard & Poor's Corporation, or Fitch Financial Services and requires that the management company of mutual funds must have attained the highest ranking or the highest letter and numerical rating provided by not less than two nationally recognized statistical rating organizations.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-39-
2. CASH AND INVESTMENTS, (continued)
C. Risk Disclosures, (continued)
The City's investments are rated by the nationally recognized statistical rating organizations as follows:
Standard
Moody's & Poor's
Investment Pools:
State of California - Local Agency Investment Fund Not Rated Not Rated Investment in Section 115 trust Not Rated Not Rated
Negotiable Certificates of Deposit Aaa AAA
U.S. Government Agencies:
FNMA Aaa AA+
FHLB Aaa AA+
FHLMC Aaa AA+
Concentration of Credit Risk
The City’s Investment Policies instructs the city to remain within defined portfolio percentages to prevent a substantial loss related to the failure of one issue or issuer. For the Local Agency Investment Fund, there is no dictated percentage limit over the investment. For the Investment in Section 115 trust, there is no dictated percentage limit over the investment. For Certificates of Deposit, the City’s Investment Policy dictates that no more than 30% of the total portfolio may be invested in all Certificates of Deposits. As of June 30, 2022, the City is in compliance with its investment policies.
Custodial Credit Risk
The California Government Code (Code) requires California banks and savings and loan associations to secure the City's cash deposits by pledging securities as collateral. This Code states that collateral pledged in this manner shall have the effect of perfecting a security interest in such collateral superior to those of a general creditor. Thus, collateral for cash deposits is considered to be held in the City's name.
The market value of pledged securities must equal at least 110% of the City's cash deposits.
California law also allows institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the City's total cash deposits. The City has waived collateral requirements for cash deposits, which are fully insured up to $250,000 by the Federal Deposit Insurance Corporation. The City’s cash balances held with financial institutions in excess of the FDIC limit are held in collateralized accounts.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-40-
2. CASH AND INVESTMENTS, (continued)
C. Risk Disclosures, (continued)
The following is a chart of City's investment portfolio:
Amount Percentage of
Investments Invested Investments
Local Agency Investment Fund 40,213,047 $ 44.09%
Investment in Section 115 trust 7,365,660 8.08%
Negotiable Certificates of Deposit 15,140,452 16.60%
U.S. Government Obligations 27,975,490 30.67%
Money Market 507,675 0.56%
Total $ 100.00% 91,202,324
D. Summary of Investments to Maturity
Investments held in the City Treasury grouped by maturity date at June 30, 2022, are shown below:
Maturity
Current to one year 52,810,150 $
One to two years 3,704,361
Two to three years 5,793,020
Three to four years 9,924,312
Four to five years 18,970,481
Total $ 91,202,324
E. Fair Value Measurements
The City categorizes its fair value measurements 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 asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs.
The City has the following recurring fair value measurements as of June 30, 2022:
Investments by Fair Value Level Total Level 1 Level 2 Level 3 Negotiable Certificates of Deposit 15,140,452 $ - $ 15,140,452 $ - $ U.S. Government Obligations 27,975,490 27,975,490 - -
Money Market 507,675 507,675 - -
Total investments by fair value 43,623,617 28,483,165 $ 15,140,452 $ - $ Investments not subject to GASB 72:
Investment in Section 115 trust 7,365,660
Local Agency Investment Fund 40,213,047
Total 91,202,324 $
Fair Value Measurement Using
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-41-
3. LOANS RECEIVABLE
A. Fund Financial Statements
As of June 30, 2022 the following loans were outstanding:
Governmental
Funds
Computer Loan Program $ 26,463
Housing Rehabilitation Loan Program 139,699
Housing Successor loans 590,420
Total $ 756,582
Computer Loan Program
Zero interest loans were provided to City employees for purchases of personal computers. Loan payments are deducted from bi-weekly paychecks and are secured by the employees' accrued vacation hours. At June 30, 2022, the outstanding amount due to the City was $26,463.
Housing Rehabilitation Loan Program
Low interest loans were provided to qualified borrowers for financial assistance for improvements to low and moderate income housing. The loans, which are secured by trust deeds on the property, are due upon sale of property or death of the homeowner. At June 30, 2022, the outstanding amount due to the City was $139,699.
Housing Successor Loans
Housing Successor loans in the amount of $590,420 consist of low and moderate income housing loans totaling $225,000 for three properties located on Lubbock Avenue and deferred housing setaside funds in the amount of $365,420 owed to the Housing Asset Fund by the Successor Agency to the former La Mesa Community Redevelopment Agency.
The low and moderate income housing loans are secured by trust deeds on the individual properties and are payable upon sale or transfer of the property by the original property owner. The deferred housing set-aside funds have been approved as an enforceable obligation of the Successor Agency and will be included on future Recognized Obligation payment Schedules according to the approved repayment plan until such time as the balance is paid in full.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-42-
4. LEASE RECEIVABLE
On July 1, 2021, the City entered into a 46-month lease as Lessor for the use of AMR - Fire Station
11. An initial lease receivable was recorded in the amount of $309,125. As of June 30, 2022, the value of the lease receivable is $266,386. The lessee is required to make monthly fixed payments of $4,950. The lease has an interest rate of 0.6720%. The value of the deferred inflow of resources as of June 30, 2022 was $226,753, and the City recognized lease revenue of $82,372 during the fiscal year. The lessee has 1 extension option for 41 months.
On July 1, 2021, the City entered into a 90 month lease as Lessor for the use of EDCO. An initial lease receivable was recorded in the amount of $2,836,625. As of June 30, 2022, the value of the lease receivable is $2,477,172. The lessee is required to make monthly fixed payments of $32,896.
The lease has an interest rate of 1.4500%. The value of the deferred inflow of resources as of June 30, 2022, was $2,458,548, and the City recognized lease revenue of $378,077 during the fiscal year. The lessee has 1 extension option for 120 months.
On July 1, 2021, the City entered into a 22 month lease as Lessor for the use of Foothill Arts Assoc.
An initial lease receivable was recorded in the amount of $5,827. As of June 30, 2022, the value of the lease receivable is $2,793. The lessee is required to make monthly fixed payments of $255. The lease has an interest rate of 0.5100%. The value of the deferred inflow of resources as of June 30, 2022 was $2,654, the City recognized lease revenue of $3,174 during the fiscal year.
On July 1, 2021, the City entered into a 23 month lease as Lessor for the use of LM Community Welfare Assoc. An initial lease receivable was recorded in the amount of $24,884. As of June 30, 2022, the value of the lease receivable is $0.00. The lessee is required to make annual fixed payments of $25,000. The lease has an interest rate of 0.5100%. The value of the deferred inflow of resources as of June 30, 2022 was $11,901, and the City recognized lease revenue of $12,983 during the fiscal year.
On July 1, 2021, the City entered into a 58 month lease as Lessor for the use of AMR - Fire Station
12. An initial lease receivable was recorded in the amount of $123,610. As of June 30, 2022, the value of the lease receivable is $101,303. The lessee is required to make monthly fixed payments of $1,950. The lease has an interest rate of 1.0600%. The value of the deferred inflow of resources as of June 30, 2022 was $98,080, and the City recognized lease revenue of $25,530 during the fiscal year. The lessee has 2 extension options, each for 60 months. The City had a termination period of 3 months as of the lease commencement.
On July 1, 2021, the City entered into a 17 month lease as Lessor for the use of USPS. An initial lease receivable was recorded in the amount of $200,913. As of June 30, 2022, the value of the lease receivable is $59,419. The lessee is required to make monthly fixed payments of $11,917.
The lease has an interest rate of 1.1060%. The value of the deferred inflow of resources as of June 30, 2022 was $59,092, and the City recognized lease revenue of $141,821 during the fiscal year.
The lessee has 4 extension options, each for 60 months.
On July 1, 2021, the City entered into a 568 month lease as Lessor for the use of Campina. An initial lease receivable was recorded in the amount of $347,055. As of June 30, 2022, the value of the lease receivable is $341,580. The lessee is required to make annual fixed payments of $8,460.
The lease has an interest rate of 2.5800%. The value of the deferred inflow of resources as of June 30, 2022 was $339,723, and the City recognized lease revenue of $7,332 during the fiscal year.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-43-
4. LEASE RECEIVABLE (continued)
On August 1, 2021, the City entered into a 660 month lease as Lessor for the use of Westmont. An initial lease receivable was recorded in the amount of $26,024,391. As of June 30, 2022, the value of the lease receivable is $26,210,229. The lessee is required to make monthly fixed payments of $414,691. The lease has an interest rate of 2.4400%. The value of the deferred inflow of resources as of June 30, 2022 was $25,590,650, and the City recognized lease revenue of $433,740 during the fiscal year.
5. INTERFUND TRANSACTIONS
A. Advances From/To Other Governments
As of June 30, 2022, balances of advances from/advances to were as follows:
Governmental Activities:
General Fund 5,300,000 $ 5,300,000 $
Advances to Other
Total 5,300,000 $ 5,300,000 $
Governments
Successor
Agency Total
Advances From
Other Governments
The advance from the Housing Successor Agency to the City represents the amount owed for the sale of the site of the former police station for the purposes of developing low and moderate income housing. At June 30, 2022, the outstanding balance is $5,300,000.
B. Due To/From Other Funds
Interfund receivable and payable balances at June 30, 2022 were as follows:
Due to Other
Funds
Transportation
CIP
Non-Major
Governmental
Funds Total
General
Fund $ 1,108,672 1,276,201 $ 2,384,873 $
Due From
Other Funds
The above amounts represent short-term borrowings from the General Fund for temporary cash shortfalls for the funds listed above.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-44-
5. INTERFUND TRANSACTIONS, (continued)
C. Transfers In and Out
Transfers in and out for the year ended June 30, 2022 were as follows:
Non-Major Internal
General Transportation Governmental Service
Fund CIP Funds Funds Total
Governmental Activities:
General Fund - $ - $ 648,348 $ 934,800 $ 1,583,148 $
Non-Major Governmental Funds 1,452,516 1,611,519 592,421 - 3,656,456 Business-Type Activities:
Wastewater 1,192,200 - - 954,100 2,146,300
Total $ 1,611,519 2,644,716 $ 1,240,769 $ 1,888,900 $ 7,385,904 $ Transfers out
Governmental Activities
Transfers In
Throughout the year, transfers are used to move revenues from the fund with collection authority to the fund with spending authority. This is the case with the following significant transfers:
$951,266 and $250,000 was transferred from TRANSNET and RMRA, respectfully, to the General Fund for street maintenance;
$1,289,900, $85,000, and $68,550 transferred from various funds the General Fund for support service;
$71,474, $466,519, $919,987, and $153,539 in Gas tax funds, grant funds, TRANSNET, and RMRA respectfully, were transferred to the Transportation CIP fund to support capital improvement projects;
$447,708 was transferred from the General Fund to the Debt Service funds to pay principal and interest payments as they became due;
$50,000, $88,140, $62,500 were transferred from the General Fund, respectfully Environmental Services, Parks & Recreation, Capital Asset Management Plan; $363,005, $150,000, and $79,416 were transferred to and from the various non-major funds; $934,800 and $954,100 was transferred to the General Fund and Wastewater Fund, respectfully, to the Liability Fund to fund anticipated claims.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-45-
6. CAPITAL ASSETS AND INTANGIBLE RIGHT-TO-USE ASSETS
A. Government-Wide Financial Statements
At June 30, 2022 the City's capital assets consisted of the following:
Governmental Business-Type
Activities Activities Total
Non-depreciable assets:
Land $ 11,398,339 $ - $ 11,398,339
Right-of-way 15,905,824 - 15,905,824
Construction in progress 7,783,345 231,456 8,014,801
Total non-depreciable assets 35,087,508 231,456 35,318,964 Depreciable assets:
Buildings and improvements 47,796,770 - 47,796,770
Vehicles and equipment 18,921,282 2,303,345 21,224,627
Infrastructure 208,404,853 54,614,829 263,019,682
Total depreciable assets, at cost 275,122,905 56,918,174 332,041,079 Accumulated Depreciation:
Buildings and improvements (15,128,518) - (15,128,518)
Vehicles and equipment (11,570,322) (1,104,068) (12,674,390) Infrastructure (117,951,125) (20,528,013) (138,479,138) Total accumulated depreciation (144,649,965) (21,632,081) (166,282,046) Total depreciable assets, net 130,472,940 35,286,093 165,759,033 Total capital assets $ 165,560,448 $ 35,517,549 $ 201,077,997
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-46-
6. CAPITAL ASSETS AND INTANGIBLE RIGHT-TO-USE ASSETS, (continued) A. Government-Wide Financial Statements, (continued)
The following is a summary of capital assets for governmental activities:
Governmental activities: Balance Balance
June 30, 2021 Additions Deletions June 30, 2022
Non-depreciable assets:
Land $ 11,398,339 $ - $ - $ 11,398,339
Right-of-way 15,905,824 - - 15,905,824
Construction in progress 7,618,119 3,810,503 (3,645,277) 7,783,345 Total non-depreciable assets 34,922,282 3,810,503 (3,645,277) 35,087,508 Depreciable assets:
Buildings and improvements 47,783,050 13,720 - 47,796,770 Vehicles and equipment 18,408,454 1,925,857 (1,413,029) 18,921,282 Infrastructure 205,556,431 3,431,381 (582,959) 208,404,853 Total depreciable assets, at cost 271,747,935 5,370,958 (1,995,988) 275,122,905 Accumulated Depreciation
Buildings and improvements (14,134,134) (994,384) - (15,128,518) Vehicles and equipment (11,725,404) (880,072) 1,035,154 (11,570,322) Infrastructure (113,860,569) (4,133,909) 43,353 (117,951,125) Total accumulated depreciation (139,720,107) (6,008,365) 1,078,507 (144,649,965) Total depreciable assets, net 132,027,828 (637,407) (917,481) 130,472,940 Total governmental activities $ 166,950,110 $ 3,173,096 $ (4,562,758) $ 165,560,448 Governmental activities depreciation expense for capital assets for the year ended June 30, 2022 was as follows:
General government $ 205,997
Police 786,209
Fire 488,572
Public works 4,335,351
Community services 183,736
Community development 8,500
Total $ 6,008,365
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-47-
6. CAPITAL ASSETS AND INTANGIBLE RIGHT-TO-USE ASSETS, (continued) A. Government-Wide Financial Statements, (continued)
The following is a summary of intangible right-to-use assets for governmental activities:
Governmental activities: Balance Balance
June 30, 2021 Additions Deletions June 30, 2022
Intangible right-to-use asset $ - $ 530,443 $ - $ 530,443 Accumulated Amortization - (53,202) - (53,202)
Total intangible right-to-use asset,
net $ - $ 477,241 $ - $ 477,241
The following is a summary of capital assets for business-type activities:
Business-Type activities: Balance Balance
June 30, 2021 Additions Deletions June 30, 2022
Non-depreciable assets:
Construction in progress $ 4,085,143 $ 1,541,181 $ (5,394,868) $ 231,456 Total non-depreciable assets 4,085,143 1,541,181 (5,394,868) 231,456 Depreciable assets:
Vehicles and equipment 2,325,850 - (22,505) 2,303,345
Infrastructure 49,261,818 5,394,868 (41,857) 54,614,829 Total depreciable assets, at cost 51,587,668 5,394,868 (64,362) 56,918,174 Accumulated Depreciation:
Vehicles and equipment (934,708) (179,098) 9,738 (1,104,068) Infrastructure (19,854,077) (706,342) 32,406 (20,528,013) Total accumulated depreciation (20,788,785) (885,440) 42,144 (21,632,081) Total depreciable assets, net 30,798,883 4,509,428 (22,218) 35,286,093 Total business-type activities $ 34,884,026 $ 6,050,609 $ (5,417,086) $ 35,517,549 Business-type activities depreciation expense for capital assets for the year ended June 30, 2022 was as follows:
Wastewater $ 885,440
Total depreciation $ 885,440
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-48-
6. CAPITAL ASSETS AND INTANGIBLE RIGHT-TO-USE ASSETS, (continued) B. Fund Financial Statements
The fund financial statements do not present general government capital assets, but capital assets are shown in the Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Position.
7. LONG-TERM DEBT
A. Governmental Activities Long-Term Debt
The summary of changes in long-term debt for governmental activities for the year ended June 30, 2022 was as follows:
Balance Balance Due Within Due in More
June 30, 2021 Additions Deletions June 30, 2022 One Year Than One Year Bonds payable:
2006 Certificates of participation:
Series A 935,000 $ - $ (125,000) $ 810,000 $ 135,000 $ 675,000 $ Series B 1,460,000 - (205,000) 1,255,000 220,000 1,035,000 2016 General obligation refunding bonds 18,515,000 - (810,000) 17,705,000 840,000 16,865,000 Unamortized bond premium 1,023,910 - (63,995) 959,915 - 959,915 TransNet Commercial Paper - direct borrowing 999,992 - (500,004) 499,988 499,988 - Total $ - 22,933,902 $ (1,703,999) $ 21,229,903 $ 1,694,988 $ 19,534,915 $ Classification
Bonds Payable
2006 Certificates of Participation, Series A and B
On July 27, 2006, the La Mesa Public Financing Authority (The Authority) issued Certificates of Participation, Series 2006A in the amount of $1,830,000 and Series 2006B in the amount of $3,170,000, bearing interest rates of 4.15%-6.32% with maturity dates from August 1, 2007 to 2027.
The purpose of the issuance was to provide funds to construct a building and related site improvements at the City of La Mesa's Civic Center, to acquire a municipal bond debt service reserve insurance policy and a municipal bond insurance policy for the certificates, and to pay the costs of issuance incurred in connection with the execution and delivery of the certificates. Interest is payable on February 1 and August 1 each year, commencing August 1, 2007.
The City has pledged future post office lease revenue to repay the 2006 Certificates of Participation Series A. Total principal and interest remaining on the Certificates of Participation Series A is $946,512 payable through 2027. Total principal and interest remaining on the Certificates of Participation Series B is $1,405,856 payable through 2027.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-49-
7. LONG-TERM DEBT, (continued)
A. Governmental Activities Long-Term Debt, (continued)
Whenever any event of default referred to in the lease happens and continues, the Trustee, as the assignee of the Authority, is authorized under the terms of Lease to exercise any and all remedies available pursuant to the law or granted pursuant to the Lease; provided, however, that notwithstanding anything therein or in the Trust Agreement to the contrary, there shall be no right under any circumstances to accelerate the lease payments or otherwise declare any lease payments not then due or past due to be immediately due and payable. Neither the Authority nor its assignee shall have any right to reenter or re-let the leased premises except following a default under the lease. Following an event of default, the Trustee or its assignee of the Authority, may elect either to terminate the Lease and seek to collect damages from the City or to maintain the Lease in effect and seek to collect the Lease Payments as they become due. The lease further provides that so long as an event of default exists under the lease, the trustee may reenter the leased premises for the purpose of taking possession of any portion of the leased premises and to re-let the lease premises, and in addition, at its option, with or without such entry to terminate the lease as described therein.
2006 Certificates of Participation, Series A and B, continued The outstanding principal balances of Series A and B at June 30, 2022 were $810,000 and $1,255,000 respectively, for a combined balance of $2,065,000.
The annual debt service requirements for the Series A and B Certificates outstanding at June 30, 2022 were as follows:
Year Ending
June 30, Principal Interest Total
2023 135,000 $ 46,926 $ 181,926 $
2024 150,000 37,920 187,920
2025 160,000 28,124 188,124
2026 175,000 17,538 192,538
2027 190,000 6,004 196,004
Total $ 136,512 810,000 $ 946,512 $
Year Ending
June 30, Principal Interest Total
2023 220,000 $ 52,145 $ 272,145 $
2024 235,000 41,963 276,963
2025 250,000 30,988 280,988
2026 265,000 19,205 284,205
2027 285,000 6,555 291,555
Total $ 150,856 1,255,000 $ 1,405,856 $
2006 Certificates of Participation Series B
2006 Certificates of Participation Series A
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-50-
7. LONG-TERM DEBT, (continued)
A. Governmental Activities Long-Term Debt, (continued)
2016 General Obligation Refunding Bonds
On November 30, 2016, the City issued $21,825,000 in 2016 General Obligation Refunding Bonds for the purpose of refunding the outstanding 2004 General Obligation Bonds, Series A and B. The bonds are general obligation bonds of the City, payable solely from ad valorem property taxes levied on behalf of the City and collected by the County of San Diego. The bonds mature annually each August 1, 2017 through 2036 in amounts ranging from $720,000 to $1,565,000. The bonds bear variable interest rates ranging from 2% to 5%, and are payable semi-annually each February 1 and August 1, commencing February 1, 2017.
In the event of a failure of the City to comply with any provision of the disclosure certificate, the holder or beneficial owner of the bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under the disclosure certificate. A default under the disclosure certificate shall not be deemed and event of default under the indenture, and the sole remedy under this disclosure certificate in the event of any failure of the City to comply with the disclosure certificate shall be an action to compel performance.
No holder or beneficial owner of the bonds may institute such action, suit or proceeding to compel performance unless they shall have first delivered to the City satisfactory written evidence of their status as such, and a written notice of and request to cure such failure, and the City shall have refused to comply therewith within a reasonable time.
The annual requirements for the 2016 General Obligation Refunding Bonds outstanding at June 30, 2022 were as follows:
Year Ending
June 30, Principal Interest Total
2023 840,000 $ 728,950 $ 1,568,950 $
2024 890,000 685,700 1,575,700
2025 945,000 639,825 1,584,825
2026 995,000 591,325 1,586,325
2027 1,050,000 548,075 1,598,075
2028 - 2032 5,970,000 2,131,249 8,101,249
2033 - 2037 7,015,000 800,975 7,815,975
Total $ 6,126,099 17,705,000 $ 23,831,099 $
2016 General Obligation Refunding Bonds
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-51-
7. LONG-TERM DEBT, (continued)
A. Governmental Activities Long-Term Debt, (continued)
TransNet Commercial Paper – Direct Borrowing
On May 4, 2018, the City entered into a loan agreement with San Diego County Regional Transportation Commission for a $2,000,000 loan for the purpose of financing the West La Mesa Improvements project. The proceeds were funded when the City requested reimbursement of valid expenditures related to this project. The repayment of debt is the first priority on the use of the City’s annual TransNet revenues, which are received from SANDAG. Total principal and interest remaining on the loan is $506,759 payable through 2023.
The annual debt service requirements for the TransNet Commercial Paper outstanding at June 30, 2022 were as follows:
Year Ending
June 30, Principal Interest Total
2023 499,988 $ 6,771 $ 506,759 $
Total $ 6,771 499,988 $ 506,759 $
TransNet Commercial Paper
B. Business-Type Activities Long-Term Debt
The summary of changes in long-term debt for business-type activities for the year ended June 30, 2022 was as follows:
Balance Balance Due Within Due in More
June 30, 2021 Additions Deletions June 30, 2022 One Year Than One Year Notes payable:
State Revolving Fund Loan $ 9,575,541 $ 3,999,793 $ (885,679) $ 12,689,655 $ 1,107,393 $ 11,582,262 Total $ 9,575,541 $ 3,999,793 $ (885,679) $ 12,689,655 $ 1,107,393 $ 11,582,262 Classification
State Revolving Fund Loan
On July 25, 2006, the City entered into an agreement to obtain a low interest federal pass-through loan from the State Water Resources Control Board which would allow the City to borrow up to $14,500,000 at 2.4% from January 7, 2006 through February 1, 2028 for sewer system improvements. An additional $5,000,000 and $7,000,000 was approved for borrowing on November 3, 2015 and July 7, 2020, respectively. At June 30, 2022, the City had borrowed $21,376,482, of which $12,689,655 remains outstanding.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-52-
7. LONG-TERM DEBT, (continued)
B. Business-Type Activities Long-Term Debt (continued)
The annual debt service requirements for the State Water Fund Loan outstanding at June 30, 2022 were as follows:
Year Ending June 30, Principal Interest Total
2023 1,107,393 $ 206,060 $ 1,313,453 $
2024 1,117,925 195,528 1,313,453
2025 1,139,196 174,257 1,313,453
2026 1,160,916 152,537 1,313,453
2027 1,183,093 130,359 1,313,452
2028 - 2032 3,687,273 367,160 4,054,433
2033 - 2037 2,120,409 352,306 2,472,715
2038 - 2042 1,173,450 40,793 1,214,243
Total $ 1,619,000 12,689,655 $ 14,308,655 $
State Revolving Fund Loan
8. FINANCED PURCHASE
The summary of changes in long-term financed purchases for governmental activities for the year ended June 30, 2022 was as follows:
Balance Balance Due Within Due in More
June 30, 2021 Additions Deletions June 30, 2022 One Year Than One Year Financed purchase payable
Municipal Finance Corp - 2016 204,691 $ - $ (101,032) $ 103,659 $ 103,659 $ - $ San Diego County Next Gen RCS - 2017 683,773 - (129,335) 554,438 132,942 421,496 Total $ 888,464 $ - $ (230,367) $ 658,097 $ 236,601 $ 421,496 Classification
Municipal Finance Corporation - 2016
On January 22, 2016, the City entered into a purchase option lease agreement with Municipal Finance Corporation in order to acquire a fire pumper from Pierce Manufacturing, Inc. The annual payments on the long-term lease payable as of June 30, 2022 were as follows:
Year Ending
June 30, Principal Interest Total
2023 103,659 $ 2,695 $ 106,354 $
Total $ 2,695 103,659 $ 106,354 $
Municipal Finance Corporation - 2016
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-53-
8. FINANCED PURCHASE (continued)
San Diego County Next Gen RCS - 2017
The San Diego-Imperial County Regional Communications System (RCS) is utilized by the Police, Fire and Public Works Departments for their radio communications. The current system has reached end of life, and the RCS has developed plans for a new “next generation system” to meet the region’s needs (NextGen RCS).
On July 12, 2016, the City of La Mesa was notified by San Diego County that a contract for the NextGen RCS system was awarded to Motorola Solutions for $70,065,207. The City of La Mesa’s share of this amount is $1,279,649. Our shared infrastructure obligation will be financed by the County of San Diego at an annual interest rate of 2.79% per year, for a period of ten years, with an annual payment of $148,411 beginning in FY 16-17 and continuing for 10 years until the debt is paid. The annual payments as of June 30, 2022 were as follows:
Year Ending
June 30, Principal Interest Total
2023 $ 15,469 132,942 $ 148,411 $
2024 136,651 11,760 148,411
2025 140,464 7,947 148,411
2026 144,381 4,028 148,411
Total $ 39,204 554,438 $ 593,644 $
San Diego County Next Gen RCS - 2017
Schedule of property under financed purchase by major classes at June 30, 2022:
Schedule of Property under capital leases by major class Governmental Business-Type
Activities Activities Total
Equipment 3,291,866 $ - $ 3,291,866 $
Less: accumulated depreciation (2,128,055) - (2,128,055) Total 1,163,811 $ - $ 1,163,811 $
9. LEASE LIABILITY
The summary of changes in long-term lease liabilities for governmental activities for the year ended June 30, 2022 was as follows:
Balance Balance Due Within Due in More
June 30, 2021 Additions Deletions June 30, 2022 One Year Than One Year Lease liability:
Copier $ 20,169 - $ (2,306) $ 17,863 $ 3,956 $ 13,907 $ Fire Stryker Equipment - 510,274 (54,141) 456,133 47,524 408,609 Total $ - $ 530,443 $ (56,447) $ 473,996 $ 51,480 $ 422,516 Classification
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-54-
9. LEASE LIABILITY (continued)
On December 17, 2021, the City entered into a 60-month lease as Lessee for the use of Ricoh Copier - 8130 Allison Ave. An initial lease liability was recorded in the amount of $20,169. As of June 30, 2022, the value of the lease liability is $17,863. The City is required to make monthly fixed payments of $347. The lease has an interest rate of 1.2900%. The value of the right-to-use asset as of June 30, 2022 of $20,169 with accumulated amortization of $2,174 is included with Equipment as intangible right-to-use asset in note 6.
The annual payments as of June 30, 2022 were as follows:
Year Ending
June 30, Principal Interest Total
2023 3,956 $ 207 $ 4,163 $
2024 4,007 156 4,163
2025 4,059 104 4,163
2026 4,112 51 4,163
2027 6 1,729 1,735
Total $ 524 17,863 $ 16,652 $
Ricoh Copier - 8130 Allison Ave
On July 1, 2021, the City entered into a 120-month lease as Lessee for the use of Fire Stryker Equipment. An initial lease liability was recorded in the amount of $510,274. As of June 30, 2022, the value of the lease liability is $456,133. The City is required to make annual fixed payments of $54,822. The lease has an interest rate of 1.6000%. The value of the right-to-use asset as of June 30, 2022 of $510,274 with accumulated amortization of $51,028 is included with Equipment as intangible right-to-use asset in note 6.
The annual payments as of June 30, 2022 were as follows:
Year Ending
June 30, Principal Interest Total
2023 47,524 $ 7,298 $ 54,822 $
2024 48,284 6,538 54,822
2025 49,057 5,765 54,822
2026 49,841 4,980 54,821
2027 50,639 4,183 54,822
2028 - 2031 210,788 8,498 219,286
Total $ 37,262 456,133 $ 493,395 $
Fire Stryker Equipment
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-55-
10. COMPENSATED ABSENCES
The summary of changes in compensated absences for governmental activities for the year ended June 30, 2022 was as follows:
Balance Balance Due Within Due in More
June 30, 2021 Additions Deletions June 30, 2022 One Year Than One Year Compensated Absences $ 3,885,126 $ 3,264,508 $ (2,865,241) $ 4,284,393 $ 2,870,000 $ 1,414,393 Classification
The
funds to be used to liquidate this liability include the General Fund, Housing Rehabilitation, Community Development Block Grant, Downtown Parking, Wastewater, Environmental Services, Workers Compensation Fund, Liability Risk Financing Fund and the Low-Moderate Housing Successor Fund. At June 30, 2022, compensated absences balance consisted of the following:
Vacation pay 2,158,720 $
Holiday pay 819,442
Sick leave 1,086,469
Compensatory time 219,762
Total $ 4,284,393
11. OTHER POST– EMPLOYMENT BENEFITS
Plan Description
The City provides the minimum required employer contribution under the CalPERS Health Plan for eligible retirees and surviving spouses in receipt of a pension benefit from CaIPERS. An employee is eligible for this employer contribution provided they are vested in their CalPERS pension benefit and commence payment of their pension benefit within 60 days of retirement with the City. Vesting requires at least 5 years of CalPERS total service. The surviving spouse of an eligible retiree who elected spouse coverage under CalPERS is eligible for the employer contribution upon the death of the retiree.
The scheduled minimum required employer contributions for each eligible retiree under the CalPERS Health Plan are $149 per month per employee in 2022. The City does not issue a financial report for the plan. A separate financial report is not prepared for the Plan.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-56-
11. OTHER POST– EMPLOYMENT BENEFITS, (continued)
Employees Covered
As of the June 30, 2021 actuarial valuation, the following current and former employees were covered by the benefit terms under the Plan:
Active employees 248
Inactive employees or beneficiaries currently receiving benefits 142 Inactive employees entitled to, but not yet receiving benefits - Total 390
Contributions
By unanimous vote of the City Council on May 12, 2009, the City adopted pre-funding through the California Employers' Retiree Benefit Trust (CERBT), a GASB eligible trust. The CERBT has an investment policy with an expected long-term rate of return equal to approximately 6.80% for employers fully funding the annual required contribution each year. For the fiscal year ended June 30, 2022, the City’s cash contributions were $372,129 in payments to the trust.
Net OPEB Liability
The City’s net OPEB liability was measured as of June 30, 2021 based on the following actuarial methods and assumptions:
Actuarial Assumptions June 30, 2021 Measurement Date
Actuarial Valuation Date June 30, 2021
Actuarial cost method Entry age normal
Discount Rate 6.80%
General Inflation 2.50%
Mortality Society of Actuaries (SOA) Pub-2010 Continuing Survivor Headcount Weighted Mortality Table fully
generational using Scale MP-2021.
Retirement, Disability,
Termination
According to the rates under the 2021 experience
study for the CalPERS Pension plan.
Salary increases 2.80%
Medical Trend 6.5% for 2022, decreasing to an ultimate rate of
4.5% in 2030 and later years
Healthcare Participation 50% of eligible active employees are assumed to elect medical coverage at retirement.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-57-
11. OTHER POST– EMPLOYMENT BENEFITS, (continued)
Net OPEB Liability (continued)
The long-term expected rate of return on OPEB plan investments was determined using a building – block method in which expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:
Asset Class Component Target Allocation
Long-Term
Expected Real
Rate of Return
Global equity 59% N/A
Global debt securities 25% N/A
Inflation assets 5% N/A
Commodities 8% N/A
REITs 3% N/A
Total 100%
Discount Rate
A discount rate of 6.80% was used in the valuation. This discount rate assumes the City continues to fully fund for its retiree health benefits through the CERBT under its investment allocation strategy.
Changes in the OPEB Liability
The changes in the net OPEB liability for the Plan are as follows:
(a) (b) (a) - (b) = (c)
Total OPEB
Liability
Plan
Fiduciary
Net Position
Net OPEB
Liability
Balance at June 30, 2020 (measurement date) 6,105,728 $ 4,479,457 $ 1,626,271 $ Changes recognized for the measurement period:
Service cost 104,011 - 104,011
Interest 415,772 - 415,772
Differences between expected and
actual experience 588,094 - 588,094
Changes of assumptions 82,245 - 82,245
Contributions – employer - 1,034,864 (1,034,864)
Net investment income - 1,279,360 (1,279,360)
Benefit payments (549,584) (549,584) -
Administrative expense - (1,763) 1,763
Net changes 640,538 1,762,877 (1,122,339)
Balance at June 30, 2021 (measurement date) $ 6,242,334 6,746,266 $ 503,932 $
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-58-
11. OTHER POST– EMPLOYMENT BENEFITS, (continued)
Sensitivity of the Net OPEB Liability to Changes in the Discount Rate The following presents the net OPEB liability of the City if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate, for measurement period ended June 30, 2021:
1% Decrease
(5.80%)
Current Discount
Rate (6.80%)
1% Increase
(7.80%)
Net OPEB Liability/
(Asset) $ 503,932 1,274,955 $ (138,656) $
Sensitivity of the Net OPEB Liability to Changes in the Health Care Cost Trend Rates The following presents the net OPEB liability of the City if it were calculated using health care cost trend rates that are one percentage point lower or one percentage point higher than the current rate, for measurement period ended June 30, 2021:
1% Decrease
Current
Healthcare Cost
Trend Rates 1% Increase
Net OPEB Liability/
(Asset) $ 503,932 (203,243) $ 1,370,761 $
OPEB Plan Fiduciary Net Position
CalPERS issues a publicly available CERBT financial report that may be obtained from the CalPERS’ website at www.calpers.ca.gov.
Recognition of Deferred Outflows and Deferred Inflows of Resources Gains and losses related to changes in total OPEB liability and fiduciary net position are recognized in OPEB expense systematically over time. Amounts are first recognized in OPEB expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to OPEB and are to be recognized in future OPEB expense. The net difference between projected and actual earnings on OPEB plan investments is amortized using the straight-line method over 5 years, while all other amounts are amortized over the expected average remaining service lifetime (EARSL) of plan participants.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-59-
11. OTHER POST– EMPLOYMENT BENEFITS, (continued)
OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB A complete breakdown of the OPEB expense is as follows:
Service cost 104,011 $
Interest on total OPEB liability 415,772
Projected earnings on OPEB plan investments (330,199)
OPEB plan administrative expense 1,763
Current period recognition of deferred outflows (inflows) of resources:
Differences between expected and actual experience in
measurement of the total OPEB liability 10,330
Changes of assumptions (25,090)
Differences between projected and actual earnings on OPEB plan investments (180,221)
Annual OPEB expense (credit) (3,634) $
For the fiscal year ended June 30, 2022, the City recognized OPEB credit of $3,634. As of fiscal year ended June 30, 2022, the City reported deferred inflows and outflows of resources related to OPEB from the following sources:
Deferred Outflows
of Resources
Deferred Inflows of
Resources
Net difference between projected and actual
earnings on OPEB plan investments - $ (678,158) $
Changes of assumptions 71,964 (70,742)
Difference between expected and actuarial experience 720,437 (1,162,760) Contributions to OPEB plan subsequent to the measurement date 884,163 - Total $ (1,911,660) 1,676,564 $
Contributions subsequent to the measurement date of $884,163, reported as deferred outflows of resources will be recognized as a reduction of the net OPEB liability in the upcoming fiscal year. Other amounts reported as deferred outflows or inflows of resources related to OPEB will be recognized as expense as follows:
Fiscal Year
Ended June 30
Deferred
Outflows/(Inflows)
of Resources
2023 (178,955) $
2024 (175,131)
2025 (246,074)
2026 (272,149)
2027 (82,316)
Thereafter (164,634)
$ (1,119,259)
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-60-
12. OTHER REQUIRED DISCLOSURES
Generally accepted accounting principles require disclosure of certain information concerning unrestricted net position (deficit) and fund balance (deficit).
At June 30, 2022, the following funds had the following deficit fund balances:
Governmental Funds
Transportation CIP (1,598,296) $
Miscellaneous Grants (274,080)
Non-Major:
Transportation Improvement (769,787)
Community Services Grants (33,989)
The negative fund balance amount represents expenditures incurred before June 30, 2022, which as of the financial statement date and accrual period, were not yet reimbursed.
13. RISK MANAGEMENT
The City is exposed to various risks of loss related to torts; theft of damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City self-insures against tort claims and workers' compensation exposures and purchases health benefits through the Public Employees' Retirement System.
The City is a member of the Public Entity Risk Management Authority (PERMA) for general liability, workers' compensation, and property risk financing.
Currently, the City has a Workers' Compensation Fund (an internal service fund) to account for and finance its uninsured risk of loss. Under this program, the Workers' Compensation Fund provides financing for up to a maximum of $250,000 for each accident (e.g., occurrence) and each claim for catastrophic illness. The City pools the exposure for claims in excess of the Self-Insured Retentions (S.I.R.s) from the Workers' Compensation Fund to statutory limits and for employers' liability to $5,000,000 limit of liability. Settled claims have not exceeded this commercial coverage in any of the past three years.
All funds of the City participate in the Workers' Compensation program and make payments to the Workers' Compensation Fund based on estimates of the amounts needed to pay prior and current year's claims.
The City also maintains an internal service fund for liability risk financing. Under the PERMA pooled program for general liability, the City's S.I.R. is $50,000 of each claim.
Excess liability financing includes layers of pooling and commercial excess liability insurance. Separate deposits are collected from PERMA members to cover claims between the S.I.R. and $1,000,000.
Additional reinsurance raises the limit of liability to $50,000,000 per occurrence. These deposits are subject to retrospective adjustments. Deposits are accrued based on the ultimate cost of the experience to date from members of PERMA.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-61-
13. RISK MANAGEMENT, (continued)
The City participates in PERMA's All Risks Property Protection Program, which is underwritten by a casualty insurance company. The annual premiums paid by participating member cities are based upon insured values and deductible levels and are not subject to retroactive adjustments. The City's deductible is $5,000 for all risk, $10,000 for fire trucks and $2,500 for electronic and data processing equipment.
The claim liability of $5,947,934 reported in the Government-Wide Statement of Net Position in accordance with generally accepted accounting principles, which require a liability for claims be reported if information prior to issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of loss can be reasonably estimated.
Changes in claims liability amount for fiscal years 2020, 2021 and 2022 were:
Beginning of
Fiscal Year
Liability
Current Year Claims
and Change in
Estimates
Claims
Payments
Balance at
Fiscal Year End
2019 - 2020 3,822,925 $ 327,560 $ (164,342) $ 3,986,143 $ 2020 - 2021 3,986,143 1,064,751 (221,916) 4,828,978
2021 - 2022 4,828,978 1,543,974 (425,018) 5,947,934
14. DEFINED BENEFIT PENSION PLANS
A summary of pension plans and related deferred inflows and outflows of resources which reconciles to the Statement of Net Position is as follows:
PERS - Misc PERS - Safety PARS Total
Net Pension Liability / (Asset) 26, $ 47,039,925 563,831 $ (455,792) $ 73,147,964 $ Deferred Outflows - Pension Related 5,556,341 8,800,587 - 14,356,928 Deferred Inflows - Pension Related 9,342,794 14,613,941 233,335 24,190,070 A. General Information about the Pension Plans
Plan Description
The Plan is an agent multiple-employer defined benefit pension plan administered by the California Public Employees’ Retirement System (CalPERS). A full description of the pension plan regarding number of employees covered, benefit provisions, assumptions (for funding, but not accounting purposes), and membership information are listed in the Plan’s June 30, 2020 Annual Actuarial Valuation Report (funding valuation). Details of the benefits provided can be obtained in Appendix B of the actuarial valuation report. This report and CalPERS’ audited financial statements are publicly available reports that can be obtained at CalPERS’ website.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-62-
14. DEFINED BENEFIT PENSION PLANS, (continued)
A. General Information about the Pension Plans, (continued) 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.
The Plan’s provisions and benefits in effect at June 30, 2022 are summarized as follows:
On or after
January 1, 2011
Prior to And prior to On or after
Hire Date January 1, 2011 January 1, 2013 January 1, 2013 Benefit formula 3.0% @ 60 2.5% @ 55 2.0% @ 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 Retirement age 50-60 50-55 52-62
Required employer contribution rates 11.600% 11.600% 11.600% On or after
January 1, 2011
Prior to And prior to On or after
Hire Date January 1, 2011 January 1, 2013 January 1, 2013 Benefit formula 3.0% @ 50 3.0% @ 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 Retirement age 50 50 50
Required employer contribution rates 20.000% 20.000% 20.000% Miscellaneous
Safety
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-63-
14. DEFINED BENEFIT PENSION PLANS, (continued)
A. General Information about the Pension Plans, (continued) Employees Covered
At June 30, 2020, (valuation date) the following employees were covered by the benefit terms:
Miscellaneous Safety
Inactive employees or beneficiaries
currently receiving benefits 274 203
Inactive employees entitled to but
not yet receiving benefits 194 71
Active employees 153 103
Total 621 377
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, 2022 for the miscellaneous and safety plans were $4,656,051 and $7,273,122 respectively.
B. Net Pension Liability
The City’s net pension liability for each Plan is measured as the total pension liability, less the pension plan’s fiduciary net position. The net pension liability of each of the Plans is measured as of June 30, 2021, using an annual actuarial valuation as of June 30, 2020 rolled forward to June 30, 2021 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is as follows.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-64-
14. DEFINED BENEFIT PENSION PLANS, (continued)
B. Net Pension Liability, (continued)
Actuarial Methods and Assumptions Used to Determine Total Pension Liability Miscellaneous Safety
Valuation Date June 30, 2020 June 30, 2020
Measurement Date June 30, 2021 June 30, 2021
Actuarial Cost Method Entry Age Normal Entry Age Normal Asset Valuation Method Market Value of Assets Actuarial Value of Assets Actuarial Assumptions
Discount Rate 7.15% 7.15%
Inflation 2.50% 2.50%
Salary Increases Varies by Entry Age and Service Varies by Entry Age and Service Mortality Rate Table (1) Derived using CALPERS' Derived using CALPERS' membership data for all Funds membership data for all Funds Post Retirement Benefit Increase
(1) The mortality table used was developed based on CalPERS’ specific data. The probabilities of mortality are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015. Pre-retirement and Post-retirement mortality rates include 15 years of projected mortality improvement using 90% of Scale MP-2016 published by the Society of Actuaries. For more details on this table, please refer to the CalPERS Experience Study and Review of Actuarial Assumptions report from December 2017 that can be found on the CalPERS website.
The lesser of contract COLA or
2.50% until Purchasing Power
Protection Allowance floor on
purchasing power applies, 2.50%
thereafter.
The lesser of contract COLA or
2.50% until Purchasing Power
Protection Allowance floor on
purchasing power applies, 2.50%
thereafter.
All other actuarial assumptions used in the June 30, 2020 valuation were based on the results of an actuarial experience study for the period from 1997 to 2015, including updates to salary increase, mortality and retirement rates. The Experience Study report can be obtained at CalPERS’ website, at www.calpers.ca.gov.
Long-term Expected Rate of Return
The long-term expected rate of return on pension plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.
In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Using historical returns of all of the funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11+ years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the rounded single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equal to the single equivalent rate calculated above and adjusted to account for assumed administrative expenses.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-65-
14. DEFINED BENEFIT PENSION PLANS, (continued)
B. Net Pension Liability, (continued)
The expected real rates of return by asset class are as follows:
Asset Class1
Current Target
Allocation
Real Return
Years 1 - 102
Real Return
Years 11+3
Public equity 50.0% 4.80% 5.98%
Fixed income 28.0% 1.00% 2.62%
Inflation assets - 0.77% 1.81%
Private equity 8.0% 6.30% 7.23%
Real assets 13.0% 3.75% 4.93%
Liquidity 1.0% - (0.92%)
2 An expected inflation of 2.0% used for this period
3 An expected inflation of 2.92% used for this period
1 In the System's ACFR, fixed income is included in global debt securities; liquidity is included in short-term investments; inflation assets are included in both global equity securities and global debt securities.
Change of Assumptions
There was no change of assumptions for measurement date June 30, 2021.
Discount Rate
The discount rate used to measure the total pension liability was 7.15%. 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
On July 12, 2021, CalPERS reported a preliminary 21.3% net return on investments for fiscal year 2020-21. Based on the thresholds specified in CalPERS Funding Risk Mitigation policy, the excess return of 14.3% prescribes a reduction in investment volatility that corresponds to a reduction in the discount rate used for funding purposes of 0.20%, from 7.00% to 6.80%. Since CalPERS was in the final stages of the four-year Asset Liability Management (ALM) cycle, the board elected to defer any changes to the asset allocation until the ALM process concluded, and the board could make its final decision on the asset allocation in November 2021.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-66-
14. DEFINED BENEFIT PENSION PLANS, (continued)
B. Net Pension Liability, (continued)
On November 17, 2021, the board adopted a new strategic asset allocation. The new asset allocation along with the new capital market assumptions, economic assumptions and administrative expense assumption support a discount rate of 6.90% (net of investment expense but without a reduction for administrative expense) for financial reporting purposes. This includes a reduction in the price inflation assumption from 2.50% to 2.30% as recommended in the November 2021 CalPERS Experience Study and Review of Actuarial Assumptions. This study also recommended modifications to retirement rates, termination rates, mortality rates and rates of salary increases that were adopted by the board. These new assumptions will be reflected in the GASB 68 accounting valuation reports for the June 30, 2022, measurement date.
Pension Plan 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.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-67-
14. DEFINED BENEFIT PENSION PLANS, (continued)
C. Changes in Net Pension Liability
The following tables show the changes in net pension liability recognized over the measurement period for each plan.
Miscellaneous Plan:
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability
(a) (b) (c)=(a)-(b)
Balance at: 6/30/2020 (VD) $ 82,383,227 120,850,595 $ 38,467,368 $ Changes Recognized for the
Measurement Period
• Service Cost 1,895,297 - 1,895,297
• Interest on the Total Pension
Liability 8,555,981 - 8,555,981
• Differences between Expected and
Actual Experience 1,305,190 - 1,305,190
• Changes of Assumptions - - -
• Net plan to plan resource movement - -
• Contributions from the Employer - 4,230,939 (4,230,939) • Contributions from the Employee - 852,004 (852,004)
• Net Investment Income - 18,659,358 (18,659,358)
• Benefit Payments, including
Refunds of Employee Contributions (6,878,738) (6,878,738) - • Administrative Expense - (82,296) 82,296
• Other miscellaneous expense - - -
Net Change during 2020-21 16,781,267 4,877,730 (11,903,537) Balance at: 6/30/2021 (MD) $ 99,164,494 125,728,325 $ 26,563,831 $ Increases (Decreases)
Valuation Date (VD), Measurement Date (MD).
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-68-
14. DEFINED BENEFIT PENSION PLANS, (continued)
C. Changes in Net Pension Liability, (continued)
Safety Plan:
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability
(a) (b) (c)=(a)-(b)
Balance at: 6/30/2020 (VD) $ 130,081,304 196,329,137 $ 66,247,833 $ Changes Recognized for the
Measurement Period
• Service Cost 3,343,416 - 3,343,416
• Interest on the Total Pension Liability 13,814,851 - 13,814,851 • Differences between Expected and
Actual Experience 721,003 - 721,003
• Changes of Assumptions - - -
• Net plan to plan resource movement - - -
• Contributions from the Employer - 6,493,887 (6,493,887) • Contributions from the Employee - 1,350,773 (1,350,773) • Net Investment Income - 29,372,461 (29,372,461)
• Benefit Payments, including Refunds
of Employee Contributions (11,014,303) (11,014,303) -
• Administrative Expense - (129,943) 129,943
• Other miscellaneous expense - - -
Net Change during 2020-21 26,072,875 6,864,967 (19,207,908) Balance at: 6/30/2021 (MD) $ 156,154,179 203,194,104 $ 47,039,925 $ Increases (Decreases)
Valuation Date (VD), Measurement Date (MD).
Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability for each Plan as of the measurement date, calculated using the discount rate of 7.15 percent, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower (6.15 percent) or 1 percentage-point higher (8.15 percent) than the current rate:
Discount Rate - 1% Current Discount Discount Rate + 1%
(6.15%) Rate (7.15%) (8.15%)
Miscellaneous Plan's
Net Pension Liability 41,566,551 $ 26,563,831 $ 14,038,192 $ Safety Plan's Net
Pension Liability 74,129,174 47,039,925 24,797,061
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-69-
14. DEFINED BENEFIT PENSION PLANS, (continued)
C. Changes in Net Pension Liability, (continued)
Amortization of Deferred Outflows and Deferred Inflows of Resources Under GASB 68, gains and losses related to changes in total pension liability and fiduciary net position are recognized in pension expense systematically over time.
The first amortized amounts are recognized in pension expense for the year the gain or loss occurs.
The remaining amounts are categorized as deferred 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:
Difference between projected
and actual earnings
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
D. Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions
As of the start of the measurement period (July 1, 2020), the net pension liability for the Miscellaneous and Safety Plans is $38,467,368 and $66,247,833, respectively.
For the measurement period ending June 30, 2021 (the measurement date), the City of La Mesa incurred a pension expense of $1,976,316 and $3,844,745 for the Miscellaneous and Safety Plans, respectively. A complete breakdown of the pension expense is as follows:
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-70-
14. DEFINED BENEFIT PENSION PLANS, (continued)
D. Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions, (continued)
Miscellaneous Plan:
Description Amount
Service Cost $ 1,895,297
Interest on the Total Pension Liability 8,555,981
Recognized Differences between Expected and Actual Experience 1,031,169 Recognized Changes in Assumptions -
Net Plan to Plan Resource Movement -
Employee Contributions (852,004)
Projected Earnings on Pension Plan Investments (5,814,417) Recognized Differences between Projected and Actual Earnings on Plan Investments (2,922,006) Administrative Expense 82,296
Other Miscellaneous Expense -
Total Pension Expense $ 1,976,316
Safety Plan:
Description Amount
Service Cost $ 3,343,416
Interest on the Total Pension Liability 13,814,851
Recognized Differences between Expected and Actual Experience 1,903,940 Recognized Changes in Assumptions (234,263)
Net Plan to Plan Resource Movement -
Employee Contributions (1,350,773)
Projected Earnings on Pension Plan Investments (9,180,670) Recognized Differences between Projected and Actual Earnings on Plan Investments (4,581,699) Administrative Expense 129,943
Other Miscellaneous Expense -
Total Pension Expense $ 3,844,745
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-71-
14. DEFINED BENEFIT PENSION PLANS, (continued)
D. Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions, (continued)
As of June 30, 2022, the City of La Mesa has deferred outflows and deferred inflows of resources related to pensions as follows:
Miscellaneous Plan:
Deferred Outflows Deferred Inflows
of Resources of Resources
Differences between Expected and
Actual Experience 900,290 $ - $
Changes of Assumptions - -
Net Difference between Projected and
Actual Earnings on Pension Plan
Investments - 9,342,794
Pension Contributions Subsequent to
Measurement Date 4,656,051 -
Total $ 9,342,794 5,556,341 $
Safety Plan:
Deferred Outflows Deferred Inflows
of Resources of Resources
Differences between Expected and
Actual Experience 1,527,465 $ - $
Changes of Assumptions - -
Net Difference between Projected and
Actual Earnings on Pension Plan
Investments - 14,613,941
Pension Contributions Subsequent to
Measurement Date 7,273,122 -
Total $ 14,613,941 8,800,587 $
These amounts above are net of outflows and inflows recognized in the 2020-2021 measurement period expense. Contributions subsequent to the measurement date of $4,656,051 and $7,273,122 for the Miscellaneous and Safety Plans respectively, reported as 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:
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-72-
14. DEFINED BENEFIT PENSION PLANS, (continued)
D. Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions, (continued)
Miscellaneous Plan:
Measurement Period
Deferred
Outflows/(Inflows) of
Ended June 30: Resources
2022 (1,730,112) $
2023 (1,900,405)
2024 (2,242,998)
2025 (2,568,989)
2026 -
Thereafter -
Safety Plan:
Measurement Period
Deferred
Outflows/(Inflows) of
Ended June 30: Resources
2022 (2,787,020) $
2023 (2,895,683)
2024 (3,365,414)
2025 (4,038,359)
2026 -
Thereafter -
E. Payable to the Pension Plan
At June 30, 2022, the City of La Mesa reported a payable of $0 for the outstanding amount of contributions to the pension plans required for the year ended June 30, 2022.
15. RETIREMENT ENHANCEMENT PLAN
A. PARS Retirement Enhancement Plan
Plan Description
The plan is an enhanced agent pension plan administered, an agent multiple employer plan, by Public Agency Retirement Services (PARS). The plan enhancement was designed to provide a retirement factor of 3.0% at 60. At the time the plan was implemented, the CalPERS benefit only extended to 2.0% at 55. The plan was closed on January 13, 2006 when employees voted to change to the 3.0% at 60 benefit formula through CalPERS. At this time the nature of the plan changed, and the participants were divided into three groups, those that were already retired and receiving the defined benefit of the enhancement plan, those that are currently inactive and will not receive a defined benefit payment but do have their contributions set aside and available at retirement, and one active employee.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-73-
15. RETIREMENT ENHANCEMENT PLAN, (continued)
A. PARS Retirement Enhancement Plan, (continued)
Benefits Provided
The benefit provided by PARS is equal to a percentage of the highest pay multiplied by years of service, with the percentage varying by retirement age based on a modified 3.0% target offset by CalPERS 3.0% at 60 formula for current actives. There are no active participants and twenty-one Drafformer employees who retired with PARS or are currently considered inactive. Benefits are increased by a 2% annual COLA after retirement. The plan has been closed to new entrants since January 7, 2006. Employees that elected to change over to the CalPERS 3.0% at 60 formula will receive their contributions made to the plan in a lump sum payment upon retirement.
The Plan’s provisions and benefits in effect at June 30, 2021, (measurement date) are summarized as follows:
Group I Group II Group III
Terminate before Inactive employees Active
Hire Date January 13, 2006 Not yet retired Employee
Benefit formula Modified 3.0% @ 60 Closed Plan Modified 3.0% @ 60 Benefit vesting schedule City CalPERS Service Vested City CalPERS Service Benefit payments
monthly for life-offset by
CalPERS Benefit at Retirement Accumulated Contributions monthly for life-offset by
CalPERS Benefit at Retirement
Retirement age 55-63 55-60 55-60
Monthly benefits, as a % of eligible compensation
combined with CalPERS 2.5%-3.0% N/A 2.7%-3.0%
Required employee contribution rates N/A N/A 1.5%
Required employer contribution rates Closed group-Normal Cost Closed Program Closed group-Normal Cost Employees Covered
At January 1, 2021 (valuation date), the following employees were covered by the benefit terms:
PARS
Inactive employees or beneficiaries
currently receiving benefits 18
Inactive employees entitled to but
not yet receiving benefits 3
Active employees -
Total 21
Contributions
The annual contribution for the PARS plan is determined on an actuarial basis. For the measurement period ended June 30, 2021 (the measurement date), the active employee contribution rate for the plan is 1.5% of annual pay. There are, however, no longer any active employees under this plan. The employer contributes an amount determined by an actuarial study performed at least every two years as long as the Plan exists. This is a closed plan.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-74-
15. RETIREMENT ENHANCEMENT PLAN, (continued)
A. PARS Retirement Enhancement Plan, (continued)
Contributions (continued)
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, 2021, using an annual actuarial valuation as of January 1, 2021 rolled forward to June 30, 2021 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is as follows.
B. Net Pension Liability
Actuarial Methods and Assumptions Used to Determine Total Pension Liability For the measurement period ended June 30, 2021 (the measurement date), the total pension liability was determined by rolling forward the January 1, 2021 total pension liability. The June 30, 2020 and June 30, 2021 total pension liabilities were based on the following actuarial methods and assumptions:
PARS
Valuation Date January 1, 2021
Measurement Date June 30, 2021
Actuarial Cost Method Entry Age Normal, Level % of Pay
Asset Valuation Method Investment gains and losses spread over 5-year rolling period
Actuarial Assumptions
Discount Rate 5.50% at June 30, 2021, and 6.00% at June 30, 2020 Inflation 2.50%
Mortality Rate Table Mortality projected fully generational with Scale MP-2020 Discount Rate
The discount rate used to measure the total pension liability was 5.50%. Discount rate was updated based on newer capital market assumptions. The City chose a Moderate Risk Investment Strategy when setting up this plan. The current 5.50% discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The long-term expected discount rate of 5.50% is applied to the plan. Administrative expenses are expected to be 0.6% of assets, this is added to the discount rate bringing the Expected Long-Term Net Rate of Return to 5.50%.
According to Paragraph 30 of Statement 68, the long-term discount rate should be determined without reduction for pension plan administrative expense. The 5.50% investment return assumption used in this accounting valuation is net of administrative expenses. Administrative expenses are assumed to be 0.6% of assets. An investment return excluding administrative expenses would have been 6.56%. Using this lower discount rate has resulted in a slightly higher total pension liability and net pension liability. This difference was deemed immaterial to the plan.
Refer to the sensitivity of the net pension liability to changes in the discount rate section of this note, which provides information on the sensitivity of the net pension liability to changes in the discount rate.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-75-
15. RETIREMENT ENHANCEMENT PLAN, (continued)
B. Net Pension Liability, (continued)
The following table reflects long-term expected real rate of return by asset class. Approximate expected real rates of return provided by Bartel Associates’ 2017 capital market assumptions which are based on a survey of various investment advisors’ expected asset class returns. These geometric rates of return are net of administrative expenses.
PARS Moderate Investment Policy
Target
Allocation
PARS -
Moderate
Expected
Real
Return
Global Equity 48.25% 4.56%
Fixed Income 45.00% 0.78%
REITs 1.75% 4.06%
Cash 5.00% -0.50%
Assumed Long-Term Rate of Inflation 2.50%
Expected Long-Tern Net Rate of Return, Rounded 5.50%
Pension Plan 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 the City’s GASB 68 Employer Accounting Information report. 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 each plan.
Investments are reported at fair value.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-76-
15. RETIREMENT ENHANCEMENT PLAN, (continued)
C. Changes in the Net Pension Liability
The following table shows the changes in net pension liability recognized over the measurement period.
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability/(Asset)
(a) (b) (c)=(a)-(b)
Balance at 6/30/2019 (MD) $ 2,495,825 2,412,244 $ (83,581) $ Changes Recognized for the
Measurement Period
• Service Cost - -
• Interest on the Total Pension
Liability 138,733 138,733
• Changes of Benefit Terms - -
• Differences between Expected and
Actual Experience 17,508 17,508
• Changes of Assumptions 60,325 60,325
• Contributions from the Employer - 125,000 (125,000)
• Contributions from the Employee - - -
• Net Investment Income - 472,636 (472,636)
• Benefit Payments, including
Refunds of Employee Contributions. (200,051) (200,051) - • Administrative Expenses - (8,859) 8,859
Net Change during 2019-20 388,726 16,515 (372,211)
Balance at: 6/30/2020 (MD) $ 2,884,551 2,428,759 $ (455,792) $ Increases (Decreases)
Measurement Date (MD)
Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability of the Plan as of the measurement date, calculated using the discount rate of 5.50 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 (4.50 percent) or 1 percentagepoint higher (6.50 percent) than the current rate:
Discount Rate - 1% Current Discount Discount Rate + 1%
(4.50%) Rate (5.50%) (6.50%)
PARS Plan's Net Pension
Liability/(Asset) (247,509) $ (455,792) $ (636,843) $
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-77-
15. RETIREMENT ENHANCEMENT PLAN, (continued)
C. Changes in the Net Pension Liability, (continued)
Subsequent Events
There were no subsequent events that would materially affect the results presented in this disclosure.
Recognition of Gains and Losses
Under GASB 68, gains and losses related to changes in total pension liability and fiduciary net position are recognized in pension expense systematically over time. The first amortized amounts are recognized in pension expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred 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:
Difference between
projected and
actual earnings
5 year straight-line amortization
All other amounts Straight-line amortization over the average expected remaining service lives of all
members that are provided with benefits
(active, inactive and retired) as of the
beginning of the measurement period
The expected average remaining service lifetime (EARSL) is calculated by dividing the total future service years by the total number of plan participants (active, inactive, and retired).
The EARSL for the Plan for the 2020-21 measurement period is 0.0 years, which was obtained by dividing the total service years of 0 (the sum of the remaining service lifetimes of the active employee) by 21 (the total number of participants: active, inactive, and retired). The reason the EARSL is 0 is that this is a closed plan and there are no active employees with no remaining service life. The last active employee left the City in fiscal year 2018. There are 21 total covered employees. Inactive employees and retirees have remaining service lifetimes equal to 0. Total future service is based on the members’ probability of decrementing due to an event other than receiving a cash refund.
As of the start of the measurement period (July 1, 2021), the net pension asset is $83,581.
For the measurement period ending June 30, 2021 (the measurement date), the City of La Mesa incurred pension expense of $17,047 for the Plan. A complete breakdown of the pension income is as follows:
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
-78-
15. RETIREMENT ENHANCEMENT PLAN, (continued)
D. Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions
Description Amount
Service Cost - $
Interest on the Total Pension Liability 138,733
Projected Earnings on Investments (146,047)
Employee Contributions -
Administrative Expenses 8,859
Experience 17,508
Assumptions 60,325
Asset returns (62,331)
Total Pension Expense (Income) $ 17,047
As of June 30, 2022, the City of La Mesa has deferred outflows and deferred inflows of resources related to pensions as follows:
Deferred Outflows Deferred Inflows
of Resources of Resources
Net Difference between Projected and
Actual Earnings on Pension Plan
Investments - $ 233,335 $
Pension Contributions Subsequent to
Measurement Date - -
Total $ 233,335 - $
These amounts above are net of outflows and inflows recognized in the 2020-2021 measurement period expense. Contributions subsequent to the measurement date of $0.00 reported as 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:
Fiscal Year
Deferred
Outflows/(Inflows) of
Ended June 30: Resources
2023 (53,758) $
2024 (56,450)
2025 (57,810)
2026 (65,317)
2027 -
Thereafter -
E. Payable to the Pension Plan
At June 30, 2022, the City of La Mesa reported a payable of $0 for the outstanding amount of contributions to the pension plan required for the year ended June 30, 2022.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
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16. COMMITMENTS AND CONTINGENCIES
Lawsuits in the Normal Course of Business
The City is presently involved in certain matters of litigation that have arisen in the normal course of conducting City business. The City incurred a significant settlement in February 2023, which was fully covered by insurance. There is no residual liability to the City. City management believes, based upon consultation with the City Attorney, that other outstanding cases, in the aggregate, are not expected to result in a material adverse financial impact on the City. Additionally, City management believes that the City's insurance programs are sufficient to cover any potential losses should an unfavorable outcome materialize.
17. RELATED PARTY TRANSACTIONS
On November 25, 2008, the City entered into a Purchase and Sale Agreement with the Redevelopment Agency to sell certain real property located at 8181 Allison Avenue, La Mesa, California at the appraised value of $8,350,000 for the purposes of increasing, improving and preserving the community's supply of housing available at affordable cost to persons and families of low or moderate income. The Agency made an initial payment of $1,000,000 at closing and issued a promissory note to the City for $7,350,000.
The outstanding balance was transferred from the Agency to the Successor Agency on February 1, 2012 as part of the dissolution of redevelopment. At June 30, 2022, the outstanding balance of the advances from the City to the Successor Agency relating to this transaction was $5,300,000.
On August 23, 2012, the City of La Mesa acting as Successor Agency filed the Recognized Obligation Payment Schedule (ROPS III) for the January through June 2013 time period. As it had been for all previous ROPS, included on the ROPS III was the outstanding loan balance ($5,300,000 at June 30, 2012) for the Police Station Land Sale between the General Fund and the Successor Agency and the related annual debt service ($750,000 per year). The Department of Finance denied the debt on the ROPS III as an enforceable obligation, despite approving it on all previous ROPS, stating:
HSC section 34171 (d) defines enforceable obligations. Based on our review and application of the law, Item No.5- a loan agreement between the City of La Mesa (City) and the Agency in the amount of $5.3 million is not an enforceable obligation. The loan was used to purchase the land under the police station. HSC section 34171 (d) (2) states that agreements between the City and the Agency are not enforceable.
The City requested a Meet and Confer with the Department of Finance, which was held on November 21, 2012. On December 19, 2012, the City received a determination from the Department of Finance that upheld the original determination to deny both the outstanding loan balance and related annual debt service as enforceable obligations. However, on December 7, 2017, the Oversight Board for the Successor Agency approved a repayment schedule in accordance with the maximum repayment amounts specified in the Dissolution Law including H&S Code Section 34191.4(b)(3) until the loan is repaid in full. On January 23, 2018, the Department of Finance issued a Determination Letter, approving the loan balance of $5,300,000. Repayments of this loan will begin after other Deferrals listed on the ROPS are repaid.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
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18. SUCCESSOR AGENCY
On December 29, 2011, the California Supreme Court upheld Assembly Bill 1X 26 (“the Bill”) that provides for the dissolution of all redevelopment agencies in the State of California. This action impacted the reporting entity of the City of La Mesa that previously had reported a redevelopment agency within the reporting entity of the City as a blended component unit.
In accordance with the Bill, on January 10, 2012, the City Council elected to become the Successor Agency for the former redevelopment agency in accordance with the Bill as part of City resolution. The Successor Agency is subject to the control of the oversight board and remaining assets can only be used to pay enforceable obligations in existence at the date of dissolution of the redevelopment agency (including the completion of any unfinished projects that were subject to legally enforceable contractual commitments).
In future fiscal years, successor agencies will only be allocated revenue in the amount that is necessary to pay the estimated annual installment payments on enforceable obligations of the former redevelopment agency until all enforceable obligations of the prior redevelopment agency have been paid in full and all assets have been liquidated.
19. SUCCESSOR AGENCY LONG-TERM DEBT
In accordance with the provisions of the Bill and the California Supreme Court’s decision to uphold the Bill, the obligations of the former redevelopment agency became vested with the funds established for the successor agency upon the date of dissolution, February 1, 2012. Former tax increment revenues pledged to fund the debts of the former redevelopment agency will be distributed to the Successor Agency subject to the reapportionment of such revenues as provided by the Bill.
The debt of the Successor Agency as of June 30, 2022 was as follows:
Balance Balance Due Within Due in More
June 30, 2021 Additions Deletions June 30, 2022 One Year Than One Year Bonds payable:
1998-1 AD improvement bonds $ 1,395,000 $ - $ (440,000) $ 955,000 $ 465,000 $ 490,000 Total $ 1,395,000 $ - $ (440,000) $ 955,000 $ 465,000 $ 490,000 Classification
1998-1 AD Improvement Bonds
On June 24, 1998, the City issued Assessment District No. 1998-1 Limited Obligation Improvement Bonds in the amount of $6,825,000 bearing interest rates of 4.25-5.60% with maturity dates from September 2, 1999 to 2023. The Bonds were issued to provide funding for the acquisition of certain storm drains, surface improvements, rights-of-way associated with the improvements, to pay the costs of issuance and to establish a Reserve Fund. Interest is payable on March 2 and September 2 each year commencing March 2, 1999. The outstanding balance as of June 30, 2022 was $955,000. The Successor Agency has pledged a portion of future property tax increment revenue to repay the Alvarado Creek AD 1998-1 Improvement Bonds. Total principal and interest remaining on the bonds is $1,010,632 payable through 2024.
CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022
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19. SUCCESSOR AGENCY LONG-TERM DEBT, (continued)
The annual debt service requirements for the Bonds outstanding at June 30, 2022 were as follows:
Year Ending
June 30, Principal Interest Total
2023 465,000 $ 41,544 $ 506,544 $
2024 490,000 14,088 504,088
Total $ 55,632 955,000 $ 1,010,632 $
1998-1 AD Improvement Bonds
20. RISK, UNCERTAINTIES & CONTINGENCIES
Grants
Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures that may be disallowed by the grantor cannot be determined at this time, although the government expects such amounts, if any, to be immaterial.
Successor Agency
Deductions (expenses) incurred by the Successor Agency for the year ended June 30, 2022 (and subsequent years in which the Successor Agency is in operation) are subject to review by various State agencies and the County in which the Successor Agency resides. If any expenses incurred by the Successor Agency are disallowed by the State agencies or County, the City, acting as the Successor Agency could be liable for the repayment of the disallowed costs from either its own funds or by the State withholding remittances normally paid to the City. The amount, if any, of expenses that may be disallowed by the State agencies or County cannot be determined at this time, although the Successor Agency expects such amounts, if any, to be immaterial.
In October 2014, the City received a letter from the State Controller’s Office stating that the City’s general government received an unallowable transfer of $2,409,056 in assets from the then RDA. The State Controller’s Office is requesting that the unallowable transfers be returned to the now Successor Agency.
The City continues to encumber the funds at June 30, 2022 and plans to pay off the demand.
21. PRIOR PERIOD ADJUSTMENT
The City posted a prior period adjustment to correct work in progress in prior year not included in the government-wide statements.
Governmental
Activities
Net position, beginning of year, prior to restatement 132,810,306 $ Prior period restatement 788,675
Net position, beginning of year, as restated 133,598,981 $ Government-wide Statements - Statement of Activities
REQUIRED SUPPLEMENTARY INFORMATION
CITY OF LA MESA
Required Supplementary Information
Budgetary Information
For the Year Ended June 30, 2022
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The City follows these procedures in establishing the budgetary data reflected in the financial statements:
The biennial budget adopted by the City Council provides for the general operation of the City. It includes proposed expenditures and the means of financing them. The City Council approves total budgeted appropriations and any amendments to appropriations throughout the year. All transfers between funds, departments and/or activities shall be made by the City Council except that the City Manager may, on his own initiative and without prior approval of the City Council, transfer between budget accounts within a single department or activity to any other account or appropriation, or to the reserve, amounts determined to be in excess of actual requirements.
Budget figures used in the financial statements are the final adjusted amounts. Formal budgetary integration is employed as a management control device during the year.
Commitments for materials and services, such as purchase orders and contracts, are recorded as encumbrances to assist in controlling expenditures.
Budgets for the General and Special Revenue Funds are adopted on a basis substantially consistent with generally accepted accounting principles in the United States (GAAP). Accordingly, actual revenues and expenditures can be compared with related budgetary amounts without any significant reconciling items. No budgetary comparisons are presented for the Debt Service and Capital Projects Funds since no "annual" budget is adopted for these funds. No budgetary comparisons are presented for proprietary fund types, as the City is not legally required to adopt a budget for these types of funds. Excess expenditures over appropriations were as follows:
Expenditures Appropriations Excess
General Fund:
Capital outlay 20,169 $ - $ (20,169) $
Debt service:
Principal retirement 2,306 - (2,306)
Interest and fiscal charges 123 - (123)
Miscellaneous Grants Fund:
Police 656,708 600,000 (56,708)
CITY OF LA MESA
Required Supplementary Information
Budgetary Comparison Schedule – General Fund
For the Year Ended June 30, 2022
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The following is a budget comparison schedule for the General Fund.
Variance
Actual with Final
Original Final Amounts Budget
Fund Balances - Beginning $ 53,364,673 53,364,673 $ 53,364,673 $ - $ Resources (inflows):
Property taxes 16,035,110 16,035,110 16,687,577 652,467 Other taxes 29,325,700 29,325,700 36,521,606 7,195,906
Licenses and permits 1,580,500 1,580,500 2,163,310 582,810 Fines and forfeitures 379,100 379,100 462,540 83,440
Use of money and property 1,365,920 1,365,920 (283,463) (1,649,383) Intergovernmental 1,258,120 1,258,120 2,139,554 881,434 Charges for services 1,866,100 1,866,100 2,557,339 691,239 Other revenues 145,490 145,490 142,126 (3,364)
Transfers from other funds - 3,090,200 2,644,716 (445,484) Amount available for appropriations 105,320,713 108,410,913 116,399,978 7,989,065 Charges to appropriations (outflows):
General government 7,974,070 10,711,302 7,350,118 3,361,184 Police 22,495,300 22,648,231 21,796,432 851,799
Fire 13,518,930 13,605,129 13,541,283 63,846
Public works 10,339,590 10,709,620 8,751,602 1,958,018
Community development 2,675,110 3,152,597 2,441,496 711,101 Community services 1,992,590 2,006,760 1,949,538 57,222 Capital outlay - - 20,169 (20,169)
Debt service:
Principal retirement - - 2,306 (2,306)
Interest and fiscal charges - - 123 (123)
Transfers to other funds - 2,100,390 1,583,148 517,242
Proceeds from lease - - (20,169) 20,169
Total charges to appropriations 58,995,590 64,934,029 57,416,046 7,517,983 Fund Balances - Ending $ 43,476,884 46,325,123 $ 58,983,932 $ 15,507,048 $ Budgeted Amounts
CITY OF LA MESA
Required Supplementary Information
Budgetary Comparison Schedule – Housing Asset Fund
For the Year Ended June 30, 2022
‐84-
The following is a budget comparison schedule for the Housing Asset Fund.
Variance
Budgeted Amounts Actual with Final
Original Final Amounts Budget
Fund Balances - Beginning $ 10,202,170 10,202,170 $ 10,202,170 $ - $ Resources (inflows):
Use of money and property 2,980 2,980 (59,177) (62,157) Intergovernmental 1,021,160 1,021,160 1,021,154 (6)
Other revenues 25,000 25,000 93,546 68,546
Amount available for appropriations 11,251,310 11,251,310 11,257,693 6,383 Charges to appropriations (outflows):
Community development 219,570 267,880 222,110 45,770
Total charges to appropriations 219,570 267,880 222,110 45,770 Fund Balances - Ending $ 10,983,430 11,031,740 $ 11,035,583 $ 52,153 $ Note: Budgeted Fund Balances include only available amounts while Actual Fund Balances include both available and restricted amounts.
CITY OF LA MESA
Required Supplementary Information
Budgetary Comparison Schedule – Miscellaneous Grants Fund For the Year Ended June 30, 2022
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The following is a budget comparison schedule for the Miscellaneous Grants Fund.
Variance
Budgeted Amounts Actual with Final
Original Final Amounts Budget
Fund Balances (Deficit) - Beginning $ (77,922) (77,922) $ (77,922) $ - $ Resources (inflows):
Intergovernmental 5,413,290 5,413,290 727,083 (4,686,207) Amount available for appropriations 5,335,368 5,335,368 649,161 (4,686,207) Charges to appropriations (outflows):
Police 600,000 600,000 656,708 (56,708)
Community development 385,200 862,783 266,533 596,250
Total charges to appropriations 985,200 1,462,783 923,241 539,542 Fund Balances (Deficit) - Ending $ 3,872,585 4,350,168 $ (274,080) $ (4,146,665) $
CITY OF LA MESA
Required Supplementary Information Schedules of Changes in Net Pension Liability and Related Ratios Last Ten Years* ‐86-
Miscellaneous Plan
6/30/2014 6/30/2015 6/30/2016 6/30/2017 6/30/2018 6/30/2019 6/30/2020 6/30/2021
TOTAL PENSION LIABILITY
Service Cost $ 1,605,289 1,725,483 $ 1,587,287 $ 1,736,333 $ 1,745,608 $ 1,735,047 $ 1,821,665 $ 1,895,297 $ Interest on Total Pension Liability 6,823,080 6,602,641 7,124,332 7,316,806 7,602,090 7,944,529 8,219,050 8,555,981 Difference Between Expected and Actual Experience - (1,101,092) 263,533 (5,847) 1,300,541 1,569,003 507,760 1,305,190 Changes of Assumptions (1,539,484) - - 5,617,856 (661,183) - - - Benefit Payments, Including Refunds of Employee Contributions (4,351,133) (4,592,998) (4,896,950) (5,490,512) (5,923,785) (6,320,349) (6,462,046) (6,878,738) Net Change in Total Pension Liability 3,976,991 1,194,795 4,078,202 9,174,636 4,063,271 4,928,230 4,086,429 4,877,730 Total Pension Liability - Beginning 89,348,041 93,325,032 94,519,827 98,598,029 107,772,665 111,835,936 116,764,166 120,850,595 Total Pension Liability - Ending (a) 93,325,032 94,519,827 98,598,029 107,772,665 111,835,936 116,764,166 120,850,595 125,728,325
PLAN FIDUCIARY NET POSITION
Contributions - Employer 2,233,832 2,018,839 2,553,613 2,693,445 3,000,728 3,398,605 3,871,245 4,230,939 $ Contributions - Employee 699,783 793,357 727,594 761,773 739,434 751,231 790,692 852,004 Net Investment Income 1,548,306 10,477,342 378,797 7,561,152 6,214,843 5,041,276 4,031,596 18,659,358 Benefit Payments, Including Refunds of Employee Contributions (4,351,133) (4,592,998) (4,896,950) (5,490,512) (5,923,785) (6,320,349) (6,462,046) (6,878,738) Net Plan to Plan Resource Movement - - - - (180) - - -
Administrative Expense (78,335) - (42,421) (100,879) (114,925) (55,269) (113,154) (82,296) Other Miscellaneous Income/(Expense) - - - - (218,244) 180 - - Net Change in Fiduciary Net Position 8,938,405 (189,412) (1,279,367) 5,424,979 3,697,871 2,815,674 2,118,333 16,781,267 Plan Fiduciary Net Position - Beginning 60,856,744 69,795,149 69,605,737 68,326,370 73,751,349 77,449,220 80,264,894 82,383,227 Plan Fiduciary Net Position - Ending (b) 69,795,149 69,605,737 68,326,370 73,751,349 77,449,220 80,264,894 82,383,227 99,164,494 Plan Net Position Liability - Ending (a) - (b) 23,529,883 $ 24,914,090 $ 30,271,659 $ 34,021,316 $ 34,386,716 $ 36,499,272 $ 38,467,368 $ 26,563,831 $ Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 74.79% 73.64% 69.30% 68.43% 69.25% 68.74% 68.17% 78.87%Covered Payroll $ 9,805,687 9,338,814 $ 10,775,401 $ 10,782,250 $ 9,713,133 $ 10,004,158 $ 9,771,136 $ 9,799,062 $ Plan Net Pension Liability as a Percentage of Covered Payroll 251.96% 254.08% 280.93% 315.53% 354.02% 364.84% 393.68% 271.09%Notes to Schedule:* Measurement period 2013-14 (fiscal year 2015) was the 1st year of implementation.
Measurement date
Changes in Assumptions: There were no assumption changes for 2021. For 2020, the Plan adopted a new amortization policy effective with the 2019 actuarial valuation. The new amortization policy shortens the period over which actuarial gains and losses are amortized from 30 years to 20 years with the payments computed as a level dollar amount. In addition, the new policy does not utilize a five-year ramp-up and ramp-down on UAL bases attributable to assumption changes and non-investment gains/losses. The new policy also does not utilize a five-year ramp-down on investment gains/losses. These changes apply only to new UAL bases established on or after June 30, 2019. There were no changes in assumptions in 2019. In 2018, demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and Review of Actuarial Assumptions December 2017. There were no changes in the discount rate in 2019. In 2017, the accounting discount rate was reduced from 7.65 percent to 7.15 percent. In 2016, there were no changes in the discount rate. In 2015, amounts reported reflect an adjustment of the discount rate from 7.5 percent (net of administrative expense) to 7.65 percent (without a reduction for pension plan administrative expense). In 2014, amounts reported were based on the 7.5 percent discount rate.Changes in Benefit Terms: There were no changes to benefit terms that applied to all members of the Public Agency Pool. Additionally, the figures above do not include any liability impact that may have resulted from Golden Handshakes that occurred after the June 30, 2020 valuation date, unless the liability impact is deemed to be material to the Public Agency Pool.