La Mesa City Council
April 22, 2025

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impractical or extremely difficult to fix the amount of such damages. Therefore, the Parties agree that, in the event of a breach of either of these provisions, the Party in breach shall pay to the impacted parties the sum of $10,000 per shift from the time the arbitrator determines that a delay has occurred until the arbitrator determines that the project is no longer disrupted. If the breaching party is a Union, the liquidated damages will be paid to the Prime Contractor and other affected Contractors as determined by the Arbitrator. If the breaching party is a Contractor, the liquidated damages will be apportioned among the affected employees and the benefit funds as determined by the Arbitrator. The payment of liquidated damages, when made, shall constitute a damages remedy for the delay specified, but shall not prevent the impacted party or parties from seeking an injunction or equitable relief, including termination of this PLA. Payment of these sums as liquidated damages is not intended as a forfeiture or penalty within the meaning of California Civil Code sections 3275 or 3369, but instead, is intended to constitute liquidated damages to the affected party or parties pursuant to section 1671 of the California Civil Code.

Section 7.9 Payroll and Benefit Delinquencies. Notwithstanding other provisions of this PLA, it shall not be a violation of this PLA for any Union to withhold the services of its members from a Contractor who fails to timely pay its weekly payroll in accordance with the applicable Schedule A, or fails to make timely payments to the applicable Union benefit funds. This Section 7.9 does not inhibit or affect responsibilities of the Council and the Union under Section 7.1 to refrain from picketing or other disruption of Covered Projects.

Prior to withholding its members' services for the Contractor's failure to meet its weekly payroll, the Union shall give at least five (5) calendar days written notice of such failure to pay by certified mail, and by facsimile or email transmission to the involved Contractor, Prime Contractor and Project Labor Coordinator. The Prime Contractor, together with the involved Contractor and affected Union, shall meet within five (5) working days after the written notice of such failure to pay was sent to attempt to resolve the payroll delinquency. If the payroll delinquency remains unresolved, then the affected Union may withhold the services of its members from the involved Contractor. Upon the payment of all monies due and then owing for wages, the Union shall direct its members to immediately return to work and the Contractor shall return all such members back to work.

Prior to withholding its members' services for the Contractor's failure to make timely payments to the applicable Union benefit funds, the Union shall give at least thirty (30) days written notice of such failure to pay by certified mail, and by facsimile or email transmission to the involved Contractor, the Prime Contractor

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and Project Labor Coordinator. The Prime Contractor, together with the involved Contractor and affected Union, shall meet within five (5) working days after the written notice of such failure to pay was sent to attempt to resolve the delinquency. If the delinquency remains unresolved, then the affected Union may withhold the services of its members from the involved Contractor. Upon payment by the delinquent Contractor of all monies due and then owing for employee benefit contributions, the Union shall direct its members to immediately return to work and the Contractor shall return all such members back to work.

Nothing in this section should be construed to prevent the Union having jurisdiction over the involved work from submitting a grievance under the procedures of Article 10 for any alleged or actual violations of Article 6 or referring any alleged or actual prevailing wage violation to the Project Labor Coordinator and Department of Labor Relations for review and enforcement, in accordance with Section 6.4.

The Public Agency shall have the right to replace any delinquent Contractor in accordance with the terms and conditions of the applicable prime contract with the Public Agency and applicable law.

The Public Agency is not liable for any unpaid benefits or wages, or damages that flow from non-payment of either, regardless of any action or failure to act by the Public Agency.

ARTICLE 8

WORK ASSIGNMENTS AND JURISDICTIONAL DISPUTES
Section 8.1 No Jobsite Disruption. There will be no strikes, work stoppages, picketing, sympathy strikes, slowdowns, or other interference with the work because of jurisdictional disputes between Unions. The assignment of work will be solely the responsibility of the Contractor performing the work involved; and such work assignments will be in accordance with the Plan for Settlement of Jurisdictional Disputes in the Construction Industry (the “Plan”) or any successor Plan.

Section 8.2 All jurisdictional disputes on this project shall be settled and adjusted according to the present Plan established by the Building and Construction Trades Department or any other plan or method of procedure that may be adopted by the Building and Construction Trades Department. Decisions rendered shall be final and binding and conclusive on the Contractors and Unions party to this PLA.

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All jurisdictional disputes shall be resolved without the occurrence of any of the activities prohibited in Article 7 (Work Stoppages and Lockouts), and the Contractor’s assignment shall be adhered to until the dispute is resolved.

Individuals violating this section shall be subject to immediate discharge.

Section 8.2.1 If a dispute arising under this Article involves the Southwest Regional Council of Carpenters or any of its subordinate bodies, an arbitrator shall be chosen by the procedures specified in Article V, Section 5, of the Plan from a list composed of Thomas Pagan, Thomas Angelo, Robert Hirsch, and John Kagel, and the arbitrator’s hearing on the dispute shall be held at the offices of the Council within fourteen (14) days of the selection of the arbitrator. All other procedures shall be as specified in the Plan.

Section 8.3 Failure to Comply. If any Union or Contractor fails to immediately and fully comply with the final decision rendered by the Plan, affected Union(s) or Contractor(s) may seek legal redress for such conduct, including, but not limited to, injunctive relief and/or damages.

Section 8.4 Labor Pre-job Conference. It is required that a pre-job conference be held not later than fourteen (14) calendar days prior to the start of work by each Contractor for the Project in accordance with the procedure described in Article 16.

ARTICLE 9

MANAGEMENT RIGHTS
Section 9.1 Contractor and Public Agency Rights. The Contractors and the Public Agency have the sole and exclusive right and authority to oversee and manage construction operations on Covered Projects without any limitations unless expressly limited by a specific provision of this PLA. In addition to the following and other rights of the Contractors enumerated in this PLA, the Contractors expressly reserve their management rights and all the rights conferred upon them by law. The Contractor's rights include, but are not limited to, the right to:
(a) Plan, direct, and control operations of all work; and (b) Hire, promote, transfer, and lay off their own employees, respectively, as deemed appropriate to satisfy work and/or skill requirements; and (c) Promulgate and require all employees to observe reasonable job rules and security and safety regulations; and

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(d) Discharge, suspend, or discipline their own employees for just cause; and (e) Utilize, in accordance with Public Agency approval, any work methods, procedures, or techniques, and select, use, and install any types or kinds of materials, apparatus, or equipment, regardless of source of manufacture or construction; and
(f) Assign and schedule work at their discretion; and
(g) Assign overtime, determine when it will be worked and the number and identity of employees engaged in such work, subject to such provisions in the applicable Schedule A(s) requiring such assignments be equalized or otherwise made in a nondiscriminatory manner.

Section 9.2 Specific Public Agency Rights. In addition to the following and other rights of the Public Agency and Prime Contractor enumerated in this PLA, the Public Agency expressly reserves its management rights and all the rights conferred on it by law and contract. Public Agency’s rights (and those of the Project Labor Coordinator on its behalf) include, but are not limited to the right to:
(a) Inspect any construction site or facility to ensure that the Contractor follows the applicable safety and other work requirements; and (b) At its sole option, terminate, delay, and/or suspend any and all portions of Covered Projects at any time; prohibit some or all work on certain days or during certain hours of the day to accommodate the ongoing operations of the Public Agency and/or to mitigate the effect of ongoing Covered Work on businesses and residents in the neighborhood of the Covered Project sites; and/or require any other operational or schedule changes it deems necessary, in its sole judgment, to meet Project deadlines and remain a good neighbor to those in the area of the Covered Project. (In order to permit the Contractors and Unions to make appropriate scheduling plans, the Public Agency will use best efforts to provide the Project Labor Coordinator and the affected Contractor[s] and Union[s] with reasonable notice of any changes it requires pursuant to this section); and (c) Approve any work methods, procedures, and techniques used by Contractors whether or not these methods, procedures, or techniques are part of industry practices or customs; and
(d) Investigate and process complaints or disagreements, through its Project Labor Coordinator.

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Section 9.3 Use of Materials. Subject to the terms of this Agreement, there shall be no limitations or restrictions by the Union upon a Contractor's choice of materials or design, nor, regardless of source or location, upon the full use and utilization of equipment, machinery, packaging, precast, prefabricated, prefinished, preassembled or modular materials, products, tools, or other labor-saving devices, subject to the application of the California Public Contract and Labor Codes.

Generally, the onsite installation or application of such items shall be performed by the craft having jurisdiction over such work.

Section 9.4 Special Equipment, Warranties, and Guaranties. (a) It is recognized that certain equipment of a highly technical and specialized nature may be installed at Covered Project sites. The nature of the equipment, together with the requirements for manufacturer's warranties, may dictate that it be prefabricated, pre-piped, and/or pre-wired and that it be installed under the supervision and direction of the manufacturer's personnel. The Unions agree that such equipment is to be installed without incident. (b) The Parties recognize that the Contractor will initiate from time to time the use of new technology, equipment, machinery, tools, and other labor-savings devices and methods of performing Covered Work. The Unions agree that they will not restrict the implementation of such devices or work methods. The Unions will accept and will not refuse to handle, install, or work with any standardized and/or catalogue parts, assemblies, accessories, prefabricated items, preassembled items, partially assembled items, modular products or materials, whatever their source of manufacture or construction.
(c) If any disagreement between the Contractor and the Unions concerning the methods of implementation or installation of any equipment, device, or item, or method of work arises, or whether a particular part or pre-assembled item is a standardized or catalog part or item, the work will proceed as directed by the Contractor, and the Parties shall immediately consult over the matter. If the disagreement is not resolved, the affected Union(s) shall have the right to proceed through the procedures set forth in Article 10.

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ARTICLE 10

SETTLEMENT OF GRIEVANCES AND DISPUTES
Section 10.1 Cooperation and Harmony on Site.
(a) This PLA is intended to establish and foster continued close cooperation between management and labor. The Council shall assign a representative to this Project for the purpose of assisting the local Unions, and working with the Project Labor Coordinator, together with the Contractors, to complete construction of the Covered Projects economically, efficiently, continuously, and without any interruption, delays, or work stoppages.
(b) The Project Labor Coordinator, the Contractors, Unions, and employees, collectively and individually, realize the importance to all Parties of maintaining continuous and uninterrupted performance of Covered Work, and agree to resolve all disputes in accordance with the grievance provisions set forth in this Article or, as appropriate, those of Article 7 or 8.
(c) The Project Labor Coordinator shall observe the processing of grievances under this Article and Articles 7 and 8, including the scheduling and arrangement of facilities for meetings, selection of the arbitrator from the agreed-upon panel to hear the case, and any other administrative matters necessary to facilitate the timely resolution of any dispute; provided, however, it is the responsibility of the principal Parties to any pending grievance to ensure the time limits and deadlines are met.

Section 10.2 Processing Grievances. Any disputes arising out of and during the term of this PLA involving its interpretation and application, and all disputes involving the interpretation or application of the applicable Schedule A's, but not alleged violations of Articles 7 or 8, shall be considered a grievance and subject to resolution under the following procedures.

Step 1. (a) Employee Grievances. When any employee subject to the provisions of this PLA feels aggrieved by an alleged violation of this PLA or the applicable Schedule A, the employee shall, through his local Union business representative or job steward, within ten (10) working days after the occurrence of the violation, give notice to the work site representative of the involved Contractor stating the provision(s) alleged to have been violated, the details of the alleged violation and the remedy sought to resolve the matter. A grievance shall be considered null and void if notice of the grievance is not given within the ten (10) day period. A business representative of the local Union or the job steward

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and the work site representative of the involved Contractor shall meet and endeavor to adjust the matter within ten (10) working days after timely notice has been given. If they fail to resolve the matter within the prescribed period, the grieving Party may, within ten (10) working days thereafter, pursue Step 2 of this grievance procedure provided the grievance is reduced to writing, setting forth the relevant information, including a short description thereof, the date on which the alleged violation occurred, and the provision(s) of the applicable agreement alleged to have been violated. Grievances and disputes settled at Step 1 shall be non-precedential except as to the Parties directly involved. (b) Union or Contractor Grievances. Should the Union(s) or any Contractor have a dispute with the other Party(ies) and, if after conferring within ten (10) working days after the disputing Party knew or should have known of the facts or occurrence giving rise to the dispute, a settlement is not reached within five (5) additional working days, the dispute shall be reduced to writing and processed to Step 2 in the same manner as outlined in Step 1(a) above for the adjustment of an employee complaint.

Step 2. The business manager of the involved local Union or his designee, together with the site representative of the involved Contractor, and the labor relations representative of the Project Labor Coordinator shall meet within seven (7) working days of the referral of the dispute to this second step to arrive at a satisfactory settlement thereof. If the Parties fail to reach an agreement, the dispute may be appealed in writing in accordance with the provisions of Step 3 within seven (7) calendar days after the initial meeting at Step 2.

Step 3. (a) If the grievance shall have been submitted but not resolved under Step 2, either the Union or Contractor Party may request in writing to the Project Labor Coordinator (with copy[ies] to the other Party[ies]) within seven (7) calendar days after the initial Step 2 meeting, that the grievance be submitted to an arbitrator selected from the agreed-upon list below, on a rotational basis in the order listed. Those arbitrators are: (1) Robert M. Hirsch; (2) Kenneth Perea; (3) Sara Adler; (4) John Kagel; (5) Michael Prihar; (6) Michael Rappaport; and (7) Fred Horowitz. The decision of the arbitrator shall be final and binding on all Parties, and the costs and expenses of such arbitrations shall be borne equally by the involved Contractor(s) and the involved Union(s).
(b) Failure of the grieving Party to adhere to the time limits established herein shall render the grievance null and void. The time limits established herein may be extended only by written consent of the Parties involved at the particular step where the extension is agreed upon. The arbitrator shall have the authority to

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make decisions only on issues presented and shall not have the authority to change, amend, add to, or detract from any of the provisions of this PLA or the applicable Schedule A.

Section 10.3 Limit on Use of Procedures. Procedures contained in this Article shall not be applicable to any alleged violation of Article 7 or 8, with a single exception that any employee discharged for violation of Section 7.2 may resort to the procedures of this Article to determine only if he/she was, in fact, engaged in that violation.

Section 10.4 Notice. The Project Labor Coordinator shall be notified by the involved Contractor of all actions at Steps 2 and 3, and further, the Project Labor Coordinator shall, upon its own request, be permitted to participate fully in all proceedings at such steps.

ARTICLE 11

COMPLIANCE
Section 11.1 Compliance with All Laws. The Council and all Unions, Contractors, and their employees shall comply with all applicable federal and state laws, ordinances, and regulations including, but not limited to, those relating to safety and health, employment, and applications for employment. All employees shall comply with the safety regulations established by the Public Agency, the Project Labor Coordinator, and the Contractor. Employees must promptly report any injuries or accidents to a supervisor.

ARTICLE 12

SAFETY AND PROTECTION OF PERSON AND PROPERTY
Section 12.1 Safety.
(a) It shall be the responsibility of each Contractor to ensure safe working conditions and employee compliance with all applicable safety laws and regulations and any safety rules contained herein or established by the Public Agency, the Prime Contractor, or the Contractor. It is understood that employees have an individual obligation to use diligent care to perform their work in a safe manner and to protect themselves and the property of the Contractor and the Public Agency.
(b) All Parties and Contractor employees shall be bound by the safety, security, and visitor rules established by the Prime Contractor, Contractor and the

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Public Agency. These rules will be published and posted. An employee's failure to satisfy his/her obligations under this Section will subject him/her to discipline, up to and including discharge.

Section 12.2 Drug and Alcohol Testing Policy. The Parties agree to adopt the Drug and Alcohol Testing Policy attached hereto as Attachment C, which is the exclusive Drug and Alcohol Testing Policy for the Project.

Section 12.3 Inspection. All inspections shall be performed in accordance with the requirements in the prime contract.

ARTICLE 13

TRAVEL, SUBSISTENCE AND PARKING
Section 13.1 Travel expenses, travel time, subsistence allowances and/or zone rates, and parking reimbursements shall not be applicable to work under this PLA, except to the extent provided for in any applicable prevailing wage determination. Parking for employees covered by this PLA shall be provided by the Contractor(s) according to the provision of the applicable Schedule A’s.

ARTICLE 14

APPRENTICES
Section 14.1 Importance of Training. The Parties recognize the need to maintain continuing support of the programs designed to develop adequate numbers of competent workers in the construction industry, the obligation to capitalize on the availability of the local workforce in the area served by the Public Agency, and the opportunities to provide continuing work on Covered Projects for Local Residents. To these ends, and consistent with any laws or regulations, the Parties will facilitate, encourage, and assist Local Residents to commence and progress in Apprenticeship Programs and/or apprenticeship readiness programs in the construction industry leading to participation in such Joint-Labor Management Apprenticeship Programs. The Project Labor Coordinator, the Contractors, the Public Agency, and the Council and Unions, will work cooperatively to identify, or establish and maintain, effective programs and procedures for persons interested in entering the construction industry and which will help prepare them for entry into Apprenticeship Programs. Apprentices, if utilized, must be enrolled in a California Apprenticeship Council-approved Program.

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Section 14.2 Use of Apprentices.
(a) The Unions and Contractors agree to cooperate in referring and employing Apprentices up to the maximum percentage allowed by the State Labor Code and the standards of each Joint Labor-Management Apprenticeship Program. The minimum ratios for Apprentice to journeyperson hours worked shall be in compliance, at a minimum, with the applicable provisions of the California Labor Code relating to utilization of Apprentices. The Public Agency, unless otherwise required by law, shall encourage such utilization, and, both as to Apprentices and the overall supply of experienced workers, the Project Labor Coordinator will work with the Council, Apprenticeship Programs, and Contractors to assure appropriate and maximum utilization of Apprentices and the continuing availability of both Apprentices and journeypersons.
(b) The Parties and Contractors will comply with all applicable laws and regulations in the request for dispatch and employment of Apprentices. (c) The Parties agree that Apprentices will not be dispatched to Contractors working under this PLA unless there is a journeyperson or other Contractor employee working on the Project where the Apprentice is to be employed who is qualified to assist and oversee the Apprentice's progress through the program in which he/she is participating.

ARTICLE 15

LEGAL ACTION
Section 15.1 Legal Action. The Public Agency, Council and Unions recognize the substantial legal costs (including all attorney’s fees and associated disbursements) that might accrue with regard to any legal challenge over this PLA and related to claims directly challenging the legality of this PLA, or a particular section or language that has been adopted herein. In the event of a legal challenge, the Council, on behalf of itself and affiliated Unions, agrees to seek to intervene in the legal action and actively participate in the litigation or other action to defend the legality of this PLA, or a particular section or language herein. The failure of the Council to seek to intervene in the legal action and actively participate to defend the legality of this PLA will constitute a material breach of this PLA. In the event the Council is denied leave to intervene in the legal action, the Council shall have its counsel coordinate with counsel for the Public Agency, at the Council’s own expense, regarding how the Council can best support the Public Agency’s legal position.

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ARTICLE 16

PRE-JOB CONFERENCE
Section 16.1 Each Contractor is required to conduct a pre-job conference with the Unions not later than fourteen (14) calendar days prior to commencing work. The purpose of the conference will be to, among other things, convey craft manpower needs, the schedule of work for the Covered Project, project work rules, and propose preliminary Union work assignments. The Project Labor Coordinator may work with the Prime Contractor and Council to facilitate the scheduling of all pre-job conferences, but ensuring each Contractor conducts a pre-job conference in accordance with this Agreement is the responsibility of the Prime Contractor. All preliminary Union work assignments shall be disclosed by each Contractor at a pre-job conference. Should there be work within the scope of a Construction Contract for a Covered Project that was not previously assigned at a pre-job conference, or additional work be added to the scope of a Covered Project, the Contractor(s) performing such work will conduct a separate pre-job conference.

Any Union in disagreement with a proposed assignment shall notify the affected Contractor of its position in writing, with a copy sent to the Project Labor Coordinator, within seven (7) calendar days after the pre-job conference occurred.

Within seven (7) calendar days after the period allowed for Union notices of disagreement with the Employer’s proposed assignments, but prior to the commencement of any work, the Employer shall make final assignments in writing with copies sent to the Project Labor Coordinator and Council.

Section 16.2 A Contractor’s failure to conduct a pre-job conference in accordance with this PLA is considered a breach of contract, and any affected Union may pursue a grievance under Article 10 of this PLA to seek a remedy for such a violation.

Provided, however, if the Contractor has conducted a pre-job conference in accordance with this PLA, that Contractor is not required to participate in any additional pre-job conferences or mark-up meetings related to the original scope(s) of work assigned at the pre-job conference.

Section 16.3 The Project Labor Coordinator may attend and facilitate each pre-job conference.

At each pre-job conference, the Project Labor Coordinator shall address the programs, goals and outcomes related to Local Resident employment, as well as the progress of implementing the Work Opportunities Program.

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ARTICLE 17

LABOR/MANAGEMENT AND COOPERATION
Section 17.1 Labor/Management Collaboration Meetings. The Parties will conduct periodic labor/management cooperation meetings, which will be chaired jointly by a designee of the Public Agency and a designee of the Council. The co-chairs shall determine the frequency and scheduling of the meetings with the assistance of the Project Labor Coordinator. The purpose of the meetings shall be to update the Parties about the progress and schedule of Covered Projects, promote harmonious and stable labor management relations, ensure effective and constructive communication between labor and management Parties, advance the proficiency of work in the industry, and to evaluate and ensure an adequate supply of skilled labor for all Covered Projects. All Parties will be invited to attend the labor/management cooperation meetings. Substantive grievances or disputes shall not be reviewed or discussed by this Committee but shall be processed pursuant to the provisions of the appropriate Article.

ARTICLE 18

SAVINGS AND SEPARABILITY
Section 18.1 Savings Clause. It is not the intention of the Public Agency, the Project Labor Coordinator, Contractor, or the Union Parties to violate any laws governing the subject manner of this PLA. The Parties hereto agree that in the event any provision of this PLA is finally held or determined to be illegal or void as being in contravention of any applicable law or regulation, the remainder of the PLA shall remain in full force and effect unless the part or parts so found to be void are wholly inseparable from the remaining portions of this PLA. Further, the Parties agree that if and when any provision(s) of this PLA is finally held or determined to be illegal or void by a court of competent jurisdiction, the Parties will promptly enter into negotiations concerning the substantive effect of such decision for the purposes of achieving conformity with the requirements of any applicable laws and the intent of the Parties hereto. If the legality of this PLA is challenged and any form of injunctive relief is granted by any court, suspending temporarily or permanently the implementation of this PLA, then the Parties agree that all Covered Projects that would otherwise be covered by this PLA should be continued to be bid and constructed without application of this PLA so that there is no delay or interference with the ongoing planning, bidding, and construction of any Covered Projects.

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Section 18.2 Effect of Injunctions or Other Court Orders. The Parties recognize the right of the the Public Agency to withdraw, at its absolute discretion, the utilization of the PLA as part of any bid specification should a court of competent jurisdiction issue any order, or any applicable statute that could result, temporarily or permanently, in delay of the bidding, awarding, and/or construction on the Project.

ARTICLE 19
WAIVER
Section 19.1 Waiver. A waiver of or a failure to assert any provisions of this PLA by any or all of the Parties hereto shall not constitute a waiver of such provision for the future.

Any such waiver shall not constitute a modification of the PLA or a change in the terms and conditions of the PLA and shall not relieve, excuse or release any of the Parties from any of their rights, duties, or obligations hereunder.

ARTICLE 20

AMENDMENTS
Section 20.1 (a) Amendments; Most Favored Nation; The provisions of this PLA can be renegotiated, supplemented, rescinded, or otherwise altered only by mutual agreement in writing, hereafter signed by the Council and the Public Agency. (b) Most Favored Nation. In the event that any city with a population of 100,000 or less (as of the effective date of this PLA) executes a project labor agreement with the Council, Public Agency shall maintain an option, in its sole and exclusive discretion, to amend this PLA to contain substantively all of the provisions as that of said project labor agreement.

ARTICLE 21

DURATION OF THE PLA
Section 21.1 Duration. This PLA shall be effective on the date when it has been executed by both the Council and the Public Agency. The Agreement shall continue in full force and effect for a term of three (3) years after the initial effective date (provided, however, it shall continue in effect for all work awarded prior to such termination date until the completion of such Project Work). At the end of the initial three (3) year term, this PLA shall automatically renew for an additional term of three (3) years unless either party provides written notice to the other at

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least 60 days before the expiration date of its intention to renegotiate or terminate the PLA.

Section 21.2 Turnover and Final Acceptance of Completed Work.

Turnover and final acceptance of Completed Work shall be in accordance with the requirements of the prime contract and Public Agency policy. As areas and systems of the Covered Project are inspected and construction-tested and/or approved and accepted by the City or third parties with approval of the Public Agency, the PLA shall have no further force or effect on such items or areas, except when the Contractor is directed by the Public Agency to engage in repairs, modifications or warranty work required by its Contract(s) with the Public Agency or the Prime Contractor.

Section 21.3 Continuation of Schedule A’s. Schedule A's incorporated as part of this PLA shall continue in full force and effect with regard to Covered Work, until the Schedule A is modified by parties thereto.

The Parties agree to recognize and implement all applicable changes on their effective dates, except as otherwise provided by this PLA; provided, however, that any such provisions negotiated in said collective bargaining agreements will not apply to work covered by this PLA if such provisions are less favorable to the Contractor under the PLA than those uniformly required of Contractors for construction work normally covered by those agreements in San Diego County; nor shall any provision be recognized or applied if it may be construed to apply exclusively or predominantly to work covered by this PLA. Any disagreement between the Parties over the incorporation into a Schedule A of any such provision agreed upon in a negotiation of the local collective bargaining agreement that is the basis for a Schedule A shall be resolved under the procedures established in Article 10.

Section 21.4 Final Termination. Final termination of all obligations, rights, and liabilities, and disagreements shall occur upon receipt by the Council of a Notice from the Public Agency saying that no work remains within the scope of the PLA.

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ARTICLE 22
[DELETED]
ARTICLE 23

HELMETS TO HARDHATS
Section 23.1 Veterans Entry into Building and Construction Trades. The Parties recognize a desire to facilitate the entry into the building and construction trades of Veterans who are interested in careers in the building and construction industry. The Contractors and Unions agree to utilize the services of the Center for Military Recruitment, Assessment and Veterans Employment (hereinafter the “Center”) and the Center’s “Helmets to Hardhats” program to serve as a resource for preliminary orientation, assessment, and construction aptitude, referral to Apprenticeship Programs or hiring halls, counseling and mentoring, support network, employment opportunities, and other needs as identified by the Parties.

Section 23.2 Integrated Database. The Unions and Contractors agree to coordinate with the Center to create and maintain an integrated database of Veterans interested in working on this Project and of apprenticeship and employment opportunities for this Project.

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In witness whereof, the Parties have caused this Project Labor Agreement for the the Public Agency to be executed as of the date and year above stated.

Dated: _____________ SAN DIEGO BUILDING AND CONSTRUCTION

TRADES COUNCIL
By: _____________________________________
Carol Kim, Business Manager
Dated: _____________ CITY OF LA MESA
By: _____________________________________
Mark Arapostathis, Mayor
Approved as to form: _____________________________

SIGNATORY UNIONS AND
(See Attached)

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SIGNATORY UNIONS
By: By
:

Allied Workers Local 5 Boilermakers Local 92
By: By
:

Bricklayer & Allied Crafts Local 4 Cement Masons Local 500 / Area 744 By: By
:

Electrical Workers Local 569 Elevator Constructors Local 18 By: By
:

Painters and Allied Trades Local 1399 Iron Workers Local 229 By: By
:

Laborers Local 89 Plasterers Local 200
By: By
:

Plaster Tenders Local 1414 Operating Engineers Local 12 By: By
:

Plumbers & Pipefitters Local 230 Road Sprinkler Fitters Local 669 By: By
:

Roofers & Waterproofers Local 45 Sheet Metal Workers’ Local 206 By: By
:

Laborers Local 1184 Teamsters Local 166
By: By
:

Laborers Local 345 Tradeshow & Sign Crafts Local 831

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By: By
:

UA Local 345 Laborers Local 300
By:

Southwest Regional Council of Carpenters

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ATTACHMENT A – LETTER OF ASSENT
To be signed by all Contractors awarded work covered by the Project Labor Agreement prior to commencing work.
[CONTRACTOR’S LETTERHEAD]
DATE
Project Labor Coordinator
Address
Address
Address
Attention: ________________________
Re: [___________] Project Labor Agreement
Dear Sir:

This is to confirm that [Name of Company] agrees to be party to and bound by the [___________] Project Labor Agreement, effective ______, 202_, as such Agreement may from time to time be amended by the negotiating Parties or interpreted pursuant to its terms. Such obligation to be a Party and bound by this Agreement shall extend to all work covered by the Agreement undertaken by this Company on the Project pursuant to [Contract No. __________], and this Company shall require all of its subcontractors of whatever tier to be similarly bound for all work within the scope of the Agreement by signing and furnishing to you an identical Letter of Assent prior to their commencement of work.

Sincerely,
[Name of Construction Company]
By:
[Name and Title of Authorized Executive]
[Copies of this Letter must be submitted to the Project Labor Coordinator and to the Council consistent with Article 3, Section 3.3(b)]

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ATTACHMENT B-1 – WORKFORCE DISPATCH REQUEST FORM

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ATTACHMENT B-2 – CONTRACTOR CORE WORKFORCE FORM

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ATTACHMENT C – DRUG AND ALCOHOL TESTING POLICY
The Parties recognize the problems that drug and alcohol abuse have created in the construction industry and the need to develop drug and alcohol abuse prevention programs. Accordingly, the Parties agree that in order to enhance the safety of the workplace and to maintain a drug and alcohol-free work environment, individual Contractors shall require applicants or employees to undergo drug and alcohol testing in accordance with this PLA and this policy, Attachment C – Drug and Alcohol Testing Policy, hereafter “Policy.”

1. It is understood that the use, possession, transfer, or sale of illegal drugs, narcotics, or other unlawful substances, as well as being under the influence of alcohol and the possession of or consuming alcohol is absolutely prohibited while employees are on the Contractor’s job premises or while working on any jobsite in connection with work performed under the PLA.

2. No Contractor may implement a drug and alcohol testing program that does not conform in all respects to the provisions of this Policy.

3. No Contractor may implement drug and alcohol testing at any jobsite unless written notice is given to the Union setting forth the location of the jobsite, a description of the project under construction, and the name and telephone number of the Prime Contractor's project manager. Said notice shall be provided at the pre-job conferences for each Covered Project. Failure to give such notice shall make any drug and alcohol testing engaged in by the Contractor a violation of the Agreement and subject to the Article 10 grievance procedure.

4. A Contractor who elects to implement drug and alcohol testing pursuant to this Policy shall require all craft employees on the Covered Project to be tested. With respect to individuals who become employed on the Covered Project subsequent to the proper implementation of a valid drug and alcohol testing program, such test shall be administered upon the commencement of employment on the project, whether by referral from a Union Dispatch Office, transfer from another project, or another method.

Individuals who were employed on the project prior to proper implementation of a valid drug and alcohol testing program may only be subjected to testing for the reasons set forth in paragraphs 5(g)(l) through 5(g)(3) and paragraphs 6(a) through 6(e) of this Policy. Refusal to undergo such testing shall be considered sufficient grounds to deny employment on the project.

5. The following procedure shall apply to all drug and alcohol testing:
a. The Contractor may request urine samples only. The applicant or employee shall not be observed when the urine specimen is given. An applicant or employee, at his or her sole option, shall, upon request, receive a blood test in lieu of a urine test. No employee of the Contractor shall draw blood from a bargaining unit employee, touch or handle

- 43 -
urine specimens, or in any way become involved in the chain of custody of urine or blood specimens. A Union Business Representative, subject to the approval of the individual applicant or employee, shall be permitted to accompany the applicant or employee to the collection facility to observe the collection, bottling, and sealing of the specimen.
b. A Contractor may request an applicant or employee promptly, within four (4) hours of the Contractor’s request, perform an alcohol breathalyzer test at a certified laboratory only, and cutoff levels shall be those mandated by applicable state or federal law. c. The testing shall be done by a laboratory approved by the Substance Abuse & Mental Health Services Administration (SAMHSA), which is chosen by the Contractor and the Union.
d. An initial test shall be performed using the Enzyme Multiplied Immunoassay Technique (EMIT). In the event a question or positive result arises from the initial test, a confirmation test must be utilized before action can be taken against the applicant or employee. The confirmation test will be by Gas Chromatography/Mass Spectrometry (GC/MS). Cutoff levels for both the initial test and confirmation test will be those established by SAMHSA and this Policy. Should these SAMHSA levels be changed during the course of the PLA or new testing procedures are approved, then these new regulations will be deemed as part of this existing PLA. Confirmed positive samples will be retained by the testing laboratory in secured long-term frozen storage for a minimum of one (1) year. Handling and transportation of each sample must be documented through strict chain-of-custody procedures.
e. In the event of a confirmed positive test result, the applicant or employee may request, within forty-eight (48) hours, a sample of his/her specimen from the testing laboratory for purposes of a second test to be performed at a second laboratory, designated by the Union and approved by SAMHSA. The retest must be performed within ten (10) days of the request. Chain of custody for this sample shall be maintained by the Contractor between the original testing laboratory and the Union's designated laboratory. Retesting shall be performed at the applicant’s or employee’s expense. In the event of conflicting test results, the Contractor may require a third test, at the Contractor’s expense. f. If, as a result of the above testing procedure, it is determined that an applicant or employee has tested positive, this shall be considered sufficient grounds to deny the applicant or employee his/her employment on the project. g. No individual who tests negative for drugs and alcohol pursuant to the above procedure and becomes employed on the project shall again be subjected to drug and alcohol testing with the following exceptions:
1) Employees who are involved in industrial accidents resulting in damage to plant, property, or equipment or injury to him/her or others may be tested for drugs or alcohol pursuant to the procedures stated hereinabove.
2) The Contractor may test employees following thirty (30) days' advance written notice to the employee(s) to be tested and to the applicable Union. Notice to the applicable Union shall be sent by certified mail to the affected Union with a copy

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to the Project Labor Coordinator. Such testing shall be pursuant to the procedures stated hereinabove.
3) The Contractor may test an employee where the Contractor has reasonable cause to believe that the employee is impaired from performing his/her job. Reasonable cause shall be defined as being aberrant or unusual behavior, the type of which is a recognized and accepted symptom of impairment (e.g., slurred speech, unusual lack of muscular coordination). Such behavior must be actually observed by at least two (2) persons, one (1) of whom shall be a supervisor who has been trained to recognize the symptoms of drug and alcohol abuse or impairment and the other of whom shall be the Job Steward. If the Job Steward is unavailable or there is no Job Steward on the Covered Project, the other person shall be a member of the applicable Union’s bargaining unit. Testing shall be pursuant to the procedures stated hereinabove. Employees who are tested pursuant to the exceptions set forth in this paragraph and who test positive will be removed from the Contractor's payroll.
h. Applicants or employees who do not test positive shall be paid for all time lost while undergoing drug and alcohol testing. Payment shall be at the applicable wage and benefit rates set forth in the applicable Union’s Master Labor Agreement. Applicants who have been dispatched from the Union and who are not put to work pending the results of a test will be paid waiting time until such time as they are put to work. It is understood that an applicant must pass the test as a condition of employment.

Applicants who are put to work pending the results of a test will be considered probationary employees.

6. The Contractors will be allowed to conduct periodic jobsite drug and alcohol testing on the Project under the following conditions:
a. The entire jobsite must be tested, including any employee or subcontractor's employee who worked on that project three (3) working days before or after the date of the test; b. Jobsite testing cannot commence sooner than fifteen (15) days after start of the work on the project;
c. Prior to start of periodic testing, a Business Representative will be allowed to conduct an educational period on company time to explain periodic jobsite testing program to affected employees;
d. Testing shall be conducted by an SAMHSA-certified laboratory, pursuant to the provisions set forth in paragraph 5 hereinabove.
e. Only two (2) periodic tests may be performed in a twelve (12)-month period.

7. It is understood that the unsafe use of prescribed medication, or where the use of prescribed medication impairs the employee's ability to perform work, is a basis for the Contractor to remove the employee from the jobsite.

8. Any grievance or dispute that may arise out of the application of this Policy shall be subject to the grievance and arbitration procedures set forth in the PLA.

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9. The establishment or operation of this Policy shall not curtail any right of any employee found in any law, rule, or regulation. Should any part of this Policy be found unlawful by a court of competent jurisdiction or a public agency having jurisdiction over the Parties, the remaining portions of the Agreement shall be unaffected, and the Parties shall enter negotiations to replace the affected provision.

10. Present employees, if tested positive, shall have the prerogative for rehabilitation program at the employee’s expense. When such program has been successfully completed, the Contractor shall not discriminate in any way against the employee. If work for which the employee is qualified exists, he/she may be reinstated.

11. The Contractor agrees that results of urine and blood tests performed hereunder will be considered medical records held confidential to the extent permitted or required by law.

Such records shall not be released to any persons or entities other than designated Contractor representatives and the applicable Union. Such release to the applicable Union shall only be allowed upon the signing of a written release by the employee, and the information contained therein shall not be used to discourage the employment of the individual applicant or employee on any subsequent occasion.

12. Employees who seek voluntary assistance for substance abuse may not be disciplined for seeking such assistance. Requests from employees for such assistance shall remain confidential and shall not be revealed to other employees or management personnel without the employee's consent. Employees enrolled in substance abuse programs will be subject to all Contractor rules, regulations, and job performance standards with the understanding that an employee enrolled in such a program is receiving treatment for an illness.

13. The Contractor shall indemnify and hold the Union harmless against any and all claims, demands, suits, or liabilities that may arise out of the application of this Policy.

14. This Policy shall constitute the only Policy in effect between the Parties concerning drug and alcohol abuse, prevention, and testing. Any modifications thereto must be accomplished pursuant to collective bargaining negotiations between the Parties.

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SPECIMEN REPORTING CRITERIA
Initial Test Analyte Initial Test Cutoff 1 Confirmatory Test Analyte
Confirmatory Test Cutoff
Concentration
Marijuana metabolites
(THCA)2
50 ng/ml 3 THCA 15 ng/ml
Cocaine metabolite
(Benzoylecgonine) 150 ng/ml 3 Benzoylecgonine 100 ng/ml Codeine/
Morphine 2000 ng/ml Codeine Morphine 2000 ng/ml2000 ng/ml Hydrocodone/
Hydromorphone 300 ng/ml Hydrocodone Hydromorphone
100 ng/ml
100 ng/ml
Alcohol 0.02% Ethanol 0.02%
Oxycodone/
Oxymorphone 100 ng/ml Oxycodone Oxymorphone
100 ng/ml
100 ng/ml
6-Acetylmorphine 10 ng/ml 6-Acetylmorphine 10 ng/ml
Phencyclidine 25 ng/ml Phencyclidine 25 ng/ml
Amphetamine/
Methamphetamine 500 ng/ml Amphetamine Methamphetamine
250 ng/ml
250 ng/ml
MDMA4/MDA5 500 ng/ml MDMA
MDA
250 ng/ml
250 ng/ml
Initial Test Analyte Initial Test Cutoff Confirmatory Test Analyte
Confirmatory Test Cutoff
Concentration
Barbiturates 300 ng/ml Barbiturates 200 ng/ml
Benzodiazepines 300 ng/ml Benzodiazepines 300 ng/ml
Methadone6 300 ng/ml Methadone 100 ng/ml
Methaqualone 300 ng/ml Methaqualone 300 ng/ml
Propoxyphene 300 ng/ml Propoxyphene 100 ng/ml

1 For grouped analytes (i.e., two or more analytes that are in the same drug class and have the same initial test cutoff):

Immunoassay: The test must be calibrated with one analyte from the group identified as the target analyte.

The cross-reactivity of the immunoassay to the other analyte(s) within the group must be 80 percent or greater; if not, separate immunoassays must be used for the analytes within the group.

Alternate technology: Either one analyte or all analytes from the group must be used for calibration, depending on the technology. At least one analyte within the group must have a concentration equal to or greater than the initial test cutoff or, alternatively, the sum of the analytes present (i.e., equal to or greater than the laboratory's validated limit of quantification) must be equal to or greater than the initial test cutoff. 2 An immunoassay must be calibrated with the target analyte, 9-tetrahydrocannabinoJ-9- carboxylic acid (THCA). 3 Alternate technology (THCAandbenzoylecgonine):Theconfirmatory testcutoffmustbeusedfor analternate technology initialtestthatisspecific for the target analyte (i.e., 15 ng/mlfor THCA, 100 ng/ ml for benzoylecgonine).
4 Methylenedioxymethamphetamine (MDMA)
5 Methylenedioxyamphetamine (MDA)
6 Employees with a prescription for methadone who are using the medication as prescribed, and are not impaired and can safely perform their work, will not be considered to have violated this Policy.

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MEMORANDUM OF UNDERSTANDING REGARDING
“QUICK” DRUG SCREENING TESTS PURSUANT TO
ATTACHMENT C – DRUG AND ALCOHOL TESTING POLICY
It is hereby agreed between the Parties hereto that a Contractor who has otherwise properly implemented drug and alcohol testing, as set forth in the Policy, shall have the right to offer an applicant or employee a "quick" drug screening test. This “quick” screen test shall consist either of the “ICUP” urine screen or similar test or an oral screen test. The applicant or employee shall have the absolute right to select either of the two “quick” screen tests, or to reject both and request a full drug test.

An applicant or employee who selects one of the "quick" screen tests, and who passes the test, shall be put to work immediately. An applicant or employee who fails the "quick" screen test, or who rejects the "quick" screen tests, shall be tested pursuant to the procedures set forth in the Policy. The sample used for the "quick" screen test shall be discarded immediately upon conclusion of the test. An applicant or employee shall not be deprived of any rights granted to them by the Policy as a result of any occurrence related to the “quick” screen test.

REPORT to the MAYOR and MEMBERS of the CITY COUNCIL
From the CITY MANAGER
DATE: April 22, 2025
SUBJECT: RESOLUTION AUTHORIZING CONTRACT CHANGE ORDER
NO. 5 FOR THE BOULEVARD DRIVE STORM DRAIN
IMPROVEMENT PROJECT BID NO. 24-16, TO SC VALLEY
ENGINEERING, INC.

ISSUING DEPT: PUBLIC WORKS
SUMMARY:

Issues:

Should the City Council approve the attached Resolution authorizing Contract Change Order No. 5 in the amount of $116,575.52 to SC Valley Engineering for the Boulevard Drive Storm Drain Improvement Project, Bid No. 24-16? Recommendation:

Staff recommends the City Council approve the attached Resolutions authorizing Contract Change Order No. 5 to SC Valley Engineering, Inc. in the amount of $116,575.52 for the Boulevard Drive Storm Drain Improvement Project, Bid No 24-16.

Fiscal Impact:

Contract Change Order No. 5 for the Boulevard Drive Storm Drain Improvement Project will require a reappropriation of $116,575.52 from Highway Users Tax Account (HUTA) Streets Fund 302 to HUTA Storm Drain Fund 304.

Transfer Account Name Account No.

From HUTA FY25 Streets Fund 302-68300-2257FT
To HUTA FY25 Storm Drain Fund 304-68300-4250FT (new)

Report to Mayor and Councilmembers
Date: April 22, 2025
Page: 2 of 3
City’s Strategic Goals:
 Invest in infrastructure to serve the needs of the community.

BACKGROUND:

On April 9, 2024, the City Council approved a resolution awarding a construction contract to SC Valley Engineering, Inc. in the amount of $6,400,470.95 for the Boulevard Drive Storm Drain Improvement Project.

The Boulevard Drive Storm Drain Improvement Project is nearing substantial completion at the end of this month. Some items such as final mill and pave and miscellaneous punch list items will continue into May 2025.

Improvements include the construction of a double 8-foot by 5-foot poured in place reinforced concrete box and associated improvements. The project includes considerable wet and dry utility relocation in La Mesa and San Diego.

During construction, various extra items and unit cost overages have led to some extra costs for the project. For CCO-5 these include:
 Reconnections for Helix water mains due to previous out-of-scope capping during storm drain box construction.
 Delays and extra work for box builder sub-consultant due to column re-design in the initial phase of the project.
 Break out of encasement of sewer due to storm drain box realignment.  Removal of significant amounts of mud and rocks from large rain event from partially completed box culvert.
 Water backflow relocation.
 Re-construction of private water service for 6903 University Ave. (To Be reimbursed by Helix Water District).
 Miscellaneous additional line-item unit cost additives/overages as described in the change order.

DISCUSSION:

To address these items, the Contractor is required to perform extra work as compared to the original scope including 16 additional working days. These items listed above are generally due to some redesign and re-alignment of two sperate points in the storm drain box. The original design was not feasible because of the poor existing condition of the upstream storm drain tie-in point. The re-alignment allowed for a more efficient design, improved flow, and a suitable tie in point, as compared to the original design.

Report to Mayor and Councilmembers
Date: April 22, 2025
Page: 3 of 3
CONCLUSION:

Staff recommends that the City Council adopt the attached resolution authorizing Contract Change Order No. 5 to SC Valley Engineering in the amount of $116,575.52 including 16 extra working days to the contract duration for the Boulevard Drive Storm Drain Improvement Project, Bid No. 24-16.

Reviewed by: Respectfully submitted by:
____________________ ____________________________
Greg Humora Michael Throne, PE
City Manager Director of Public Works
____________________________
Joe Kuhn
Environmental Manager
Attachments: A. Resolution Approving CCO5 to SC Valley Engineering B. Contract Change Order No. 5

RESOLUTION NO. 2025-

RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LA MESA
AUTHORIZING CONTRACT CHANGE ORDER NO. 5 FOR THE BOULEVARD DRIVE STORM DRAIN IMPROVEMENT PROJECT BID NO. 24-16, TO SC VALLEY ENGINEERING, INC.

WHEREAS, a contract was awarded to SC Valley Engineering Inc to provide construction services for the Boulevard Drive Storm Drain Improvement Project; WHEREAS, the Contractor is required to perform additional work due to various extra items including miscellaneous line item unit cost overages, work related to the redesign and realignment of the box culvert storm drain, and reconnection of water facilities within Helix Water District easements;
WHEREAS, Administrative Instruction F-13 requires approval by the City Council for Public Works construction change orders over $25,000; and WHEREAS, a transfer of $116,575.52 from Highway Users Tax Account (HUTA) Streets Fund 302 to HUTA Storm Drain Fund 304 will fund the current Change Order No.5 for the project.

NOW, THEREFORE, BE IT AND IT IS HEREBY RESOLVED by the City Council of the City of La Mesa, California, that:

The Mayor is hereby authorized and instructed to execute for and on behalf of said City, Contract Change Order No. 5 for additional construction services between the City of La Mesa and SC Valley Engineering, Inc., for an amount for an amount of $116,575.52 for the Boulevard Drive Storm Drain Improvement Project. Said contract change order is on file in the Office of the City Clerk.

BE IT FURTHER RESOLVED that $116,575.52 is reappropriated from FY25 Highway Use Tax Account Streets Fund 302 to FY25 Highway Use Tax Account Storm Drain Fund 304, for the Boulevard Drive Storm Drain Improvement Project.

PASSED AND ADOPTED at a Regular meeting of the City Council of the City of La Mesa, California, held the 22nd day of April 2025, by the following vote, to wit:

AYES:

NOES:

ABSENT:

CERTIFICATE OF THE CITY CLERK
I, MEGAN WIEGELMAN, City Clerk of the City of La Mesa, California, do hereby certify the foregoing to be a true and exact copy of Resolution No. 2025- , duly passed and adopted by the City Council of said City on the date and by the vote therein recited.

MEGAN WIEGELMAN, CMC, City Clerk
(SEAL OF CITY)

RE Contract: Date:

P.O. No.:

The time provided for the contract is
Therefore, the revised contract time is working days, and the revised completion date is
10,111.84
2,097.04
12,203.98
1,221.93
4 Dewatering System Changes due to Realignment 5,805.78 2 3
5 6
Sub-Contractor Delays and Redeisgn for Column on Upstream Culvert Portion
Chip out Sewer Encasement for Box Culvert Realignment
Storm Damage- Removal of Rocks and Mud from Unfinished Culvert Water Backflow Removal
1 Helix Water Main Connections from Unscoped Line Caps 49,648.84 S.C. Valley Engineering 2025-

CITY OF LA MESA
CONTRACT CHANGE ORDER NO. 5
You are hereby requested to comply with the listed changes in the contract plans and specifications. Furnish to the City of La Mesa as follows:

Item No.

Change in
Contract Price
04/22/2025
242396
Detailed Description of Changes & Quantities or Scope of Work Boulevard Drive Storm Drain Improvement
Project
Bid No.: 24-16
TO: Reso. No.:
9 Water Service to 6903 University Ave. (To Be Reimbursed by HWD) 23,491.11 Total Change 116,575.52 $
ORIGINAL CONTRACT AMOUNT $ 6,400,470.95
$ 104,580.52 % Change 2%
$ 6,914,448.88
TOTAL CCO's (+ or -)
CCO's PREVIOUSLY APPROVED (+ or -)
NET CHANGE THIS CCO (+ or -)
Michael Throne
Director of Public Works
Mark Arapostathis
Mayor
$ 409,397.41 % Change 6%
$ 513,977.93 % Change 8%
% Change
01/29/2025
Megan Wiegelman
City Clerk
ATTESTED BY:
7 Item 14 Removal/Disposal of Additional 71 CY of Unsuitable Material @ $105 per CY 7,980.00
8 Item 19 Additional 9.2 Tons of Temporary Resurfacing @ $435 per ton 4,015.00 8%
.

APPROVAL RECOMMENDED BY: APPROVED BY:

This document shall become an amendment to the contract and all provisions for the contract will apply hereto. The contractor accepts this change order as full compensation for additional work and delay to the project caused by this change order. This change order was requested by the City/Contractor. increased by 16 working days.
171
NEW CONTRACT AMOUNT (C + B + A)

RE Contract: Date:

P.O. No.:

S.C. Valley Engineering 2025-

CITY OF LA MESA
CONTRACT CHANGE ORDER NO. 5
04/22/2025
242396
Boulevard Drive Storm Drain Improvement
Project
Bid No.: 24-16
TO: Reso. No.:

I, THE UNDERSIGNED CONTRACTOR/CONSULTANT, have given careful consideration to the changes proposed and hereby agree, if this proposal is approved, that we will provide all equipment, furnish all materials, except as may otherwise be noted above, and perform all services necessary for the work above specified, and will accept as full payment therefore the price shown above.

Samuel Wathen, President
SC Valley Engineering, INC.

REPORT to the MAYOR and MEMBERS of the CITY COUNCIL
From the CITY MANAGER
DATE: April 22, 2025
SUBJECT: RESOLUTION APPROVING THE FINDINGS FOR THE

QUIMBY ACT PARKLAND DEDICATION IN-LIEU FEE

AND PARK ACQUISITION AND IMPROVEMENT

IMPACT FEE AND APPROPRIATING FUNDS FOR

PROJECTS AS OUTLINED IN THE PARKS MASTER
PLAN
ISSUING DEPARTMENT: CITY MANAGER
SUMMARY:

Issue:

Should the City Council approve the findings for the Quimby Act Parkland Dedication In-Lieu Fee and Park Acquisition and Improvement Impact Fee as required in California Government Code Section 66000 et seq. and appropriate funds for projects as outlined in the Parks Master Plan? Recommendation:

Staff recommends that the City Council adopt a resolution approving the findings for the Quimby Act Parkland Dedication In-Lieu Fee and Park Acquisition and Improvement Impact Fee as required in California Government Code Section 66000 et seq. and appropriate funds for projects as outlined in the Parks Master Plan.

Fiscal Impact:

Pursuant to the City Council’s adoption of the resolution, staff would program $205,338 into the Capital Improvement Program (CIP) for projects as outlined in the Parks Master Plan.

Report to Mayor and Councilmembers
Date: April 22, 2025
Page: 2 of 4
City’s Strategic Goals:
 Ensure a strong financial outlook through careful planning, sustainable service levels, and fiscal sustainability.
 Invest in infrastructure to serve the needs of the community.

BACKGROUND:

On April 12, 2005, the City Council accepted and approved a report from MuniFinancial establishing Municipal Code Chapter 9.20, which added two park development impact fees; 1) The Quimby Act Parkland Dedication In-Lieu Fee; and 2) The Park Acquisition and Improvement Impact Fee. The impact fees are associated with the development of new single and multi-family residential developments and are used to offset the cost of park infrastructure improvements needed to accommodate growth. The fees were based on population and growth projections, facility standards, the cost of facilities required to accommodate growth, and total cost of facilities per unit of development. The use of the fees must be tied to new park amenities in existing parks or acquisition of park land and cannot be used for park maintenance. The City appropriates fund each year as part of the Capital Improvement Program and in alignment with the Parks Master Plan.

The current fees for single and multi-family developments are as follows:

Quimby Act Parkland Dedication In-Lieu Fee (for subdivisions only) Single Family $3,882
Multi Family $2,815
Park Improvement Impact Fee
Single Family $1,559
Multi Family $1,130
Five-Year Development Impact Fee Findings
In accordance with California Government Code Section 66001, the City is required to make specific findings every five years for any portion of development impact fees that remain unexpended, whether committed or uncommitted. The required findings for the Park Development Impact Fees are as follows:

1. Identify the purpose of the fee: The purpose of the two fees is to provide a funding mechanism to support park improvements necessary to serve new residential developments.

Report to Mayor and Councilmembers
Date: April 22, 2025
Page: 3 of 4

2. Identify the use for the fee: Fee revenues may be used for the acquisition and development of parkland, construction of adjacent street improvements, installation of typical park amenities, development of special use facilities, and associated financing costs.

3. Identify all sources and amounts of funding anticipated to complete financing in incomplete improvements: At this time, the improvements outlined in the Parks Master Plan are anticipated to be funded by park development impact fees.

However, the exact amount of funding needed or available to complete these improvements has not yet been determined.

4. Designate the approximate dates on which the funding referred to is expected to be deposited into the appropriate account or fund: Park development impact fee revenue is expected to be deposited into the appropriate Capital Improvement Program account in July 2025 to fund park improvements identified in the Parks Master Plan.

DISCUSSION:

In 2012, the City Council approved the Parks Master Plan, which identifies improvements to ten community and neighborhood parks. The Plan serves as the basis for the use of Park Acquisition and Improvement Impact Fees and Quimby Act Parkland Dedication InLieu Fees. Both fees are collected by the City at building permit issuance. Since the last report in April 2024, the City collected $152,320 from Park Acquisition and Improvement Fees from residential developments. In addition, $18,080 in unappropriated funding from a prior year is available to be appropriated. The City also collected $34,938 from Quimby Act Parkland Dedication In-Lieu Fees, which are assessed for subdivision developments only. The total collected from both fees is $205,338.

The City’s Impact Fee Waiver Policy allows park development impact fees to be waived for projects consisting of 100% affordable housing units. Since April 2024, none of the projects that paid park development impact fees met this condition; therefore, the waiver policy was not applicable during this fiscal year.

CONCLUSION:

Section 66000 et seq. of the California Government Code requires that the findings and the Capital Improvement Plan be adopted annually by a resolution of the governing body for the use of Park In-Lieu and Park Impact Fees. Staff recommends that the City Council approve the resolution to support the findings for the Quimby Act Parkland Dedication InLieu Fee and Park Acquisition and Improvement Impact Fee as required by California Government Code Section 66000 et seq. Staff also recommends appropriating $205,338 for projects as outlined in the Parks Master Plan.

Report to Mayor and Councilmembers
Date: April 22, 2025
Page: 4 of 4
Reviewed by: Respectfully submitted by:
____________________ ____________________
Greg Humora Amanda Lee
City Manager Assistant City Manager
____________________
Lyn Dedmon
Assistant to the City Manager
Attachment “A” - Resolution

RESOLUTION NO. 2025-____

RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LA MESA APPROVING

THE FINDINGS FOR THE QUIMBY ACT PARKLAND DEDICATION IN-LIEU FEE

AND PARK ACQUISITION AND IMPROVEMENT IMPACT FEE AS REQUIRED BY CALIFORNIA GOVERNMENT CODE SECTION 66000 ET SEQ. AND

APPROPRIATING FUNDS FOR PROJECTS AS OUTLINED IN THE PARKS

MASTER PLAN
WHEREAS, Section 66000 et seq. of the California Government Code requires that the capital improvement plan be annually adopted by a resolution of the governing body and every five years the City approve the findings with respect to that portion of the account that is unexpended, whether committed or uncommitted;
WHEREAS, Section 9.20.030 of the La Mesa Municipal Code outlines the use of Quimby Act Parkland Dedication In-lieu Fees and Park Acquisition and Improvement Impact Fees;
WHEREAS, the City Council of the City of La Mesa did hold a public meeting on April 22, 2025 to consider the Capital Improvement Program projects paid for with Quimby Act Parkland Dedication In-lieu Fees and Park Acquisition and Improvement Impact Fees; WHEREAS, the City Council did receive and consider a staff report to approve the findings as required by California Government Code Section 66000 et seq. and appropriate funds for the recommended Park In-Lieu and Impact Fee project; and WHEREAS, the disposition of revenue generated from appropriation of the Quimby Act shall be pursuant to Section 66477 of the California Government Code.

NOW, THEREFORE, BE IT AND IT IS HEREBY RESOLVED, that the City Council of the City of La Mesa hereby finds the following:

1. The foregoing findings of fact and determinations are true and hereby made a part hereof.

2. The City Council resolves to approve and appropriate funds for projects as outlined in the Parks Master Plan.

PASSED AND ADOPTED at a Regular Meeting of the City Council of the City of La Mesa, California, held the 22nd day of April 2025, by the following vote, to wit:

AYES:

NOES:

ABSENT:

CERTIFICATE OF THE CITY CLERK
I, MEGAN WIEGELMAN, City Clerk of the City of La Mesa, California, do hereby certify the foregoing to be a true and exact copy of Resolution No. 2025- , duly passed and adopted by the City Council of said City on the date and by the vote therein recited.

Megan Wiegelman, CMC, City Clerk
(Seal of the City)

REPORT to the MAYOR and MEMBERS of the CITY COUNCIL
From the CITY MANAGER
DATE: April 22, 2025
SUBJECT: SAN DIEGO ASSOCIATION OF GOVERNMENTS
(“SANDAG”) ANNUAL ADJUSTMENT TO THE

REGIONAL TRANSPORTATION CONGESTION
IMPROVEMENT PROGRAM (“RTCIP”) DEVELOPMENT

IMPACT FEE
ISSUING DEPARTMENT: Public Works
SUMMARY:

Issues:

Should the City Council approve the resolution adopting the SANDAG annual adjustment to the RTCIP development impact fee for the fiscal year 2025/2026? Recommendation:

Staff recommends that the City Council approve the resolution adopting the SANDAG annual adjustment to the RTCIP development impact fee for the fiscal year 2025/2026.

Fiscal Impact:

The current fee is $2,875.06. Effective July 1, 2025, the City would collect $3,047.57 per dwelling unit for each new residence constructed in La Mesa. If the City does not comply with the RTCIP adjustments, La Mesa may lose its TransNet funding for improvements to local roads for the following fiscal year.

City’s Strategic Goals:
 Invest in infrastructure to serve the needs of the community.

BACKGROUND:

Report to Mayor and Councilmembers
Date: April 22, 2025
Page: 2 of 3
The TransNet Extension Ordinance and Expenditure Plan, also known as SANDAG Commission Ordinance 04-01, requires each local San Diego County agency to collect fees from private sector development to the RTCIP for each newly constructed residential unit beginning July 1, 2008. The program aims to ensure that new development invests in the region’s transportation system to offset the impact of growth on congestion and mobility.

In compliance with the TransNet Extension Ordinance and Expenditure Plan and the RTCIP Impact Fee Nexus Study, the City Council adopted Ordinance 2008-2791 on May 13, 2008, establishing the City’s residential traffic impact mitigation fee program and authorizing the collection of RTCIP fees. Revenue collected through the residential traffic impact mitigation fee program must be used on the regional arterial streets in La Mesa to construct transportation improvements such as new roadways, turning lanes, traffic signal coordination, bike lanes, sidewalks, and other transportation improvements.

The regional transportation system is comprised of streets that create vital links through communities to freeways. This system of streets is defined as the Regional Arterial System. The following La Mesa streets are classified as regional arterials: 70th Street, El Cajon Boulevard, Fletcher Parkway, Grossmont Center Drive, Jackson Drive, La Mesa Boulevard from the eastern intersection with University Avenue to I-8, Lake Murray Boulevard, Massachusetts Avenue, Spring Street, and University Avenue.

DISCUSSION:

The Transnet Extension Ordinance requires that the RTCIP fee charged by local jurisdictions be adjusted every year on July 1 to ensure the RTCIP retains its purchasing power to improve the regional arterial system. The adjustment shall not exceed the percentage increase set forth in the construction cost index published by the Engineering News Record or a similar cost of construction index. In no event, however, shall the increase be less than two percent per year.

SANDAG staff evaluated construction cost trends and relevant indices, and based on this analysis, a 6% fee adjustment was approved by the SANDAG Board of Directors at its meeting on February 28, 2025, raising the minimum RTCIP fee from $2,875.06 to $3,047.57, effective July 1, 2025.

CONCLUSION:

Staff recommends that the City Council approve SANDAG’s annual adjustment to the development impact fee for the Regional Transportation Congestion Improvement Program, setting the fee at $3,047.57 to be collected for each newly constructed residential unit for the fiscal year 2025/2026.

Report to Mayor and Councilmembers
Date: April 22, 2025
Page: 3 of 3
Reviewed by: Respectfully submitted by:
____________________ ____________________________
Greg Humora Michael Throne, PE
City Manager Director of Public Works
Attachments: A – Resolution FY26 RTCIP Fee Adjustment

RESOLUTION NO. 2025-

RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LA MESA ADOPTING THE SAN DIEGO ASSOCIATION OF GOVERNMENTS (“SANDAG”) ANNUAL

ADJUSTMENT TO THE REGIONAL TRANSPORTATION CONGESTION
IMPROVEMENT PROGRAM (“RTCIP”) DEVELOPMENT IMPACT FEE TO

COMPLY WITH THE REQUIREMENTS OF SANDAG COMMISSION
ORDINANCE 04-01 AND TRANSNET EXTENSION ORDINANCE AND

EXPENDITURE PLAN
WHEREAS, SANDAG Commission Ordinance 04-01 and the TransNet Extension Ordinance and Expenditure Plan requires that each local agency in San Diego County contribute exactions from the private sector to the Regional Transportation Congestion Improvement Program (RTCIP) for each newly constructed residential housing unit; WHEREAS, said exactions are intended to ensure that future development contributes its proportional share of the funding needed to pay for the Regional Arterial System and related regional transportation facility improvements as defined in the SANDAG Regional Transportation Plan;
WHEREAS, SANDAG commissioned the RTCIP Impact Fee Nexus Study to assist local agencies in complying with the legal requirements governing development impact fees in California;
WHEREAS, Ordinance No. 2008-2791 establishes a residential traffic impact mitigation fee program for the City of La Mesa in compliance with the requirements of SANDAG Commission Ordinance 04-01, the TransNet Extension Ordinance and Expenditure Plan and the RTCIP Impact Fee Nexus Study;
WHEREAS, any revenue collected by the City of La Mesa through the residential traffic impact mitigation fee program must be used on the Regional Arterial System to construct transportation improvements such as new or widened arterial roadways, turning lanes, traffic signal coordination and other traffic improvements;
WHEREAS, the TransNet Extension Ordinance and Expenditure Plan requires that the amount collected by each local agency be increased on July 1 of each year; WHEREAS, the amount of the increase shall not exceed the percentage increase set forth in the Engineering Construction Cost Index published by the Engineering News Record or similar cost of construction index and in no event shall the increase be less than two percent per year; WHEREAS, Resolution No. 2024-047 set the residential traffic impact mitigation fee beginning July 1, 2024, at two thousand eight hundred seventy-five dollars and six cents ($2,875.06), for newly constructed residential housing units, in compliance with the SANDAG RTCIP Fee Nexus Study; and
WHEREAS, the SANDAG Board of Directors approved a 6 percent increase to the residential traffic impact mitigation fee raising the fee to three thousand forty-seven dollars and fifty-seven cents ($3,047.57) at their meeting held on February 28, 2025.

NOW, THEREFORE, BE IT AND IT IS HEREBY RESOLVED by the City Council of the City of La Mesa, California, that the amount of the traffic impact mitigation fee effective July 1, 2025, shall be three thousand forty-seven dollars and fifty-seven cents ($3,047.57).

PASSED AND ADOPTED at a Regular meeting of the City Council of the City of La Mesa, California, held the 22
nd day of April 2025, by the following vote, to wit:

AYES:

NOES:

ABSENT:

CERTIFICATE OF CITY CLERK
I, MEGAN WIEGELMAN, City Clerk of the City of La Mesa, California, do hereby certify the foregoing to be a true and exact copy of Resolution No. 2025- , duly passed and adopted by the City Council of said City on the date and by the vote therein recited.

MEGAN WIEGELMAN, CMC, City Clerk
(SEAL OF CITY)

DATE: April 22, 2025
TO: Mayor and Members of the City Council
FROM: John Herrera, CPA, Acting Finance Director
VIA: Greg Humora, City Manager
SUBJECT: ACCEPTANCE OF THE SINGLE AUDIT OF FEDERALLY ASSISTED GRANT PROGRAMS FOR THE YEAR ENDING JUNE 30, 2023
A Single Audit is a compliance engagement required to be performed when $1 million or more in federal awards are “expended” by the City during any one fiscal year. The City of La Mesa was required to perform a Single Audit for Fiscal Year 2023 because its total federal grant award expenditures totaled $1,769,634.

The City engaged the services of independent auditing firm Rogers, Anderson, Malody & Scott, CPAs for the FY 2023 Single Audit. The Single Audit Report on Federal Awards attached to this staff report shows that the independent auditors found “deficiencies described in their finding #2023-001 and #2023-002 to be material weaknesses” in the City’s internal controls managed by Finance staff during FY 2023.

The auditors also stated, “We consider the deficiency described in the accompanying Schedule of Findings and Questioned Costs as item 2023-003 to be a significant deficiency”.

Staff responses, to address the Schedule of Findings by the auditors, are shown in the last two pages of the attached Single Audit report.

City of La Mesa
La Mesa, California
Single Audit Report on Federal Awards
Year Ended June 30, 2023

CITY OF LA MESA
Single Audit Report on Federal Awards
Year Ended June 30, 2023
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

6 Notes to the Schedule of Expenditures of Federal Awards

7 Schedule of Findings and Questioned Costs

8 Summary Schedule of Prior Audit Findings

14 Corrective Action Plan

15

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

CERTIFIED PUBLIC ACCOUNTANTS
-1-

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL

STATEMENTS PERFORMED IN ACCORDANCE WITH

GOVERNMENT AUDITING STANDARDS
Independent Auditor’s Report
To the Honorable City Council
City of 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 (Government Auditing Standards), the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of La Mesa (the City) as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated April 11, 2025.

Report 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.

Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. However, as described in the accompanying Schedule of Findings and Questioned Costs, we identified certain deficiencies in internal control that we consider to be material weaknesses and significant deficiencies.

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. We consider the deficiencies described as finding 2023-001 and 2023-002 to be material weaknesses.

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. We consider the deficiency described in the accompanying Schedule of Findings and Questioned Costs as item 2023-003 to be a significant deficiency.

-2-
Report on 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 financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed instances of noncompliance or other matters that are required to be reported under Government Auditing Standards, and which are described in the Schedule of Findings and Questioned Costs findings as 2023-003 and 2023-004.

City’s Response to Findings
Government Auditing Standards requires the auditor to perform limited procedures on the City’s response to the findings identified in our audit and 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 the financial statements and, accordingly, we express no opinion on the response.

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
April 11, 2025

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

CERTIFIED PUBLIC ACCOUNTANTS
-3-
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
Independent Auditor’s Report
To the Honorable City Council
City of La Mesa, California
Report of 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, 2023. 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, 2023.

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.

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.

-4-
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.

Other Matters
The results of our auditing procedures disclosed an instance of noncompliance which is required to be reported in accordance with the Uniform Guidance and which is described in the accompanying schedule of findings and questioned costs as item 2023-005. Our opinion on each major federal program is not modified with respect to this matter. 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. 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.

-5-
Report on Internal Control Over Compliance
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.

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. Given these limitations, during our audit we did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, material weaknesses or significant deficiencies in internal control over compliance may exist that were not identified.

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.

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, 2023, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements. We issued our report thereon, dated April 11, 2025, 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
April 11, 2025

CITY OF LA MESA
Schedule of Expenditures of Federal Awards
Year Ended June 30, 2023
See accompanying notes to the schedule of expenditures of federal awards. -6-
Federal Grantor / Pass-through Grantor / Program Title
Assistance
Listing (AL)
Number
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 40,961 $ - $ Community Development Block Grant 14.218 B-19-MC-06-0551 47,483 - Community Development Block Grant 14.218 B-20-MW-06-0551 136,641 30,000 Community Development Block Grant 14.218 B-20-MC-06-0551 391,306 - Community Development Block Grant 14.218 B-21-MC-06-0551 369,027 - Community Development Block Grant 14.218 B-22-MC-06-0551 274,331 - Total AL 14.218 / CDBG-Entitlement Grants Cluster 1,259,749 30,000 Total - U.S. Department of Housing and Urban Development 1,259,749 30,000 U.S. Department of Justice
Passed through the County of San Diego Sheriff's Department Equitable Sharing Funds (Asset Forfeiture Funds) 16.922 Unknown 10,358 - Total AL 16.922 - 10,358
Total - U.S. Department of Justice 10,358 -
U.S. Department of Transportation
Passed through the State of California Department of Transportation Highway Bridge Program 20.200 BRLS-5207(036) 411,301 -
Total AL 20.200 - 411,301
Highway Safety Improvement Program 20.205 HSIPL-5207(050) 11,435 - Local Roadway Safety Plan 20.205 LRSPL-5207(049) 385
Total AL 20.205 - 11,820
Total - U.S. Department of Transportation 423,121 -
U.S. Department of the Treasury
Direct Assistance
American Rescue Plan 21.027 CSLFRF 565,451 -
Total AL 21.027 - 565,451
Total - U.S. Department of the Treasury 565,451 -
Total Expenditures of Federal Awards 2,258,679 $ 30,000 $

CITY OF LA MESA
Notes to the Schedule of Expenditures of Federal Awards Year Ended June 30, 2023
-7-
(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, 2023. 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 in 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 to subrecipients. 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, 2023
-8-
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? X Yes No
Significant deficiency(ies) identified? X Yes None Reported Noncompliance material to financial
statements noted? X Yes No
Federal Awards
Internal control over major federal programs:

Material weakness(es) identified? Yes X No
Significant deficiency(ies) identified? Yes X 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
Dollar threshold used to distinguish
between type A and type B programs: 750,000 $
Auditee qualified as low-risk auditee? Yes X No
Name of Federal Program or Cluster
Type of report the auditor issued on whether the financial statements Type of auditor's report issued on compliance for major federal programs: unmodified Community Development Block Grants Cluster

CITY OF LA MESA
Schedule of Findings and Questioned Costs (continued)
Year Ended June 30, 2023
-9-
SECTION II. FINANCIAL STATEMENT FINDINGS
Finding 2023-001 – Year-End Closing
Material Weakness
Condition
The City experienced significant delays in completing its annual audit due to excessively late financial statement preparation and inefficiencies in the year-end closing procedures. The lack of timely and accurate financial reporting impairs the City’s ability to meet regulatory deadlines and ensure transparency in its financial operations.

Criteria
The City is required to prepare and submit financial statements prepared in accordance with generally accepted accounting principles (GAAP) and applicable governmental accounting standards. Timely and accurate financial reporting is essential to maintain compliance with regulatory requirements and support informed decision-making.

Cause
The delays and deficiencies in financial statement preparation were primarily due to inadequate internal controls over the financial reporting process, insufficient staffing or training in accounting functions, and ineffective communication among departments responsible for financial reporting. Additionally, the implementation of a new accounting software caused unforeseen challenges, including technical issues, data migration complexities, and extended processing times, which further disrupted the financial closing process.

Effect
The late completion of the audit resulted in noncompliance with reporting deadlines, potential penalties, and a lack of reliable financial data for stakeholders. Additionally, the inefficiencies in the closing procedures increased the risk of material misstatements, errors, and omissions in the financial statements, which could impact the accuracy and integrity of the City’s financial position.

Recommendation
We recommend that the City implement stronger internal controls over the financial reporting process, including: Establishing a structured and documented year-end closing schedule with clear responsibilities and deadlines.
 Providing additional training to accounting personnel to ensure proficiency in governmental accounting standards and the newly implemented accounting software.  Enhancing communication and coordination among finance staff to ensure timely reconciliation and review of financial records.
 Investing in financial management systems or resources to improve efficiency and accuracy in financial reporting, while ensuring proper testing and contingency plans for future software implementations.

Management Response
See Corrective Action Plan.

CITY OF LA MESA
Schedule of Findings and Questioned Costs (continued)
Year Ended June 30, 2023
-10-
SECTION II. FINANCIAL STATEMENT FINDINGS, CONTINUED
Finding 2023-002 – Bank Reconciliations
Material Weakness
Condition
The City did not complete bank reconciliations in a timely and consistent manner, leading to incomplete and late reconciliations. This issue increases the risk of undetected errors, misstatements, and potential fraud.

Criteria
Regular and timely bank reconciliations are a fundamental internal control requirement to ensure the accuracy of financial records and the detection of discrepancies. Government accounting standards require entities to perform and document reconciliations as part of their financial management practices.

Cause
The delays in completing bank reconciliations were due to inadequate staffing, insufficient training, and a lack of structured processes to ensure timely completion. Additionally, workflow inefficiencies and competing priorities within the finance department further contributed to the issue.

Effect
Failure to perform timely bank reconciliations increases the risk of financial reporting errors, undetected misappropriation of funds, and inaccurate cash balances. This issue can undermine stakeholders' confidence in the reliability of financial information and create difficulties in financial decision-making.

Recommendation
We recommend that the City strengthen its internal controls over bank reconciliations by:
 Implementing a formal reconciliation schedule with clear deadlines and accountability.  Providing additional training to finance personnel on best practices for timely and accurate reconciliations.
 Allocating sufficient resources to ensure reconciliations are completed consistently.  Regularly reviewing reconciliation reports and promptly addressing any discrepancies.  Exploring automation tools or financial management systems to improve the efficiency of the reconciliation process.

Management Response
See Corrective Action Plan.

CITY OF LA MESA
Schedule of Findings and Questioned Costs (continued)
Year Ended June 30, 2023
-11-
SECTION II. FINANCIAL STATEMENT FINDINGS, CONTINUED
Finding 2023-003 – Budgetary Compliance for Fund Transfers Significant Deficiency and Noncompliance
Condition
The City processed fund transfers that exceeded approved budgetary amounts, and some funds had transfers without any approved budget. Additionally, management was unable to provide a detailed schedule for disclosure purposes that outlined which transfers were made to and from specific funds. This represents noncompliance with the City's budget policies and financial management requirements.

Criteria
Government entities are required to adhere to approved budgets when making fund transfers to ensure fiscal discipline, compliance with financial policies, and proper oversight of public funds. The City's financial policies require that all fund transfers be properly budgeted, approved and adequately documented.

Cause
The budget overages and unapproved transfers were caused by a lack of adequate monitoring and enforcement of budgetary controls, as well as insufficient review processes before executing fund transfers. Additionally, communication gaps between departments contributed to the issue. The inability to provide a detailed transfer schedule was due to inefficiencies in the tracking and reporting processes.

Effect
Noncompliance with budgetary policies increases the risk of financial mismanagement, potential audit findings, and weakened oversight of public funds. Additionally, improper fund transfers can lead to inaccurate financial reporting and hinder the City's ability to allocate resources effectively. The absence of a detailed transfer schedule also reduces transparency and limits the ability to verify the appropriateness and accuracy of fund movements.

Recommendation
We recommend that the City strengthen its budgetary controls by:
 Implementing a formal review and approval process for all fund transfers to ensure compliance with approved budgets.
 Enhancing communication and coordination between finance and budget departments to prevent unauthorized transfers.
 Providing additional training to financial personnel on budgetary compliance and monitoring procedures.
 Establishing regular budget variance reviews to identify and address discrepancies before transfers occur.
 Enforcing stricter internal controls to ensure that all fund transfers are documented, justified, and properly approved in accordance with City policies.

Management Response
See Corrective Action Plan.

CITY OF LA MESA
Schedule of Findings and Questioned Costs (continued)
Year Ended June 30, 2023
-12-
SECTION II. FINANCIAL STATEMENT FINDINGS, CONTINUED
Finding 2023-004 – Excess Vacation Leave Balances
Nonmaterial Noncompliance
Condition
There were instances where employee vacation leave accrual balances exceeded the maximum thresholds established by the respective Memorandum of Understanding (MOU) due to errors and oversight in the manual spreadsheet used to track and calculate accrual limits.

Criteria
City policies and MOUs set limits on the amount of vacation leave employees can accrue. Compliance with these limits ensures proper workforce management and reduces financial liabilities associated with excessive leave balances.

Cause
The excess leave balances resulted from calculation errors in the manual tracking of accrual limits.

Effect
Noncompliance with established leave policies increases the City's financial liability and may lead to challenges in managing workforce scheduling and financial liabilities.

Recommendation
We recommend that the City implement stronger monitoring controls over vacation leave accruals by:
 Transitioning from manual spreadsheets to an automated leave management system.  Regularly reviewing and reconciling leave balances to ensure accuracy.  Providing additional training on accurate leave tracking and calculation.

Management Response
See Corrective Action Plan.

CITY OF LA MESA
Schedule of Findings and Questioned Costs (continued)
Year Ended June 30, 2023
-13-
SECTION III. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS 2023-005 – Single Audit Filing
Noncompliance
Federal Program
Community Development Block Grant, Assistance Listing Number 14.218 Criteria
Per the Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200.507(c)(1), regulations state the audit must be submitted within the earlier of 30 calendar days after receipt of the auditor’s report(s), or nine months after the end of the audit period.

Condition
The City was subject to a single audit as more than $750,000 of federal funds were expended during the fiscal year. As of the date of the issuance of the financial statements, the single audit has not been completed and therefore not submitted to the federal clearinghouse or other relevant granting agencies within the prescribed deadline.

Cause
Due to delay of financial reporting and issuance of the June 30, 2023, financial statements, the City fell out of compliance with the requirements noted above.

Effect
The City has put their federal funding status at risk for the delays in reporting.

Questioned Costs
None.

Recommendation
We recommend the City implemented internal controls to perform a timely closing of the audit, which would include the preparation of the schedule of expenditures of federal awards. This would allow for the timely submission of required report to the federal government.

Managements Response
See Corrective Action Plan.

CITY OF LA MESA
Summary Schedule of Prior Audit Findings
Year Ended June 30, 2023
-14-
STATUS OF PRIOR YEAR FINDINGS:

Finding 2022-001 Noncompliance
Corrective action was taken.

Finding 2022-002 Noncompliance
Corrective action was taken.

Finding 2022-003 Noncompliance
Corrective action was taken.

Finding 2022-004 Significant Deficiency
Corrective action was taken.

Finding 2022-005 Significant Deficiency
Corrective action was taken.

DATE: April 22, 2025
TO: Mayor and Members of the City Council
FROM: John Herrera, CPA, Acting Finance Director
VIA: Greg Humora, City Manager
SUBJECT: ACCEPTANCE OF BASIC FINANCIAL STATEMENTS AND
INDEPENDENT AUDITOR’S REPORT FOR THE CITY OF LA MESA FOR THE YEAR ENDING JUNE 30, 2023
The independent audit for the fiscal year (FY) ended June 30, 2023, has been completed.

The City of La Mesa received an “unmodified audit opinion” from its independent auditing firm of Rogers, Anderson, Malody & Scott, CPAs. The Report on the Audit of the Financial Statements is attached to this memo.

Upon approval by the City Council, staff will publish these audited FY 2023 financial statements.

City of La Mesa
La Mesa, California
Basic Financial Statements and
Independent Auditor’s Report
For the Year Ended June 30, 2023

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CITY OF LA MESA
Basic Financial Statements
For the Year Ended June 30, 2023
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 – Miscellaneous Grants Fund 84 Schedules of Changes in Net Pension Liability and Related Ratios 85 Schedule of Plan Contributions 88
Schedule of Changes in Net OPEB Liability and Related Ratios 91 Schedule of OPEB Contributions 92

CITY OF LA MESA
Basic Financial Statements
For the Year Ended June 30, 2023
Table of Contents
Page
Supplementary Information
Non-Major Governmental Funds:

Combining Balance Sheet 93
Combining Statement of Revenues, Expenditures,
and Changes in Fund Balances 99
Internal Service Funds:

Combining Statement of Net Position 105
Combining Statement of Revenues, Expenses, and Changes in Fund Net Position 106 Combining Statement of Cash Flows 107

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

CERTIFIED PUBLIC ACCOUNTANTS
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Independent Auditor’s Report
To the Honorable Mayor and Members of City Council
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 (the City), as of and for the year ended June 30, 2023, 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 referred to above 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, 2023, 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 (Government Auditing Standards). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Emphasis of Matter
As described in Note 1 to the financial statements during the year ended June 30, 2023, the City adopted new accounting guidance under Governmental Accounting Standards Board (GASB) Statement No. 96, Subscription-Based Information Technology Arrangements. Our opinions are not modified with respect to this matter.

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Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about 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 and Government Auditing Standards 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 and Government Auditing Standards, 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.

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Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and schedules as 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 GAAS, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The combining nonmajor fund financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with GAAS. In our opinion, the accompanying supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated April 11, 2025 on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.

San Bernardino, California
April 11, 2025

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CITY OF LA MESA
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2023
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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, 2023. 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 $180.5 million at the close of fiscal year 2023. Due to the City’s long-term net pension liability and Other Post-Employment Benefits (OPEB) liability, the City reported a negative unrestricted net position of $29.5 million.  The City’s total net position increased $11.3 million from the prior fiscal year. The City increased its net position even with the rising costs of long term impacts of pension accounting as required by GASB 68.
 At the close of the current fiscal year, the City’s governmental funds reported combined fund balances of $93.3 million, an increase of $12.7 million from the prior year. Approximately 53.1% of this amount or $49.5 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 $53.1 million, or approximately 89% of actual General Fund expenditures.
 The City’s capital assets (net of depreciation) increased by $2.9 million and total outstanding long-term liabilities increased by $38.8 million during the current fiscal year. This was mostly due to the pension liability accounting adjustments.

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, 2023
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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 is the 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 this 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.

CITY OF LA MESA
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2023
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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.

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 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. 2023 2022 2023 2022 2023 2022
ASSETS
Current and other assets 145,606,902 $ 137,426,324 $ 5,551,873 $ 6,544,956 $ 151,158,775 $ 143,971,280 $ Capital assets 166,084,323 166,037,688 38,233,302 35,517,549 204,317,625 201,555,237 Total assets 311,691,225 303,464,012 43,785,175 42,062,505 355,476,400 345,526,517

DEFERRED OUTFLOWS OF RESOURCES
Pension related 31,927,928 13,694,057 1,409,432 662,871 33,337,360 14,356,928 OPEB related 2,409,670 1,476,550 326,415 200,014 2,736,085 1,676,564 Loss on refunding 396,065 426,531 - - 396,065 426,531
Total deferred outflows of resources 34,733,663 15,597,138 1,735,847 862,885 36,469,510 16,460,023

LIABILITIES
Net pension liability 109,412,927 69,978,899 4,950,604 3,169,065 114,363,531 73,147,964 Net OPEB liability 1,475,821 443,813 199,915 60,119 1,675,736 503,932 Other long-term liabilities outstanding 26,087,430 27,741,254 11,434,234 11,582,262 37,521,664 39,323,516 Other current liabilities 24,014,126 22,742,992 1,526,416 1,402,002 25,540,542 24,144,994 Total liabilities 160,990,304 120,906,958 18,111,169 16,213,448 179,101,473 137,120,406

DEFERRED INFLOWS OF RESOURCES
Pension related 2,663,881 23,870,378 78,295 319,692 2,742,176 24,190,070 OPEB related 977,883 1,683,599 132,465 228,061 1,110,348 1,911,660 Unearned revenue 707,437 730,119 - - 707,437 730,119
Leases 27,747,273 28,787,401 - - 27,747,273 28,787,401
Total deferred inflows of resources 32,096,474 55,071,497 210,760 547,753 32,307,234 55,619,250

NET POSITION
Net investment in capital assets 144,716,039 143,675,693 25,518,104 22,827,894 170,234,143 166,503,587 Restricted 38,088,598 34,656,174 494,797 213,494 38,583,395 34,869,668 Unrestricted (29,466,527) (35,249,171) 1,186,192 3,122,801 (28,280,335) (32,126,370) Total net position 153,338,110 $ 143,082,696 $ 27,199,093 $ 26,164,189 $ 180,537,203 $ 169,246,885 $ Governmental Activities Business-Type Activities Total
Condensed Statement of Net Position
As of June 30,
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, 2023, the City’s total assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $180.5 million. This is an increase of $11.3 million over the last fiscal year ending June 30, 2022.

CITY OF LA MESA
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2023
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The largest portion of the City’s total citywide net position, $170.2 million, reflects its 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.

The total net position for governmental activities is $153.3 million as of June 30, 2023, of which $38.1 million is classified as restricted for various obligations, which includes $7.9 million for Section 115 pension obligations, $8.5 million for capital projects, and other governmental activities as shown on the Statement of Net Position. The total restricted net position for governmental activities increased by $3.4 million over the prior fiscal year.

The City’s unrestricted (deficit) net position of its governmental activities is negative $29.5 million on the Statement of Net Position as of June 30, 2023. However, this is an improvement of $5.7 million over the prior fiscal year ending June 30, 2022, when the unrestricted (deficit) net position stood at $35.2 million.

The largest fiscal impact to the City’s governmental activities net position was the accounting treatment of net OPEB and net pension liabilities as of June 30, 2023. The total of net OPEB and net pension liabilities is $110.9 million as of June 30, 2023, which is an increase of $40.5 million over the prior fiscal year, due to changes in the discount rate used in the actuarial valuations.

Deferred outflows and inflows represent flows of resources into and out of a government that are related to future periods. In the case of deferred outflows and inflows of pension and OPEB-related resources, amounts arising from a single pension or OPEB-related source, that is, from differences between expected and actual experience with regard to economic or demographic factors, changes of assumptions, or differences between projected and actual earnings on pension plan investments, in different periods are reported as either deferred outflows or deferred inflows. Deferred outflows increase a City’s net position while they are being deferred and, conversely, deferred inflows decrease a City’s net position while they are being deferred. Additional information related to pensions and OPEB can be found in Note 14 and Note 11.

CITY OF LA MESA
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2023
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2023 2022 2023 2022 2023 2022

REVENUES
Program revenues:

Charges for services 10,009,014 $ 7,939,155 $ 13,675,770 $ 12,849,117 $ 23,684,784 $ 20,788,272 $ Operating grants and contributions 6,512,927 6,783,831 1,117,265 80,647 7,630,192 6,864,478 Capital grants and contributions 4,010,452 2,637,108 - - 4,010,452 2,637,108 General revenues:

Property taxes 20,605,575 18,292,171 - - 20,605,575 18,292,171 Sales taxes 31,037,133 30,167,279 - - 31,037,133 30,167,279 Other taxes 7,038,974 7,328,854 - - 7,038,974 7,328,854 Investment earnings 1,903,405 (2,591,908) (333,262) (163,384) 1,570,143 (2,755,292) Other 524,987 853,466 - (22,218) 524,987 831,248
Transfers 2,325,800 2,146,300 (2,325,800) (2,146,300) - - Total revenues 83,968,267 73,556,256 12,133,973 10,597,862 96,102,240 84,154,118

EXPENSES
General government 9,593,588 9,264,707 - - 9,593,588 9,264,707 Police 26,294,528 21,938,671 - - 26,294,528 21,938,671
Fire 15,626,401 12,640,814 - - 15,626,401 12,640,814
Public works 14,651,146 13,835,151 - - 14,651,146 13,835,151 Community services 2,918,676 2,146,023 - - 2,918,676 2,146,023 Community development 3,357,093 3,451,332 - - 3,357,093 3,451,332 Interest on long-term debt 773,296 795,843 - - 773,296 795,843 Wastewater - - 11,470,004 9,724,858 11,470,004 9,724,858 Total expenses 73,214,728 64,072,541 11,470,004 9,724,858 84,684,732 73,797,399 Change in net position 10,753,539 9,483,715 663,969 873,004 11,417,508 10,356,719 Net position, as previously stated 143,082,696 132,810,306 26,164,189 25,291,185 169,246,885 158,101,491 Prior period adjustment (498,125) 788,675 370,935 - (127,190) 788,675 Net position, beginning, as restated 142,584,571 133,598,981 26,535,124 25,291,185 169,119,695 158,890,166 Net position, ending 153,338,110 $ 143,082,696 $ 27,199,093 $ 26,164,189 $ 180,537,203 $ 169,246,885 $ Condensed Statement of Activities
Governmental Activities Business-Type Activities Total
For the Year Ended June 30,
The net position from all activities increased by $11.4 million, made up of an increase of $10.7 million in Governmental activities and a $0.6 million increase in business-type activities.

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 $10.7 million. When compared to the previous year, total revenues were $10.4 million or roughly 14 percent higher.  Sales taxes increased $0.8 million, operating grants and contributions decreased by $270,000, investment earnings increased $4.3 million, and property tax increased by $2.3 million.  When compared to the previous year, total expenses were $9.1 million or 15 percent higher. Police and fire expenses increased $4.3 million and $2.9 million, respectively.  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.

CITY OF LA MESA
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2023
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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 increased by $1.5 million or 14 percent when compared to the prior year. Charges for services increased by $0.8 million and operating grants and contributions increased by $1 million.
 Wastewater expenses increased over the prior year by $1.7 million or 18 percent mainly due to the increases in professional services, and maintenance.

Financial Analysis of the City’s Funds
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements.

Governmental Funds. The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s 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, 2023, the City’s governmental funds reported combined fund balances of $93.3 million, an increase of $12.7 million from the prior year. Approximately 53 percent of this amount, or $49 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 ($38.4 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 $69.8 million, of which $53 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 $11.4 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, 2023, $8.0 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, 2023, the General Fund reported $5.1 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 for inventories and prepaid items.

CITY OF LA MESA
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2023
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General Fund Budgetary Highlights
The revised General Fund revenue and transfers in budget for fiscal year ending June 30, 2023, was $65.7 million. The actual revenues plus transfers were $70.7 million including $2.1 million of transfers into the General Fund. Actual revenues plus transfers increased by $6.5 million compared to the $63.0 actual revenues plus transfers from fiscal year 2022. Most of this revenue growth came from sales tax and property tax growth experienced in fiscal year ending June 30, 2023.

Almost all categories of General Fund revenues were received either at or above budgetary levels.

Property taxes were received right on target at $18.4 million. Sales tax and Prop L sales tax came in at a combined total of $30.6 million, $1.5 million over budget. Other taxes contributed $6.8 million and above budget by $1.6 million with cannabis business tax accounting for the majority of the increase.

The final General Fund expenditure budget for 2022-2023, including prior year carry forward encumbrances, was $72.9 million. Actual expenditures and transfers out were $61.4 million, under budgeted appropriations by $11.6 million.

On an actual vs actual comparison, for the fiscal year ended June 30, 2023, the $59.7 million in total General Fund expenditures represent an increase of 6.7% over the prior year total of $55.9 million. General government expenditures decreased by 2.7%, from $7.4 million in fiscal year 2023 down to $7.2 million in fiscal year 2022. Public safety expenditures, which includes Police and Fire, increased by $1.6 million, or 5% in fiscal year 2023, with total expenditures increasing from $35.3 million in fiscal year 2022 to $37.1 million in fiscal year 2023. All other General Fund department expenditures remained materially consistent on year over year basis in fiscal year 2022 compared with fiscal year 2023.

Capital 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 $204.3 million at June 30, 2023, an increase of $2.9 million or 1 percent. Increases were primarily recorded in construction in progress. 2023 2022 2023 2022 2023 2022
Land and right-of-way 27,304,163 $ 27,304,163 $ - $ - $ 27,304,163 $ 27,304,163 $ Construction in progress 7,789,883 1,798,106 2,551,681 794,256 10,341,564 2,592,362 Buildings and improvements 29,058,403 32,668,252 - - 29,058,403 32,668,252 Vehicles and equipment 8,608,758 8,295,706 857,871 1,007,412 9,466,629 9,303,118 Infrastructure 91,761,192 94,996,096 34,656,013 34,086,816 126,417,205 129,082,912 Right-to-use assets 1,561,924 477,241 167,737 - 1,729,661 477,241 Total 166,084,323 $ 165,539,564 $ 38,233,302 $ 35,888,484 $ 204,317,625 $ 201,428,048 $ Capital Assets
Governmental Activities Business-Type Activities Total
As of June 30,
Additional information on the City’s capital 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, 2023
‐11-
Long-term liabilities. At June 30, 2023, the City had long-term liabilities totaling $37.8 million, a decrease of $0.5 million.
2023 2022 2023 2022 2023 2022
Compensated absences 4,653,062 $ 4,284,393 $ - $ - $ 4,653,062 $ 4,284,393 $ General obligation refunding bonds 16,865,000 17,705,000 - - 16,865,000 17,705,000 Certificates of participation 1,710,000 2,065,000 - - 1,710,000 2,065,000 TransNet commercial paper - 499,988 - - - 499,988
Financed purchases payable 421,496 658,097 - - 421,496 658,097 Leases/SBITA liabilities 1,475,868 473,996 162,316 - 1,638,184 473,996 State revolving fund loan - - 12,552,882 12,689,655 12,552,882 12,689,655 Total 25,125,426 $ 25,686,474 $ 12,715,198 $ 12,689,655 $ 37,840,624 $ 38,376,129 $ Governmental Activities Business-Type Activities Total
Long-Term Liabilities
As of June 30,
The only new borrowing was a draw on the State Water Resources revolving fund loan which is utilized for funding of wastewater projects. The outstanding loan balance decreased by $136,773, which is a combined effect of payment of $1.1 million and an addition of $0.9 million.

Additional information on the City’s long-term debt including compensated absences can be found in Notes 7, 8, 9 and 10 in the Notes to Basic Financial Statements section of this report.

Economic Factors and Next Year’s Budget
 The total assessed valuation in the City continues to increase in accord with the 1978 Proposition 13, which is based on the 1% of assessed value and a tax rate of 2% maximum growth rate per fiscal year. With the growth in residential resale activity, which creates a “step up” in assessed values, and continued spikes in housing prices, assessed values are growing consistently with those economic factors. Also, new residential construction remains robust even as recovery from the pandemic continues and chain supply interruptions are worked out. These strong positive gains in the fiscal capacity and tax base growth were reflected in the 2023-2024 biennial budget.  Base sales tax (Bradly Burns) revenues were budgeted at $17 million in fiscal year 2022-2023 and are estimated to remain flat for fiscal year 2023-2024.  Fiscal year 2022-2023 was the fourteenth 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 2022-2023 were above budgetary projections by $606k. Proceeds from the Prop L sales tax measure are being used to maintain reserves at required levels, and City services that otherwise would have had to be reduced are being expanded to meet the service demands of the community.  Cannabis business tax revenues were approved by the voters in November 2018 and implemented in July 2019. Actual Cannabis tax revenue totaled $3.1 million, which exceeded expectations by $1.1 million for 2022-2023. Budget projections for 2023-2025 remain at $2 million each year.
 In 2015 the City established a Section 115 Retirement Trust Fund with an initial deposit of $5.5 million using General Fund Reserves. Since its inception, the Section 115 Trust Fund has grown to $7.9 million as of June 30, 2023 due to investment earnings. The City intends to use accumulated interest earnings to offset its unfunded pension liability as early as 2025.

CITY OF LA MESA
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2023
‐12-

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, P.O. Box 937, 8130 Allison Avenue, La Mesa, CA 91944.

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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, 2023
The accompanying notes are an integral part of these financial statements. -13-
Governmental Business-Type
Activities Activities Total
Assets
Current assets:

Cash and investments $ 4,876,873 83,696,483 $ 88,573,356 $ Receivables:

Accounts, net 180,203 7,449,453 7,629,656
Loans - 371,934 371,934
Grants - 2,135,367 2,135,367
Interest - 455,634 455,634
Lease - 29,216,586 29,216,586
Due from sucessor agency - 315,067 315,067
Inventory - 286,924 286,924
Prepaid items - 1,971 1,971
Advances to other agency - 5,080,004 5,080,004
Land held for resale - 8,350,000 8,350,000
Total current assets 5,057,076 137,359,423 142,416,499
Noncurrent assets:

Restricted cash and investments 8,247,479 494,797 8,742,276 Capital assets:

Nondepreciable 2,551,681 35,094,046 37,645,727
Depreciable, net 35,681,621 130,990,277 166,671,898
Total capital assets 38,233,302 166,084,323 204,317,625 Total noncurrent assets 38,728,099 174,331,802 213,059,901 Total assets 43,785,175 311,691,225 355,476,400
Deferred Outflows of Resources
Pension related 1,409,432 31,927,928 33,337,360
OPEB related 326,415 2,409,670 2,736,085
Loss on refunding - 396,065 396,065
Total deferred outflows of resources 34,733,663 1,735,847 36,469,510 Liabilities
Current liabilities:

Accounts payable 81,180 4,824,094 4,905,274
Salaries payable 39,409 789,866 829,275
Deposits - 3,722,774 3,722,774
Interest payable 124,863 342,139 467,002
Unearned revenue - 9,204,017 9,204,017
Compensated absences payable - due within one year 3,140,000 - 3,140,000 Long-term liabilities - due within one year 716,236 110,996 827,232 Long-term debt - due within one year 1,275,000 1,169,968 2,444,968 Total current liabilities 1,526,416 24,014,126 25,540,542 Non-current liabilities:

Claims and judgments payable - 5,197,320 5,197,320
Compensated absences payable 1,513,062 - 1,513,062
Long-term liabilities - due in more than one year 1,181,128 51,320 1,232,448 Long-term debt - due in more than one year 18,195,920 11,382,914 29,578,834 Net pension liability 4,950,604 109,412,927 114,363,531 Net OPEB liability 199,915 1,475,821 1,675,736
Total noncurrent liabilities 16,584,753 136,976,178 153,560,931 Total liabilities 18,111,169 160,990,304 179,101,473
Deferred Inflows of Resources
Pension related 78,295 2,663,881 2,742,176
OPEB related 132,465 977,883 1,110,348
Unearned revenue - housing loans - 707,437 707,437
Leases - 27,747,273 27,747,273
Total deferred inflows of resources 32,096,474 210,760 32,307,234 Net Position
Net investment in capital assets 144,716,039 25,518,104 170,234,143 Restricted for:

Investment in Section 115 - 7,938,631 7,938,631
General government - 3,906,366 3,906,366
Public safety - 1,458,365 1,458,365
Capital projects - 8,512,963 8,512,963
Community services - 161,913 161,913
Community development - 12,522,446 12,522,446
Debt service 494,797 3,587,914 4,082,711
Total restricted 494,797 38,088,598 38,583,395
Unrestricted (deficit) 1,186,192 (29,466,527) (28,280,335) Total net position $ 27,199,093 153,338,110 $ 180,537,203 $

CITY OF LA MESA
Statement of Activities
For the Year Ended June 30, 2023
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 9,593,588 $ 546,141 $ 1,172,912 $ - $ 1,719,053 $ Police 26,294,528 785,210 1,153,591 - 1,938,801
Fire 15,626,401 681,786 948,708 - 1,630,494
Public works 14,651,146 1,769,012 2,893,388 4,010,452 8,672,852 Community services 2,918,676 2,046,733 129,251 - 2,175,984 Community development 3,357,093 4,180,132 215,077 - 4,395,209 Interest on long-term debt 773,296 - - - -
Total governmental activities 73,214,728 10,009,014 6,512,927 4,010,452 20,532,393 Business-type activities:

Wastewater 11,470,004 13,675,770 1,117,265 - 14,793,035 Total business-type activities 11,470,004 13,675,770 1,117,265 - 14,793,035 Total primary government 84,684,732 $ 23,684,784 $ 7,630,192 $ 4,010,452 $ 35,325,428 $ General revenues:

Taxes:

Property taxes
Sales taxes
Franchise taxes
Motor vehicle license
Other taxes
Total taxes
Investment earnings
Miscellaneous
Transfers
Total general revenues and transfers
Change in net position
Net position, as previously stated
Prior period adjustment (Note 21)
Net position, beginning of year, as restated
Net position, end of year
Program Revenues

(continued)
-15-
Governmental Business-Type
Activities Activities Total
$ - (7,874,535) $ (7,874,535) $
- (24,355,727) (24,355,727)
- (13,995,907) (13,995,907)
- (5,978,294) (5,978,294)
- (742,692) (742,692)
- 1,038,116 1,038,116
- (773,296) (773,296)
- (52,682,335) (52,682,335)
3,323,031 - 3,323,031
3,323,031 - 3,323,031
3,323,031 (52,682,335) (49,359,304)
20,605,575 - 20,605,575
31,037,133 - 31,037,133
2,247,197 - 2,247,197
- 61,994 61,994
4,729,783 - 4,729,783
- 58,681,682 58,681,682
(333,262) 1,903,405 1,570,143
- 524,987 524,987
(2,325,800) 2,325,800 -
(2,659,062) 63,435,874 60,776,812
663,969 10,753,539 11,417,508
26,164,189 143,082,696 169,246,885
370,935 (498,125) (127,190)
26,535,124 142,584,571 169,119,695
$ 27,199,093 153,338,110 $ 180,537,203 $
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, 2023
The accompanying notes are an integral part of these financial statements. -16-
Non-Major
General Transportation Miscellaneous Governmental
Fund CIP Grants Funds Totals
Assets
Cash and investments 49,311,123 $ - $ 8,896,785 $ 18,062,358 $ 76,270,266 $ Restricted:

Cash and investments - - - 160,251 160,251
Investment in Section 115 Trust 7,938,631 - - - 7,938,631 Receivables:

Accounts 7,147,775 - - 256,233 7,404,008
Loans 29,917 - - 342,017 371,934
Grants - - 39,754 2,095,613 2,135,367
Interest 455,634 - - - 455,634
Lease 28,530,745 - - 685,841 29,216,586
Due from other funds 3,604,184 - - - 3,604,184
Due from sucessor agency 315,067 - - - 315,067
Inventory 286,924 - - - 286,924
Prepaid items 1,971 - - - 1,971
Advances to other governments 5,080,004 - - - 5,080,004 Land held for resale - - - 8,350,000 8,350,000
Total assets 102,701,975 $ - $ 8,936,539 $ 29,952,313 $ 141,590,827 $ Liabilities
Liabilities:

Accounts payable 1,297,641 $ 33,837 $ 70,082 $ 1,237,720 $ 2,639,280 $ Salaries payable 765,601 - - 20,983 786,584
Deposits 3,722,774 - - - 3,722,774
Due to other funds - 1,888,999 - 1,588,987 3,477,986
Unearned revenue - - 9,204,017 - 9,204,017
Total liabilities 5,786,016 1,922,836 9,274,099 2,847,690 19,830,641 Deferred Inflows of Resources
Unearned revenue - housing loans - - - 707,437 707,437
Unavailable revenue - grants - - 21,267 21,267
Leases 27,115,580 - - 631,693 27,747,273
Total deferred inflows of resources 27,115,580 - - 1,360,397 28,475,977 Fund Balances
Non-spendable:

Inventory 286,924 - - - 286,924
Prepaid items 1,971 - - - 1,971
Advances to other governments 5,080,004 - - - 5,080,004 Restricted for:

Investment in Section 115 Trust 7,938,631 - - - 7,938,631 General government - - - 831,295 831,295
Public safety - - - 1,458,365 1,458,365
Capital outlays 3,427,328 - - 5,085,635 8,512,963
Community services - - - 3,215,717 3,215,717
Community development - - - 12,522,446 12,522,446
Debt service - - - 3,919,525 3,919,525
Unassigned (deficit) 53,065,521 (1,922,836) (337,560) (1,288,757) 49,516,368 Total fund balances 69,800,379 (1,922,836) (337,560) 25,744,226 93,284,209 Total liabilities, deferred inflows of
resources and fund balances 102,701,975 $ - $ 8,936,539 $ 29,952,313 $ 141,590,827 $ Major Funds

CITY OF LA MESA
Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Position
June 30, 2023
The accompanying notes are an integral part of these financial statements. -17-
Fund balances of governmental funds 93,284,209 $
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 35,094,046
Depreciable, net 130,990,277
Total capital assets 166,084,323
Accrued interest payable for the current portion of interest due on long-term debt has not been reported in the governmental funds. (331,611) 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. (731,989)
Other long-term assets are not available to pay current period expenditures, and therefore, are reported as unavailable revenue in the funds. 21,267
Deferred inflows and outflows of resources have not been reported in the governmental funds:

Deferred inflows - pension related (2,663,881)
Deferred inflows - OPEB related (977,883)
Deferred outflows - pension related 31,927,928
Deferred outflows - OPEB related 2,409,670
Deferred outflows - loss on refunding 396,065
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 (4,653,062)
Long-term liabilities - due within one year (1,806,301) Long-term liabilities - due in more than one year (18,731,877) Net pension liability (109,412,927)
Net OPEB liability (1,475,821)
Total long-term liabilities (136,079,988)
Net position of governmental activities 153,338,110 $
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, 2023
The accompanying notes are an integral part of these financial statements. -18-
Non-Major
General Transportation Miscellaneous Governmental
Fund CIP Grants Funds Totals
Revenues:

Property taxes 18,418,083 $ - $ - $ 1,794,982 $ 20,213,065 $ Other taxes 37,372,154 - - 547,993 37,920,147
Licenses and permits 2,473,422 210,881 - 208,338 2,892,641 Fines and forfeitures 442,809 - - 145,938 588,747
Use of money and property 3,510,031 (109) - 675,804 4,185,726 Intergovernmental 1,701,778 - 736,931 8,721,195 11,159,904 Charges for services 3,413,608 - - 349,058 3,762,666
Other revenues 1,261,304 2,818 - 124,135 1,388,257
Total revenues 68,593,189 213,590 736,931 12,567,443 82,111,153 Expenditures:

Current:

General government 7,151,776 - - 809,071 7,960,847
Police 22,793,662 - 238,065 1,082,608 24,114,335
Fire 14,308,258 - - 980 14,309,238
Public works 8,997,778 - - - 8,997,778
Community development 2,338,650 - 562,346 431,623 3,332,619 Community services 2,194,954 - - 10,185 2,205,139
Capital outlay 1,456,400 2,221,448 - 3,409,099 7,086,947 Debt service:

Principal retirement 460,488 - - 1,721,945 2,182,433
Interest and fiscal charges 9,134 - - 838,489 847,623
Total expenditures 59,711,100 2,221,448 800,411 8,304,000 71,036,959 Excess (deficiency) of revenues
over (under) expenditures 8,882,089 (2,007,858) (63,480) 4,263,443 11,074,194 Other financing sources (uses):

Transfers in 2,122,249 1,683,318 - 798,117 4,603,684
Transfers out (1,644,291) - - (2,829,593) (4,473,884)
Lease acquisition 1,456,400 - - 80,440 1,536,840
Total other financing sources (uses) 1,934,358 1,683,318 - (1,951,036) 1,666,640 Net change in fund balances 10,816,447 (324,540) (63,480) 2,312,407 12,740,834 Fund balances (deficit), beginning of year 58,983,932 (1,598,296) (274,080) 23,431,819 80,543,375 Fund balances (deficit), end of year 69,800,379 $ (1,922,836) $ (337,560) $ 25,744,226 $ 93,284,209 $ 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, 2023
The accompanying notes are an integral part of these financial statements. -19-
Net change in fund balances - total governmental funds 12,740,834 $ 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). 361,427 The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of longterm 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 2,182,433
Amortization of premium and loss on refunding, net 33,529 Issuance of new debt (1,536,840)
Changes in pension and OPEB related items 613,168
Accrued interest for debt service. This is the net change in accrued interest for the current period. 40,798
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. (368,669)
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. (3,334,408)
Change in net position of governmental activities 10,753,539 $ Amounts reported for governmental activities in the Statement of Activities

PROPRIETARY FUND FINANCIAL STATEMENTS

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CITY OF LA MESA
Statement of Net Position
Proprietary Funds
June 30, 2023
The accompanying notes are an integral part of these financial statements. -20-
Governmental
Activities
Internal
Wastewater Service Funds
Assets
Current assets:

Cash and investments 4,876,873 $ 7,426,217 $
Accounts receivable, net 180,203 45,445
Total current assets 5,057,076 7,471,662
Noncurrent assets:

Restricted cash and investments 494,797 148,597
Capital assets:

Nondepreciable - 2,551,681
Depreciable, net 7,211,233 35,681,621
Total capital assets, net 38,233,302 7,211,233
Total noncurrent assets 38,728,099 7,359,830
Total assets 14,831,492 43,785,175
Deferred Outflows of Resources
Pension related - 1,409,432
OPEB related - 326,415
Total deferred outflows of resources 1,735,847 -
Liabilities
Current liabilities:

Accounts payable 2,184,814 81,180
Salaries payable 3,282 39,409
Due to other funds 126,198 -
Interest payable 10,528 124,863
Long-term liabilities - due in one year 110,996 184,935 Notes payable - due within one year 1,169,968 -
Total current liabilities 1,526,416 2,509,757
Noncurrent liabilities:

Long-term liabilities - due in more than one year 51,320 645,171 Notes payable - due in more than one year 11,382,914 -
Claims payable 5,197,320 -
Net pension liability - 4,950,604
Net OPEB liability - 199,915
Total noncurrent liabilities 16,584,753 5,842,491
Total liabilities 18,111,169 8,352,248
Deferred Inflows of Resources
Pension related - 78,295
OPEB related - 132,465
Total deferred inflows of resources 210,760 -
Net Position
Net investment in capital assets 25,518,104 6,381,127
Restricted 148,597 494,797
Unrestricted (deficit) (50,480) 1,186,192
Total net position 27,199,093 $ 6,479,244 $

CITY OF LA MESA
Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Funds
For the Year Ended June 30, 2023
The accompanying notes are an integral part of these financial statements. -21-
Governmental
Activities
Internal Service
Wastewater Funds
Operating revenues:

Charges for services 13,675,770 $ 7,174,309 $
Other operating revenues - 94,899
Total operating revenues 13,675,770 7,269,208
Operating expenses:

Salaries and payroll 3,079,008 399,924
Professional services 6,937,939 6,870,574
Supplies, materials and miscellaneous 172,957 578,214
Insurance premiums and settlements - 3,534,967
Maintenance expenses 139,939 -
Depreciation 928,651 812,950
Amortization - 51,028
Total operating expenses 11,258,494 12,247,657
Operating income (loss) 2,417,276 (4,978,449)
Nonoperating revenues (expenses):

Investment income (loss) (333,262) (377,304)
Interest (expense) (211,510) (32,172)
Intergovernmental 1,117,265 -
Gain (loss) on disposal of assets - (142,483)
Total nonoperating revenues (expenses) 572,493 (551,959) Transfers:

Transfers in - 2,196,000
Transfers out (2,325,800) -
Total transfers (2,325,800) 2,196,000
Change in net position 663,969 (3,334,408)
Net position, beginning of year, as restated (Note 21) 26,535,124 9,813,652 Net position, end of year 27,199,093 $ 6,479,244 $

CITY OF LA MESA
Statement of Cash Flows
Proprietary Funds
For the Year Ended June 30, 2023
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 $ 7,139,577 13,562,354 $ Cash payments to suppliers for goods and services (1,932,532) (7,288,376) Cash payments to employees for services (402,184) (2,357,473) Insurance premiums and settlements (9,208,880) -
Other operating revenues 237,194 -
Net Cash Provided by (Used for) Operating Activities (4,166,825) 3,916,505

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Intergovernmental - 1,117,265
Transfers in 2,196,000 -
Transfers out - (2,325,800)
Implicit financing 126,198 -
Net Cash Provided by (Used for) Noncapital and Related Financing Activities (1,208,535) 2,322,198

CASH FLOWS FROM CAPITAL AND RELATED FINANCING

ACTIVITIES
Acquisition of capital assets (1,189,793) (3,079,645)
Issuance of notes payable - 970,619
Payment of interest (32,172) (207,119)
Payments on long-term liabilities (284,124) (1,165,062) Net Cash Used for Capital and Related Financing Activities (3,481,207) (1,506,089)

CASH FLOWS FROM INVESTING ACTIVITIES
Investment income (377,304) (333,262)
Net Cash Used for Investing Activities (377,304) (333,262) Net Decrease in Cash and Cash Equivalents (3,728,020) (1,106,499) Cash and Cash Equivalents - beginning of the year 11,302,834 6,478,169 Cash and Cash Equivalents - end of the year $ 7,574,814 5,371,670 $

RECONCILIATION TO STATEMENT OF NET POSITION
Cash and cash equivalents - current $ 7,426,217 4,876,873 $ Cash and cash equivalents - restricted 148,597 494,797
Total cash and cash equivalents $ 7,574,814 5,371,670 $ Reconciliation of operating income (loss) to net cash provided by (used for) operating activities:

Operating income (loss) $ (4,978,449) 2,417,276 $
Adjustments to reconcile operating income (loss) to net cash provided by (used for) operating activities:

Depreciation expense 812,950 928,651
Amortization expense 51,028 -
Changes in assets and liabilities:

Accounts receivable 107,563 (113,416)
Deferred outflows of resources - (872,962)
Accounts payable 592,957 (63,703)
Claims payable (750,614) -
Salaries and benefits payable (2,260) 10,155
Deferred inflows of resources - (336,993)
Net pension liability - 1,781,539
Net OPEB liability - 139,796
Net Cash Provided by (Used for) Operating Activities $ (4,166,825) 3,916,505 $ Noncash Financing Activities
Gain (loss) on disposition of assets $ (142,483) - $
Subscription liability - 219,986
Subscription acquisition - (219,986)

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FIDUCIARY FUND FINANCIAL STATEMENTS

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CITY OF LA MESA
Statement of Fiduciary Net Position
Fiduciary Funds
June 30, 2023
The accompanying notes are an integral part of these financial statements. -23-
Successor
Agency
Restricted cash and investments 522,710 $
Accounts receivable 9,853
Capital assets not being depreciated:

Land 160,000
Total assets 692,563
Accounts payable 11,058
Salaries payable 1,239
Due to the City 315,067
Advance from other governments 5,080,004
Long term liabilities due within one year 490,000
Total liabilities 5,897,368
Held in trust for successor agency (5,204,805) $
Net Position (Deficit)
Assets
Liabilities

CITY OF LA MESA
Statement of Changes in Fiduciary Net Position
Fiduciary Funds
For the Year Ended June 30, 2023
The accompanying notes are an integral part of these financial statements. -24-
Successor
Agency
RPTTF Distribution 1, $ 174,954
Investment Income 13,463
Total additions 1,188,417
Administrative expenses 178,935
Contributions to other agencies 585,416
Interest 41,544
Total deductions 805,895
Change in net position 382,522
Net position (deficit), beginning of year (5,587,327)
Net position (deficit), end of year (5,204,805) $
Additions
Deductions

CITY OF LA MESA
Index to Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-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
Note 4 – Lease Receivable 41
Note 5 – Interfund Transactions 42
A. Advances From/To Other Governments 42
B. Due To/From Other Funds 42
C. Transfers In and Out 43
Note 6 – Capital Assets 44
A. Government-Wide Financial Statements 45
B. Fund Financial Statements 46

CITY OF LA MESA
Index to Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-26-
Page
Note 7 – Long-Term Debt 47
A. Governmental Activities Long-Term Debt 47
B. Business-Type Activities Long-Term Debt 50
Note 8 – Financed Purchase 51
Note 9 – Lease and Subscription Liabilities 52
A. Governmental Activities 52
B. Business-Type Activities 53
Note 10 – Compensated Absences 54
Note 11 – Other Post Employment Benefits 54
Note 12 – Other Required Disclosures 59
Note 13 – Risk Management 59
Note 14 – Defined Benefit Pension Plans 60
A. General Information about the Pension Plans 60
B. Net Pension Liability 62
C. Changes in Net Pension Liability 66
D. Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions 68
E. Payable to the Pension Plan 71
Note 15 – Retirement Enhancement Plan 71
A. PARS Retirement Enhancement Plan 71
B. Net Pension Liability 73
C. Changes in the Net Pension Liability 75
D. Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions 77
E. Payable to the Pension Plan 77
Note 16 – Commitments and Contingencies 78
Note 17 – Related Party Transactions 78
Note 18 – Successor Agency 79
Note 19 – Successor Agency Long-Term Debt 79
Note 20 – Risk, Uncertainties & Contingencies 80
Note 21 – Prior Period Adjustment 81

NOTES TO THE BASIC FINANCIAL STATEMENTS

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CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-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, 2023
-28-

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) B. Basis of Accounting and Measurement Focus, (continued) Government - Wide Financial Statements, (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, 2023
-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, 2023
-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.

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, 2023, 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, 2023
-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, 2023
-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, 2023
-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, 2023
-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.

Generally accepted accounting principles requires that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used.

Valuation Date (VD) June 30, 2021
Measurement Date (MD) June 30, 2022
Measurement Period (MP) July 1, 2021 to June 30, 2022
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, 2022
Measurement Period (MP) July 1, 2021 to June 30, 2022

CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-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.

Generally accepted accounting principles requires that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used:

Valuation Date (VD) June 30, 2021
Measurement Date (MD) June 30, 2022
Measurement Period (MP) July 1, 2021 to June 30, 2022
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, 2023
-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
For the year ended June 30, 2023, the financial statements include the adoption of GASB Statement No. 96 – Subscription Based Information Technology Arrangements. This Statement provides guidance on the accounting and financial reporting for subscription-based information technology arrangements (SBITAs) for government end users. Under this Statement, a lessee is required to recognize a SBITA liability and an intangible right-to-use asset. For additional information, refer to the disclosures for capital assets and lease and subscription liabilities.

CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-37-

2. CASH AND INVESTMENTS
The following is a summary of cash and investments at June 30, 2023:

Fiduciary
Funds
Governmental Business-Type Statement of
Activities Activities Fiduciary Assets Total
Cash and investments 83,696,483 $ 4,876,873 $ - $ 88,573,356 $ Restricted:

Cash and investments 308,848 494,797 1,326,355 522,710
Investments in Section 115 Trust 7,938,631 - - 7,938,631 Total $ 5,371,670 91,943,962 $ 522,710 $ 97,838,342 $
Government-Wide
Statement of Net Position
Cash, cash equivalents, and investments consisted as follows, at June 30, 2023:

Cash and cash equivalents:

Petty Cash $ 1,250
Demand Deposit 762,065
Total cash and cash equivalents 763,315
Investments:

Local Agency Investment Fund 42,189,436
Investment in Section 115 Trust 7,938,631
Negotiable Certificates of Deposit 14,448,625
U.S. Government Obligations 31,975,625
Money Market 522,710
Total investments 97,075,027
Total cash and investments $ 97,838,342
A. Cash Deposits
As of June 30, 2023, 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, 2023
-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, 2023 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, 2023, the City had $42,189,436 invested in LAIF.

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, 2023
-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, 2023, 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, 2023
-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 42,189,436 $ 43.46%
Investment in Section 115 trust 7,938,631 8.18%
Negotiable Certificates of Deposit 14,448,625 14.88%
U.S. Government Obligations 31,975,625 32.94%
Money Market 522,710 0.54%
Total $ 100.00% 97,075,027
D. Summary of Investments to Maturity
Investments held in the City Treasury grouped by maturity date at June 30, 2023, are shown below:

Maturity
Current to one year 54,324,148 $
One to two years 8,115,922
Two to three years 11,594,300
Three to four years 18,495,700
Four to five years 4,544,957
Total $ 97,075,027
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, 2023:

Investments by Fair Value Level Total Level 1 Level 2 Level 3 Negotiable Certificates of Deposit 14,448,625 $ - $ 14,448,625 $ - $ U.S. Government Obligations 31,975,625 31,975,625 - -
Money Market 522,710 522,710 - -
Total investments by fair value 46,946,960 32,498,335 $ 14,448,625 $ - $ Investments not subject to fair value hierarchy:

Investment in Section 115 trust 7,938,631
Local Agency Investment Fund 42,189,436
Total 97,075,027 $
Fair Value Measurement Using

CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-41-

3. LOANS RECEIVABLE
As of June 30, 2023 the following loans were outstanding:

Governmental
Funds
Computer Loan Program $ 29,917
Housing Rehabilitation Loan Program 117,017
Housing Successor loans 225,000
Total $ 371,934
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, 2023, the outstanding amount due to the City was $29,917.

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, 2023, the outstanding amount due to the City was $117,017.

Housing Successor Loans
Housing Successor loans in the amount of $225,000 consist of low and moderate income housing loans for three properties located on Lubbock Avenue.

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.

4. LEASE RECEIVABLE
As of June 30, 2023, the City had 8 active leases. The leases have receipts that range from $2,800 to $394,752 and interest rates that range from 0.5100% to 2.5800%. As of June 30, 2023, the total combined value of the lease receivable is $29,216,586, and the combined value of the deferred inflow of resources is $27,747,273.

CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-42-

5. INTERFUND TRANSACTIONS
A. Advances From/To Other Governments
As of June 30, 2023, balances of advances from/advances to were as follows:

Governmental Activities:

General Fund 5,080,004 $ 5,080,004 $
Advances to Other
Total 5,080,004 $ 5,080,004 $
Governments
Successor
Agency Total
Advances From
Other Governments
The advance from the 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, 2023, the outstanding balance is $5,300,000.

B. Due To/From Other Funds
Interfund receivable and payable balances at June 30, 2023 were as follows:

Due to Other
Funds
Transportation
CIP
Non-Major
Governmental
Funds
Internal
Service Funds Total
General
Fund $ 1,588,987 1,888,999 $ 126,198 $ 3,604,184 $
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, 2023
-43-

5. INTERFUND TRANSACTIONS, (continued)
C. Transfers In and Out
Transfers in and out for the year ended June 30, 2023 were as follows:

Non-Major Internal
General Transportation Governmental Service
Fund CIP Funds Funds Total
Governmental Activities:

General Fund - $ - $ - $ 1,644,291 $ 1,644,291 $
Non-Major Governmental Funds 348,158 1,683,318 798,117 2,829,593 Business-Type Activities:

Wastewater 1,774,091 - - 551,709 2,325,800
Total $ 1,683,318 2,122,249 $ 798,117 $ 2,196,000 $ 6,799,684 $ Transfers out
Governmental Activities
Transfers In
Transfers between funds primarily represent reimbursements for services provided and/or the allocation of resources to fund specific programs or capital projects. These transfers are consistent with the purpose of each fund and are used to allocate costs appropriately across governmental activities.

CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-44-

6. CAPITAL ASSETS
A. Government-Wide Financial Statements
At June 30, 2023 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 7,789,883 2,551,681 10,341,564 Total non-depreciable assets 35,094,046 2,551,681 37,645,727 Depreciable assets:

Buildings and improvements 47,796,770 - 47,796,770
Vehicles and equipment 17,917,138 2,280,839 20,197,977
Right-to-use asset - equipment 530,443 - 530,443
Right-to-use asset - subscription 1,619,802 219,986 1,839,788 Infrastructure 205,556,431 55,891,233 261,447,664
Total depreciable assets, at cost 273,420,584 58,392,058 331,812,642 Accumulated Depreciation:

Buildings and improvements (18,738,367) - (18,738,367)
Vehicles and equipment (9,308,380) (1,422,968) (10,731,348) Right-to-use asset - equipment (108,263) - (108,263)
Right-to-use asset - subscription (480,058) (52,249) (532,307) Infrastructure (113,795,239) (21,235,220) (135,030,459) Total accumulated depreciation (142,430,307) (22,710,437) (165,140,744) Total depreciable assets, net 130,990,277 35,681,621 166,671,898 Total capital assets $ 166,084,323 $ 38,233,302 $ 204,317,625

CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-45-

6. CAPITAL 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, 2022 Additions Deletions June 30, 2023
Non-depreciable assets:

Land $ 11,398,339 $ - $ - $ 11,398,339
Right-of-way 15,905,824 - - 15,905,824
Construction in progress* 1,798,106 7,078,472 (1,086,695) 7,789,883 Total non-depreciable assets 29,102,269 7,078,472 (1,086,695) 35,094,046 Depreciable assets:

Buildings and improvements 47,796,770 - - 47,796,770
Vehicles and equipment* 17,416,977 1,373,146 (872,985) 17,917,138 Right-to-use asset - equipment 530,443 - - 530,443
Right-to-use asset - subscription - 1,619,802 - 1,619,802 Infrastructure* 205,260,159 1,109,593 (813,321) 205,556,431 Total depreciable assets, at cost 271,004,349 4,102,541 (1,686,306) 273,420,584 Accumulated Depreciation/Amortization
Buildings and improvements (15,128,518) (3,609,849) - (18,738,367) Vehicles and equipment* (9,121,271) (917,605) 730,496 (9,308,380) Right-to-use asset - equipment (53,202) (55,061) - (108,263) Right-to-use asset - subscription - (480,058) - (480,058) Infrastructure* (110,264,063) (4,006,511) 475,335 (113,795,239) Total accumulated
depreciation/amortization (134,567,054) (9,069,084) 1,205,831 (142,430,307) Total depreciable assets, net 136,437,295 (4,966,543) (480,475) 130,990,277 Total governmental activities $ 165,539,564 $ 2,111,929 $ (1,567,170) $ 166,084,323 * Beginning balances include correction of errors.

Governmental activities depreciation and amortization expense for capital assets for the year ended June 30, 2023 was as follows:

General government $ 1,114,544
Police 1,236,218
Fire 1,126,047
Public works 4,921,718
Community services 659,380
Community development 11,177
Total $ 9,069,084

CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-46-

6. CAPITAL ASSETS, (continued)
A. Government-Wide Financial Statements, (continued)
The following is a summary of capital assets for business-type activities:

Business-Type activities: Balance Balance
June 30, 2022 Additions Deletions June 30, 2023
Non-depreciable assets:

Construction in progress* $ 794,256 $ 3,079,645 $ (1,322,220) $ 2,551,681 Total non-depreciable assets 794,256 3,079,645 (1,322,220) 2,551,681 Depreciable assets:

Vehicles and equipment* 2,280,839 - - 2,280,839
Right-to-use asset - subscription - 219,986 - 219,986
Infrastructure 54,614,829 1,296,058 (19,654) 55,891,233 Total depreciable assets, at cost 56,895,668 1,516,044 (19,654) 58,392,058 Accumulated Depreciation/Amortization
Vehicles and equipment* (1,273,427) (149,541) - (1,422,968) Right-to-use asset - subscription - (52,249) - (52,249) Infrastructure (20,528,013) (726,861) 19,654 (21,235,220) Total accumulated
depreciation/amortization (21,801,440) (928,651) 19,654 (22,710,437) Total depreciable assets, net 35,094,228 587,393 - 35,681,621 Total business-type activities $ 35,888,484 $ 3,667,038 $ (1,322,220) $ 38,233,302 * Beginning balances include correction of errors.

Business-type activities depreciation and amortization expense for capital assets for the year ended June 30, 2023 was as follows:

Wastewater $ 928,651
Total depreciation $ 928,651
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.

CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-47-

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, 2023 was as follows:

Balance Balance Due Within Due in More
June 30, 2022 Additions Deletions June 30, 2023 One Year Than One Year Bonds payable:
2006 Certificates of participation:

Series A 810,000 $ - $ (135,000) $ 675,000 $ 150,000 $ 525,000 $ Series B 1,255,000 - (220,000) 1,035,000 235,000 800,000 2016 General obligation refunding bonds 17,705,000 - (840,000) 16,865,000 890,000 15,975,000 Unamortized bond premium 959,915 - (63,995) 895,920 - 895,920 TransNet Commercial Paper - direct borrowing 499,988 - (499,988) - - - Total $ - 21,229,903 $ (1,758,983) $ 19,470,920 $ 1,275,000 $ 18,195,920 $ 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 $764,586 payable through 2027. Total principal and interest remaining on the Certificates of Participation Series B is $1,133,711 payable through 2027.

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.

CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-48-

7. LONG-TERM DEBT, (continued)
A. Governmental Activities Long-Term Debt, (continued)
Bonds Payable, (continued)
2006 Certificates of Participation, Series A and B, continued The outstanding principal balances of Series A and B at June 30, 2023 were $675,000 and $1,035,000 respectively, for a combined balance of $1,710,000.

The annual debt service requirements for the Series A and B Certificates outstanding at June 30, 2023 were as follows:

Year Ending
June 30, Principal Interest Total
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 $ 89,586 675,000 $ 764,586 $
Year Ending
June 30, Principal Interest Total
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 $ 98,711 1,035,000 $ 1,133,711 $
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, 2023
-49-

7. LONG-TERM DEBT, (continued)
A. Governmental Activities Long-Term Debt, (continued)
Bonds Payable, (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, 2023 were as follows:

Year Ending
June 30, Principal Interest Total
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 1,095,000 510,537 1,605,537
2029 - 2033 6,230,000 1,901,662 8,131,662
2034 - 2037 5,660,000 520,025 6,180,025
Total $ 5,397,149 16,865,000 $ 22,262,149 $
2016 General Obligation Refunding Bonds

CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-50-

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. The loan was fully paid as of June 30, 2023.

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, 2023 was as follows:

Balance Balance Due Within Due in More
June 30, 2022 Additions Deletions June 30, 2023 One Year Than One Year Notes payable:

State Revolving Fund Loan $ 12,689,655 $ 970,619 $ (1,107,392) $ 12,552,882 $ 1,169,968 $ 11,382,914 Total $ 12,689,655 $ 970,619 $ (1,107,392) $ 12,552,882 $ 1,169,968 $ 11,382,914 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, $7,000,000, and $970,619 was approved for borrowing on November 3, 2015, July 7, 2020, and February 27, 2023, respectively. At June 30, 2023, the City had borrowed $22,317,101, of which $12,552,882 remains outstanding.

The annual debt service requirements for the State Water Fund Loan outstanding at June 30, 2023 were as follows:

Year Ending June 30, Principal Interest Total
2024 1,169,968 $ 200,272 $ 1,370,240 $
2025 1,185,420 184,820 1,370,240
2026 1,207,671 162,569 1,370,240
2027 1,230,387 139,854 1,370,241
2028 1,253,577 116,664 1,370,241
2029 - 2033 3,140,984 340,278 3,481,262
2034 - 2038 2,200,010 152,149 2,352,159
2039 - 2043 1,164,865 33,681 1,198,546
Total $ 1,330,287 12,552,882 $ 13,883,169 $
State Revolving Fund Loan

CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-51-

8. FINANCED PURCHASE
The summary of changes in long-term financed purchases for governmental activities for the year ended June 30, 2023 was as follows:

Balance Balance Due Within Due in More
June 30, 2022 Additions Deletions June 30, 2023 One Year Than One Year Financed purchase payable
Municipal Finance Corp - 2016 103,659 $ - $ (103,659) $ - $ - $ - $ San Diego County Next Gen RCS - 2017 554,438 - (132,942) 421,496 136,651 284,845 Total $ 658,097 $ - $ (236,601) $ 421,496 $ 136,651 $ 284,845 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 purchase was fully repaid as of June 30, 2023.

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. The City’s shared infrastructure obligation was 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, 2023 were as follows:

Year Ending
June 30, Principal Interest Total
2024 $ 11,760 136,651 $ 148,411 $
2025 140,464 7,947 148,411
2026 144,381 4,028 148,411
Total $ 23,735 421,496 $ 445,233 $
San Diego County Next Gen RCS - 2017

CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-52-

8. FINANCED PURCHASE (continued)
Schedule of property under financed purchase by major classes at June 30, 2023:

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 AND SUBSCRIPTION LIABILITIES
A. Governmental Activities
The summary of changes in long-term lease and subscription liabilities for governmental activities for the year ended June 30, 2023 was as follows:

Balance Balance Due Within Due in More
June 30, 2022 Additions Deletions June 30, 2023 One Year Than One Year Lease liability:

Copier $ - 17,863 $ (3,956) $ 13,907 $ 4,007 $ 9,900 $
Fire Stryker Equipment 456,133 - (47,523) 408,610 48,284 360,326 Subscription liability - 1,536,840 (483,489) 1,053,351 527,294 526,057 Total $ 473,996 $ 1,536,840 $ (534,968) $ 1,475,868 $ 579,585 $ 896,283 Classification
Lease Liability
As of June 30, 2023, the City had 2 active leases. The leases have payments that range from $4,163 to $54,822 and interest rates that range from 1.29% to 1.60%. As of June 30, 2023, the total combined value of the lease liability is $422,517. The combined value of the right to use asset, as of June 30, 2023 of $530,443 with accumulated amortization of $108,263 is included within the rightto-use asset – equipment in note 6.

The annual payments as of June 30, 2023 were as follows:

Year Ending
June 30, Principal Interest Total
2024 52,291 $ 6,694 $ 58,985 $
2025 53,116 5,869 58,985
2026 53,953 5,031 58,984
2027 52,368 4,189 56,557
2028 3,373 51,449 54,822
2029 - 2031 5,126 159,340 164,466
Total $ 30,282 422,517 $ 452,799 $
Lease Liability

CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-53-

9. LEASE AND SUBSCRIPTION LIABILITY (continued)
A. Governmental Activities (continued)
Subscription Liability
As of June 30, 2023, the City had 9 active subscriptions. The subscriptions have payments that range from $4,590 to $169,931 and interest rates that range from 2.024% to 2.927%. As of June 30, 2023, the total combined value of the subscription liability is $1,053,351. The combined value of the right to use asset, as of June 30, 2023 of $1,619,802 with accumulated amortization of $480,058 is included within right-to-use asset – subscription in note 6.

The annual payments as of June 30, 2023 were as follows:

Year Ending
June 30, Principal Interest Total
2024 527,294 $ 23,391 $ 550,685 $
2025 415,082 11,384 426,466
2026 48,805 2,534 51,339
2027 41,106 1,483 42,589
2028 3,973 617 4,590
2029 - 2031 17,091 1,269 18,360
Total $ 40,678 1,053,351 $ 1,094,029 $
Subscription liability
B. Business-Type Activities
The summary of changes in long-term lease and subscription liabilities for business-type activities for the year ended June 30, 2023 was as follows:

Balance Balance Due Within Due in More
June 30, 2022 Additions Deletions June 30, 2023 One Year Than One Year Subscription liability - $ 219,986 $ (57,670) $ 162,316 $ 110,996 $ 51,320 $ $ - $ 219,986 $ (57,670) $ 162,316 $ 110,996 $ 51,320
Classification
As of June 30, 2023, the City had 1 active subscription that is split with the General Fund. The subscription has annual payments of $115,340 and interest rates of 2.184%. As of June 30, 2023, the total combined value of the subscription liability is $162,316. The combined value of the right to use asset, as of June 30, 2023 of $219,986 with accumulated amortization of $52,249 is included within right-to-use asset – subscription in note 6.

The annual payments as of June 30, 2023 were as follows:

Year Ending
June 30, Principal Interest Total
2024 110,996 $ 4,344 $ 115,340 $
2025 51,320 1,121 52,441
Total $ 5,465 162,316 $ 167,781 $
Subscription liability

CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-54-

10. COMPENSATED ABSENCES
The summary of changes in compensated absences for governmental activities for the year ended June 30, 2023 was as follows:

Balance Balance Due Within Due in More
June 30, 2022 Additions Deletions June 30, 2023 One Year Than One Year Compensated Absences $ 4,284,393 $ 3,510,229 $ (3,141,560) $ 4,653,062 $ 3,140,000 $ 1,513,062 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, 2023, compensated absences balance consisted of the following:

Vacation pay 2,333,445 $
Holiday pay 817,806
Sick leave 1,261,138
Compensatory time 240,673
Total $ 4,653,062

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 $151 per month per employee in 2023. 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, 2023
-55-

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 6.00% for employers fully funding the annual required contribution each year. For the fiscal year ended June 30, 2023, the City’s cash contributions were $496,172 in payments to the trust.

Net OPEB Liability
The City’s net OPEB liability was measured as of June 30, 2022 based on the following actuarial methods and assumptions:

Actuarial Assumptions June 30, 2022 Measurement Date
Actuarial Valuation Date June 30, 2021
Actuarial cost method Entry age normal
Discount Rate 6.00%
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, 2023
-56-

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 6.00% 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, 2021 (measurement date) 6,746,266 $ 6,242,334 $ 503,932 $ Changes recognized for the measurement period:

Service cost 180,768 - 180,768
Interest 453,954 - 453,954
Differences between expected and
actual experience (86,159) - (86,159)
Changes of assumptions 614,946 - 614,946
Contributions – employer - 883,007 (883,007)
Net investment income - (889,675) 889,675
Benefit payments (510,878) (510,878) -
Administrative expense - (1,627) 1,627
Net changes 652,631 (519,173) 1,171,804
Balance at June 30, 2022 (measurement date) $ 5,723,161 7,398,897 $ 1,675,736 $

CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-57-

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, 2022:
1% Decrease
(5.00%)
Current Discount
Rate (6.00%)
1% Increase
(7.00%)
Net OPEB Liability $ 1,675,736 2,589,556 $ 920,723 $
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, 2022:
1% Decrease
Current
Healthcare Cost
Trend Rates 1% Increase
Net OPEB Liability $ 1,675,736 774,149 $ 2,797,180 $
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, 2023
-58-

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 180,768 $
Interest on total OPEB liability 453,954
Projected earnings on OPEB plan investments (436,869)
OPEB plan administrative expense 1,627
Current period recognition of deferred outflows (inflows) of resources:

Differences between expected and actual experience in
measurement of the total OPEB liability 2,497
Changes of assumptions 30,814
Differences between projected and actual earnings on OPEB plan investments 101,114
Annual OPEB expense (credit) 333,905 $
For the fiscal year ended June 30, 2023, the City recognized OPEB expense of $333,905. As of fiscal year ended June 30, 2023, 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 547,272 $ - $
Changes of assumptions 620,725 (35,371)
Difference between expected and actuarial experience 543,998 (1,074,977) Contributions to OPEB plan subsequent to the measurement date 1,024,090 - Total $ (1,110,348) 2,736,085 $
Contributions subsequent to the measurement date of $1,024,090, 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
2024 138,249 $
2025 67,306
2026 41,231
2027 231,063
2028 (34,245)
Thereafter 158,043
Total 601,647 $

CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-59-

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, 2023, the following funds had the following deficit fund balances:

Governmental Funds
Transportation CIP (1,922,836) $
Miscellaneous Grants (337,560)
Non-Major:

Transportation Improvement (9,152)
Public Safety Grants (64,325)
2006 Certificates of Participation (4,407)
Parks and Recreation (1,210,873)
The negative fund balance amount represents expenditures incurred before June 30, 2023, 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 is self-insured 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, and all identified areas of risk as described below:

Liability- The Liability Program provides defense and indemnity coverage against claims and suits arising from covered occurrences. It provides $50 million in broad form general liability coverage, which includes auto liability, bodily injury and property damage, personal injury, and public officials’ errors and omissions.

Workers’ Compensation- The Workers’ Compensation program provides statutory benefits for employee injuries arising out of and in the course of employment. It provides statutory limits in workers’ compensation coverage and $5,000,000 in employers’ liability coverage.

Property- The all-risk property program provides coverage on a replacement cost basis. The all-risk coverage includes a $200 million limit, a $100,000 pool deductible, and a $10,000 deductible.

Automobile Physical Damage- The auto physical damage program provides coverage to City-owned vehicles. The City schedules the vehicles, and coverage is available on a replacement cost basis.

Employment Practices Liability- The Employment Practice Liability (EPL) program provides coverage for employment related lawsuits, such as wrongful termination and discrimination, through participation in the Employment Risk Management Authority (ERMA). ERMA provides $1 million in employment practices liability coverage. Additional limits are provided by PRISM.

CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-60-

13. RISK MANAGEMENT, (continued)
Cyber Liability- This program provides coverage for information security & privacy liability, privacy notification costs, regulatory defense & penalties, website media content liability, cyber extortion, first party data protection & business interruption losses.

Alliant Deadly Weapon Response Program-The ADWRP program provides coverage for 3rd-party injuries while on City property, including defense costs, for which the City is legally liable where a weapon has been used or brandished. Weapon is broadly defined and can also include vehicles. The program also covers crisis management services and 1st-party property damage, including business interruption.

Crime Coverage- This program provides public employee dishonesty, forgery or alteration, and computer fraud coverage.

Special Events- The special events program is a fully insured program allowing members of the public to purchase liability insurance at a substantially reduced cost for functions (such as weddings, parades, meetings) held on City premises.

The claim liability of $5,197,320 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 2021, 2022 and 2023 were:

Beginning of
Fiscal Year
Liability
Current Year Claims
and Change in
Estimates
Claims
Payments
Balance at
Fiscal Year End
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
2022 - 2023 5,947,934 (614,232) (136,382) 5,197,320

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) 41, $ 72,856,402 497,103 $ 10,026 $ 114,363,531 $ Deferred Outflows - Pension Related 11,814,185 21,237,632 285,543 33,337,360 Deferred Inflows - Pension Related 656,286 2,085,890 - 2,742,176

CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-61-

14. DEFINED BENEFIT PENSION PLANS, (continued)
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, 2021 Annual Actuarial Valuation Report (funding valuation). Details of the benefits provided can be obtained in Appendix B of the actuarial valuation report. This report and CalPERS’ audited financial statements are publicly available reports that can be obtained at CalPERS’ website.

Benefits Provided
CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full-time employment. 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, 2023 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 11.260% 11.260% 11.260% 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 19.800% 19.800% 19.800% Miscellaneous
Safety

CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-62-

14. DEFINED BENEFIT PENSION PLANS, (continued)
A. General Information about the Pension Plans, (continued) Employees Covered
At June 30, 2021, (valuation date) the following employees were covered by the benefit terms:

Miscellaneous Safety
Inactive employees or beneficiaries
currently receiving benefits 277 206
Inactive employees entitled to but
not yet receiving benefits 206 74
Active employees 141 102
Total 624 382
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, 2023 for the miscellaneous and safety plans were $5,144,034 and $8,027,346, 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, 2022, using an annual actuarial valuation as of June 30, 2021 rolled forward to June 30, 2022 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, 2023
-63-

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, 2021 June 30, 2021
Measurement Date June 30, 2022 June 30, 2022
Actuarial Cost Method Entry Age Normal Entry Age Normal Asset Valuation Method Fair Value of Assets Fair Value of Assets Actuarial Assumptions
Discount Rate 6.90% 6.90%
Inflation 2.30% 2.30%
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 2021 CalPERS Experience Study for the period from 2001 to 2019. Pre-retirement and Post-retirement mortality rates include generational mortality improvement using 80% of Scale MP-2020 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 November 2021 that can be found on the CalPERS website.

The lesser of contract COLA or

2.30% until Purchasing Power
Protection Allowance floor on
purchasing power applies, 2.30%
thereafter.

The lesser of contract COLA or

2.30% until Purchasing Power
Protection Allowance floor on
purchasing power applies, 2.30%
thereafter.

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. Using historical returns of all of the funds’ asset classes, expected compound (geometric) returns were calculated over the next 20 years using a buildingblock approach. The expected rate of return was then adjusted to account for assumed administrative expenses of 10 Basis points.

CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-64-

14. DEFINED BENEFIT PENSION PLANS, (continued)
B. Net Pension Liability, (continued)
Long-term Expected Rate of Return (continued)
The expected real rates of return by asset class are as follows:

Asset Class1
Assumed Asset
Allocation Real Return 1,2
Global equity - cap-weighted 30.00% 4.54%
Global equity - non-cap-weighted 12.00% 3.85%
Private equity 13.00% 7.28%
Treasury 5.00% 0.27%
Mortgage-backed Securities 5.00% 0.50%
Investment grade corporates 10.00% 1.56%
High yield 5.00% 2.27%
Emerging market debt 5.00% 2.48%
Private debt 5.00% 3.57%
Real assets 15.00% 3.21%
Leverage (5.00%) (0.59%)
Change of Assumptions
Effective with the June 30, 2021 valuation date (2022 measurement date), the accounting discount rate was reduced from 7.15% to 6.90%. In determining the long-term expected rate of return, CalPERS took into account long-term market return expectations as well as the expected pension fund cash flows. Projected returns for all asset classes are estimated, combined with risk estimates, and are used to project compound (geometric) returns over the long term. The discount rate used to discount liabilities was informed by the long-term projected portfolio return. In addition, demographic assumptions and the inflation rate assumption were changed in accordance with the 2021 CalPERS Experience Study and Review of Actuarial Assumptions.

Discount Rate
The discount rate used to measure the total pension liability was 6.90%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-65-

14. DEFINED BENEFIT PENSION PLANS, (continued)
B. Net Pension Liability, (continued)
Subsequent Events
On July 12, 2021, CalPERS reported a preliminary 21.3% net return on investments for fiscal year 2020-21. Based on the thresholds specified in CalPERS Funding Risk Mitigation policy, the excess return of 14.3% prescribes a reduction in investment volatility that corresponds to a reduction in the discount rate used for funding purposes of 0.20%, from 7.00% to 6.80%. Since CalPERS was in the final stages of the four-year Asset Liability Management (ALM) cycle, the board elected to defer any changes to the asset allocation until the ALM process concluded, and the board could make its final decision on the asset allocation in November 2021.

On November 17, 2021, the board adopted a new strategic asset allocation. The new asset allocation along with the new capital market assumptions, economic assumptions and administrative expense assumption support a discount rate of 6.90% (net of investment expense but without a reduction for administrative expense) for financial reporting purposes. This includes a reduction in the price inflation assumption from 2.50% to 2.30% as recommended in the November 2021 CalPERS Experience Study and Review of Actuarial Assumptions. This study also recommended 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, 2023
-66-

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: 6/30/2021 (VD) $ 99,164,494 125,728,325 $ 26,563,831 $ Changes Recognized for the
Measurement Period
• Service Cost 1,996,533 - 1,996,533
• Interest on the Total Pension
Liability 8,647,552 - 8,647,552
• Differences between Expected and
Actual Experience (1,125,062) - (1,125,062)
• Changes of Assumptions 3,393,444 - 3,393,444
• Net plan to plan resource movement 1,326 (1,326)
• Contributions from the Employer - 4,676,417 (4,676,417) • Contributions from the Employee - 847,804 (847,804)
• Net Investment Income - (7,484,578) 7,484,578
• Benefit Payments, including
Refunds of Employee Contributions (7,336,269) (7,336,269) - • Administrative Expense - (61,774) 61,774
• Other miscellaneous expense - - -
Net Change during 2021-22 (9,357,074) 5,576,198 14,933,272 Balance at: 6/30/2022 (MD) $ 89,807,420 131,304,523 $ 41,497,103 $ Increases (Decreases)
Valuation Date (VD), Measurement Date (MD).

CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-67-

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: 6/30/2021 (VD) $ 156,154,179 203,194,104 $ 47,039,925 $ Changes Recognized for the
Measurement Period
• Service Cost 3,640,297 - 3,640,297
• Interest on the Total Pension Liability 14,074,261 - 14,074,261 • Differences between Expected and
Actual Experience (2,888,155) - (2,888,155)
• Changes of Assumptions 7,635,111 - 7,635,111
• Net plan to plan resource movement - (1,326) 1,326
• Contributions from the Employer - 7,265,481 (7,265,481) • Contributions from the Employee - 1,308,329 (1,308,329) • Net Investment Income - (11,830,172) 11,830,172
• Benefit Payments, including Refunds
of Employee Contributions (11,572,811) (11,572,811) -
• Administrative Expense - (97,275) 97,275
• Other miscellaneous expense - - -
Net Change during 2021-22 (14,927,774) 10,888,703 25,816,477 Balance at: 6/30/2022 (MD) $ 141,226,405 214,082,807 $ 72,856,402 $ 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 of the Plan as of the measurement date, calculated using the discount rate of 6.9 percent, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower (5.9 percent) or 1 percentage-point higher (7.9 percent) than the current rate:

Discount Rate - 1% Current Discount Discount Rate + 1%
(5.90%) Rate (6.90%) (7.90%)
Miscellaneous Plan's
Net Pension Liability 57,585,547 $ 41,497,103 $ 28,132,926 $ Safety Plan's Net
Pension Liability 102,080,356 72,856,402 48,977,580

CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-68-

14. DEFINED BENEFIT PENSION PLANS, (continued)
C. Changes in Net Pension Liability, (continued)
Amortization of Deferred Outflows and Deferred Inflows of Resources Gains and losses related to changes in total pension liability and fiduciary net position are recognized in pension expense systematically over time.

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

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

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

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, 2021), the net pension liability for the Miscellaneous and Safety Plans is $26,563,831 and $47,039,925, respectively.

For the measurement period ending June 30, 2022 (the measurement date), the City incurred a pension expense of $5,153,320 and $8,871,086 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, 2023
-69-

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 $ 1,996,533
Interest on the Total Pension Liability 8,647,552
Recognized Differences between Expected and Actual Experience 170,476 Recognized Changes in Assumptions 1,413,935
Net Plan to Plan Resource Movement (1,326)
Employee Contributions (847,804)
Projected Earnings on Pension Plan Investments (6,769,215) Recognized Differences between Projected and Actual Earnings on Plan Investments 481,395 Administrative Expense 61,774
Other Miscellaneous Expense -
Total Pension Expense $ 5,153,320
Safety Plan:

Description Amount
Service Cost $ 3,640,297
Interest on the Total Pension Liability 14,074,261
Recognized Differences between Expected and Actual Experience 113,348 Recognized Changes in Assumptions 2,120,864
Net Plan to Plan Resource Movement 1,326
Employee Contributions (1,308,329)
Projected Earnings on Pension Plan Investments (10,664,197) Recognized Differences between Projected and Actual Earnings on Plan Investments 796,241 Administrative Expense 97,275
Other Miscellaneous Expense -
Total Pension Expense $ 8,871,086

CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-70-

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, 2023, the City 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 261,038 $ 656,286 $
Changes of Assumptions 1,979,509 -
Net Difference between Projected and
Actual Earnings on Pension Plan
Investments 4,429,604 -
Pension Contributions Subsequent to
Measurement Date 5,144,034 -
Total $ 656,286 11,814,185 $
Safety Plan:

Deferred Outflows Deferred Inflows
of Resources of Resources
Differences between Expected and
Actual Experience 611,852 $ - $
Changes of Assumptions 5,514,247 -
Net Difference between Projected and
Actual Earnings on Pension Plan
Investments 7,084,187 2,085,890
Pension Contributions Subsequent to
Measurement Date 8,027,346 -
Total $ 2,085,890 21,237,632 $
These amounts above are net of outflows and inflows recognized in the 2021-2022 measurement period expense. Contributions subsequent to the measurement date of $5,144,034 and $8,027,346 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, 2023
-71-

14. DEFINED BENEFIT PENSION PLANS, (continued)
D. Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions, (continued)
Miscellaneous Plan:

Fiscal Year
Deferred
Outflows/(Inflows) of
Ended June 30: Resources
2024 1,895,513 $
2025 985,825
2026 281,770
2027 2,850,757
2028 -
Thereafter -
Total 6,013,865 $
Safety Plan:

Fiscal Year
Deferred
Outflows/(Inflows) of
Ended June 30: Resources
2024 2,921,790 $
2025 2,452,059
2026 1,251,674
2027 4,498,873
2028 -
Thereafter -
Total 11,124,396 $
E. Payable to the Pension Plan
At June 30, 2023, the City reported a payable of $0 for the outstanding amount of contributions to the pension plans required for the year ended June 30, 2023.

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, 2023
-72-

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 former 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, 2022, (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, 2022 (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, 2023
-73-

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, 2022, using an annual actuarial valuation as of January 1, 2021 rolled forward to June 30, 2022 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, 2022 (the measurement date), the total pension liability was determined by rolling forward the January 1, 2021 total pension liability. The June 30, 2021 and June 30, 2022 total pension liabilities were based on the following actuarial methods and assumptions:

PARS
Valuation Date January 1, 2021
Measurement Date June 30, 2022
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, 2022, and June 30, 2021 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%. 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, 2023
-74-

15. RETIREMENT ENHANCEMENT PLAN, (continued)
B. Net Pension Liability, (continued)
Discount Rate (continued)
The following table reflects long-term expected real rate of return by asset class. Approximate expected real rates of return provided by Foster & Foster’s 2021 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 50.00% 4.56%
Fixed Income 45.00% 0.78%
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, 2023
-75-

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 6/30/2021 (MD) $ 2,884,551 2,428,759 $ (455,792) $ Changes Recognized for the
Measurement Period
• Service Cost - -
• Interest on the Total Pension
Liability 127,971 127,971
• Net Investment Income - (328,943) 328,943
• Benefit Payments, including
Refunds of Employee Contributions. (204,052) (204,052) - • Administrative Expenses - (8,904) 8,904
Net Change (541,899) (76,081) 465,818
Balance at: 6/30/2022 (MD) $ 2,342,652 2,352,678 $ 10,026 $ 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) 204,414 $ 10,026 $ (159,527) $

CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-76-

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
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 2021-22 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, 2022), the net pension asset is $455,792.

For the measurement period ending June 30, 2022 (the measurement date), the City incurred pension expense of $26,940 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, 2023
-77-

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 127,971
Projected Earnings on Investments (152,457)
Employee Contributions -
Administrative Expenses 8,904
Experience -
Assumptions -
Asset returns 42,522
Total Pension Expense (Income) $ 26,940
As of June 30, 2023, the City 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 205,543 $ - $
Pension Contributions Subsequent to
Measurement Date 80,000 -
Total $ - 285,543 $
These amounts above are net of outflows and inflows recognized in the 2021-2022 measurement period expense. Contributions subsequent to the measurement date of $80,000 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
2024 (39,830) $
2025 (38,470)
2026 (30,963)
2027 (96,280)
2028 -
Thereafter -
Total (205,543) $
E. Payable to the Pension Plan
At June 30, 2023, the City reported a payable of $0 for the outstanding amount of contributions to the pension plan required for the year ended June 30, 2023.

CITY OF LA MESA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
-78-

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. City management believes, based upon consultation with the City Attorney, that these 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, 2023, 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, 2023
-79-

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, 2023 was as follows:

Balance Balance Due Within Due in More
June 30, 2022 Additions Deletions June 30, 2023 One Year Than One Year Bonds payable:
1998-1 AD improvement bonds $ 955,000 $ - $ (465,000) $ 490,000 $ 490,000 $ - Total $ 955,000 $ - $ (465,000) $ 490,000 $ 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, 2023 was $490,000. 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 $504,088 payable through 2024.