LAGUNA BEACH PUBLIC FINANCING AUTHORITY,
A COMPONENT UNIT OF THE CITY OF LAGUNA BEACH
FOR THE YEAR ENDED JUNE 30, 2025 FINANCIAL STATEMENTS
Attachment 5
213
LAGUNA BEACH PUBLIC FINANCING AUTHORITY,
A COMPONENT UNIT OF THE CITY OF LAGUNA BEACH
Financial Statements
For the Year Ended June 30, 2025
214
LAGUNA BEACH PUBLIC FINANCING AUTHORITY,
A COMPONENT UNIT OF THE CITY OF LAGUNA BEACH
Financial Statements
For the Year Ended June 30, 2025
Table of Contents
Page
Independent Auditors’ Report ................................................................................................................................. 1 Financial Statements
Statement of Net Position ................................................................................................................................ 4 Statement of Revenues, Expenses, and Changes in Net Position ................................................................ 5 Statement of Cash Flows ................................................................................................................................. 6 Notes to Financial Statements ......................................................................................................................... 7 Independent Auditors’ 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 .............................................................................................................................. 11 215
LSLCPAS.COM
INDEPENDENT AUDITORS’ REPORT
To the Honorable Members of the City Council
Laguna Beach Public Financing Authority
Laguna Beach, California
Report on the Audit of the Financial Statements
Opinion
We have audited the accompanying financial statements of the Laguna Beach Public Financing Authority, (hereafter, the Authority) a component unit of the City of Laguna Beach, California (hereafter, the City) as of and for the year ended June 30, 2025, and the related notes to the financial statements, which collectively comprise the Authority’s basic financial statements as listed in the table of contents.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Authority as of June 30, 2025, and the changes in financial position, and cash flows thereof, for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Authority 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 discussed in Note 1, the financial statements present only the Authority and do not purport to, and do not, present fairly the financial position of the City as of June 30, 2025, the changes in its financial position, or, where applicable, its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.
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. 216
To the Honorable Members of the City Council
Laguna Beach Public Financing Authority
Laguna Beach, California
Auditors’ 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 auditors’ 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 generally accepted auditing standards 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 generally accepted auditing standards 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 Authority’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.
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.
Required Supplementary Information
Management has omitted Management Discussion and Analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of 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. Our opinion on the basic financial statements is not affected by this missing information. 2 217
To the Honorable Members of the City Council
Laguna Beach Public Financing Authority
Laguna Beach, California
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 30, 2026, on our consideration of the City’s internal control over Authority’s 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 the City’s internal control over Authority’s 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 the Authority’s financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Authority’s internal control over financial reporting and compliance.
Irvine, California
March 30, 2026
3 218
LAGUNA BEACH PUBLIC FINANCING AUTHORITY
Statement of Net Position
June 30, 2025
ASSETS
Current:
Interest receivable $ 221,990
Lease receivable 437,000
Total Current Assets 658,990
Noncurrent:
Lease receivable 10,803,000
Total assets 11,461,990
LIABILITIES
Current:
Interest payable 221,990
Bond payable 437,000
Total Current Liabilities 658,990
Noncurrent:
Bond payable 10,803,000
Total liabilities 11,461,990
NET POSITION
Unrestricted -
Total net position $ -
See Notes to Financial Statements.
4 219
LAGUNA BEACH PUBLIC FINANCING AUTHORITY
Statement of Revenues, Expenses, and
Changes in Net Position
For the Year Ended June 30, 2025
NONOPERATING REVENUES (EXPENSES)
Contribution from the City of Laguna Beach 443,980 $
Interest expense (443,980)
Total nonoperating revenues (expenses) -
Change in net position -
Net position-beginning -
Net position-ending $ -
See Notes to Financial Statements.
5 220
LAGUNA BEACH PUBLIC FINANCING AUTHORITY
Statement of Cash Flows
For the Year Ended June 30, 2025
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Interest paid on capital debt $ (221,990)
Proceeds from lease receivable with the City of Laguna Beach 221,990 Net cash provided by (used for)
capital and related financing activities -
Cash and cash equivalents-beginning -
Cash and cash equivalents-ending $ -
See Notes to Financial Statements.
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LAGUNA BEACH PUBLIC FINANCING AUTHORITY,
A COMPONENT UNIT OF CITY OF LAGUNA BEACH
Notes to the Financial Statements
For the Year June 30, 2025
NOTE 1: REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The basic financial statements of the City of Laguna Beach Public Financing Authority (Authority), a blended component unit of the City of Laguna Beach, 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 policies.
A. Reporting Entity
The Authority was established pursuant to a Joint Exercise of Powers Agreement (the “Joint Powers Agreement”) dated October 1, 2022, between the City and the California Statewide Communities Development Authority.
Pursuant to the Joint Powers Agreement, the Authority is authorized to provide the financing necessary for the purchase or construction of various facilities or improvements through the issuance of debt.
A five-member governing board, of which are all also members of the City Council, governs the Authority.
Management of the City has operational responsibility for the Authority. The Authority is a blended component unit of the City; the activities of the Authority are recorded in the debt service fund within the City’s financial statements. In accordance with GASB, the Authority is reported a proprietary fund in its stand-alone report. Only the activities of the Authority are included herein, therefore, these financial statements do not purport to represent the financial position or results of operations of the City. The Authority has the same fiscal year as the City. The Annual Comprehensive Financial Report of the City can be obtained from the Finance Department of the City.
B. Basis of Accounting and Measurement Focus
The financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis of accounting, revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of the related cash flows.
The Authority distinguishes operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services in connection with the enterprise fund’s principal operations. All revenues and expenditures not meeting this definition are reported as non-operating revenues and expenses.
The accompanying financial statements of the Authority have been prepared in conformity with Generally Accepted Accounting Principles (GAAP) as promulgated by the Government Accounting Standards Board (GASB), the accepted standard setting body for establishing governmental accounting and financial reporting principles.
C. Cash and Cash Equivalents
For purposes of the statement of cash flows, cash equivalents are defined as short-term, highly liquid investments with an initial maturity of three months or less at the time of purchase. See the City’s Annual Comprehensive Financial Report for disclosures related to custodial credit risk for deposits.
D. Components of Net Position
Net position is reported in one of three categories:
Net Investment in Capital Assets – describes the portion of net position which is represented by the current net book value of the Authority’s capital assets, less the outstanding balance of any debt issued to finance these assets. As of June 30, 2025, there was no net investment in capital assets.
Restricted – describes the portion of net position which is restricted as to use by the terms and conditions of agreements with outside parties, governmental regulations, laws, or other restriction which the Authority cannot unilaterally alter. As of June 30, 2025, there was no restricted balance. 7 222
LAGUNA BEACH PUBLIC FINANCING AUTHORITY,
A COMPONENT UNIT OF CITY OF LAGUNA BEACH
Notes to the Financial Statements
For the Year June 30, 2025
NOTE 1: REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Unrestricted – describes the portion of net position which is not restricted as to use.
When both restricted and unrestricted resources are available for use, it is the Authority’s policy to use restricted resources first, then unrestricted resources as they are needed.
NOTE 2: BOND PAYABLE
The following is a summary of the changes in the principal balance of the bonds payable for the year ended June 30, 2025:
In November 2022, the Authority issued bonds in the amount of $11,660,000 in order to secure funding for the purchase of property located at 30516 Coast Highway. Debt issuance fees and charges paid to third parties totaled $160,000 and were the responsibility of the City’s general fund.
Interest is payable semiannually on July 1 and January 1 at a rate of 3.95%. Principal is payable in annual installments on July 1 ranging from $420,000 to $855,000. The debt matures on July 1, 2042. Principal and Interest are secured by the lease-leaseback receipts from the City. The annual debt service requirements as of June 30, 2025, are as follows:
NOTE 3: LEASE - LEASEBACK ARRANGEMENT
In November 2022, the Authority transferred bond proceeds in the amount of $11,660,000 to the City as a pre-payment for the right to use City property, which includes the City Yard and Fire Station No. 3 (leased property) through 2043. The Authority then leased back the right to use the lease property to the City for an amount equal to $11,660,000 plus interest of 3.95%. The principal and interest owed on the lease-back of property by the City, will cover future principal and interest debt service payments on the bonds payable. The lease payments, which will service as the debt service payments on the Authority’s bond payable, are pledged from the City general fund.
Balance at
July 1, 2024 Additions
Deletions/
Transfers
Balance at
June 30, 2025
Due Within
One Year
Due in More
Than One Year
Bond Payable 11,240,000 $ - $ $ - $ 11,240,000 $ 437,000 $ 10,803,000 Year Ending
June 30, Principal Interest Total Payment
2026 437,000 $ 435,349 $ $ 872,349
2027 455,000 417,732 872,732
2028 473,000 399,404 872,404
2029 492,000 380,346 872,346
2030 512,000 360,517 872,517
2031-2035 2,887,000 1,475,937 4,362,937
2036-2040 3,516,000 845,577 4,361,577
2041-2043 2,468,000 148,757 2,616,757
Total 11,240,000 $ $ 4,463,619 $ 15,703,619
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LAGUNA BEACH PUBLIC FINANCING AUTHORITY,
A COMPONENT UNIT OF CITY OF LAGUNA BEACH
Notes to the Financial Statements
For the Year June 30, 2025
NOTE 3: LEASE - LEASEBACK ARRANGEMENT (CONTINUED)
Interest is payable semiannually on July 1 and January 1. Principal is payable in annual installments on July 1 ranging from $420,000 to $855,000. The remaining lease receivable as June 30, 2025, will be received as follows:
NOTE 4: CONTINGENCIES
See the City’s Annual Comprehensive Financial Report for disclosures related to contingencies including those relating to various legal actions, administrative proceedings or claims in the ordinary course of operations.
NOTE 5: SUBSEQUENT EVENTS
Management has evaluated subsequent events through March 30, 2026, which is the date the financial statements were available to be issued.
Year Ending
June 30, Principal Interest Total Payment
2026 437,000 $ 435,349 $ $ 872,349
2027 455,000 417,732 872,732
2028 473,000 399,404 872,404
2029 492,000 380,346 872,346
2030 512,000 360,517 872,517
2031-2035 2,887,000 1,475,937 4,362,937
2036-2040 3,516,000 845,577 4,361,577
2041-2043 2,468,000 148,757 2,616,757
Total 11,240,000 $ $ 4,463,619 $ 15,703,619
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OTHER REPORT
10 225
LSLCPAS.COM
INDEPENDENT AUDITORS’ 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
To the Honorable Members of the City Council
Laguna Beach Public Financing Authority
Laguna Beach, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the Laguna Beach Public Financing Authority (the Authority), a component unit of the City of Laguna Beach, California (hereafter, the City), as of and for the year ended June 30, 2025, and the related notes to the financial statements, which collectively comprise the Authority’s basic financial statements, and have issued our report thereon dated March 30, 2026.
Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City’s internal control over the Authority’s 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 Authority’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Authority’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements, on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified.
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Authority’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements.
However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. 226
To the Honorable Members of the City Council
Laguna Beach Public Financing Authority
Laguna Beach, California
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 Authority’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 Authority’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Irvine, California
March 30, 2026
12 227