Stradling Yocca Carlson & Rauth
Draft dated 6/4/24
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APPENDIX A
THE CITY OF LANCASTER
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TABLE OF CONTENTS
Page
INFORMATION REGARDING THE CITY OF LANCASTER .....................................................................A-1 General...........................................................................................................................................................A-1 City Council...................................................................................................................................................A-1 City Management...........................................................................................................................................A-1 Employee and Employee Relations ...............................................................................................................A-2 Risk Management ..........................................................................................................................................A-2 CITY FINANCIAL INFORMATION ..............................................................................................................A-3 Accounting and Financial Reporting .............................................................................................................A-3 City Blended Component Units and Discrete Component Units ..................................................................A-4 Financial Policies...........................................................................................................................................A-4 Budget Procedure...........................................................................................................................................A-6 Budget Information........................................................................................................................................A-7 Capital Improvement Program ......................................................................................................................A-9 Comparative Change in Fund Balance of the City General Fund ...............................................................A-10 Comparative General Fund Balance Sheets of the City ..............................................................................A-12 General Fund Tax Revenues........................................................................................................................A-14 Property Taxes .............................................................................................................................................A-15 Sales Taxes ..................................................................................................................................................A-15 Franchise Taxes ...........................................................................................................................................A-19 Licenses and Permits ...................................................................................................................................A-20 Other Revenues............................................................................................................................................A-20 Appropriations Limit ...................................................................................................................................A-20 Indebtedness ................................................................................................................................................A-20 Retirement System.......................................................................................................................................A-23 Other Post-Employment Benefits ................................................................................................................A-28 ECONOMIC AND DEMOGRAPHIC INFORMATION ...............................................................................A-30 Population ....................................................................................................................................................A-30 Education .....................................................................................................................................................A-30 Building Activity .........................................................................................................................................A-30 Personal Income...........................................................................................................................................A-31 Employment.................................................................................................................................................A-32 Industry ........................................................................................................................................................A-34 A-1
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APPENDIX A
INFORMATION REGARDING THE CITY OF LANCASTER
General
The City is located in the County of Los Angeles (the “County”) approximately 60 miles northeast of the City of Los Angeles in the southwest portion of the Antelope Valley between the City of Palmdale and Edwards Air Force Base. The City was incorporated on November 22, 1977 as a general law city. On April 13, 2010, the qualified electors within the City voted to convert the City to a charter city. The City maintains a council- manager form of government. The mayor and city council are elected at large for staggered four-year terms.
The City is at an elevation of 2,356 feet and experiences a dry climate. The average annual rainfall is
7.36 inches per year and the average temperature is 62 degrees.
The City provides a broad range of services, including highway, street, drainage, sewer, and infrastructure construction and maintenance; planning and zoning; and parks, recreation and cultural activities.
Sheriff’s and animal control services are provided under contract with the County, whereas fire protection, water, sanitation, school, and library are funded by special districts not under City control.
City Council
The City operates under a council-manager form of government. The Mayor and members of the City Council are elected at-large for staggered, four-year terms. As the City's legislative and policy entity, the Mayor and four members of the City Council are responsible to the residents of the City for all municipal programs and services as well as any legislative matters concerning the City. The City Council approves and adopts ordinances, resolutions and contracts, and enacts regulations and policies. The members of the City Council and the expiration dates of their respective terms are as follows:
CITY OF LANCASTER
City Council
Name Term Expires
R. Rex Parris, Mayor April 2028
Marvin Crist, Vice Mayor April 2026
Ken Mann, Council Member April 2028
Raj Malhi, Council Member April 2026
Lauren Hughes-Leslie, Council Member April 2028
The City Council appoints the City Manager, who heads the executive branch of the government, implements City Council directives and policies and manages the administrative and operational functions through the various departmental heads. The City Council also appoints the City Attorney, as well as members of various commissions and citizen advisory committees that provide broad perspective in the decision-making process.
City Management
A summary of certain City executive staff are described below.
City Manager. Jason Caudle is the City Manager of the City and the Executive Director of the Authority. Mr. Caudle has over 25 years of local government experience, previously serving for five years as a field representative for a Kern County Supervisor and serving ten years as the City Manager of the City of Tehachapi. Prior to joining the City, Mr. Caudle served as a Vice President of Public Sector Finance for Kinsell, A-2
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Newcomb, and De Dios, a broker-dealer specializing in municipal bonds. Mr. Caudle holds a bachelor's degree in Political Science and a master's degree in Public Policy and Administration from the California State University at Bakersfield and was a Licensed General Securities Representative.
Assistant City Manager. Trolis Niebla is the Assistant City Manager of the City. Mr. Niebla is a professional civil engineer with more than 20 years of experience in civil engineering related to land development, grading, drainage, hydrology, geotechnical, street design, traffic engineering, project and construction management, and building and safety review. Mr. Niebla has a bachelor’s degree in civil engineering and a master’s degree in geotechnical engineering from the University of California, Los Angeles.
Mr. Niebla started his career working for Leroy Crandall and Associates in 2000 and then moved into the public sector in 2001. Since that time, Mr. Niebla has worked for the Los Angeles County Department of Public Works, the City of Santa Clarita, and the City, previously serving as the City Engineer for the City.
Finance Director. George Harris is the Finance Director of the City and the Treasurer of the Authority.
Mr. Harris has served as Finance Director for four local government agencies since 2008, including the City and the cities of Adelanto, Rialto and Victorville. Mr. Harris also previously served for five years as a Finance Analyst at the City of Rialto and with Willdan Financial Services (formally known as Munifinancial). Mr. Harris previously held a Series 7 and 65 securities licenses during his term as a financial advisor with Ameriprise Financial Advisors (formally known as American Express Financial Advisors). Mr. Harris also serves as the Treasurer for the California Class local government investment pool as a statewide appointed member of the California Class Board of Trustees. Mr. Harris holds a bachelor’s degree in business administration from the University of California, Riverside and a master’s degree in public administration from California Baptist University.
Employee and Employee Relations
General. As of June 30, 2023, the City had approximately 298.00 full-time equivalent employees. In accordance with the provisions of California Government Code Section 3500, the City participates in labor negotiations with its employee associations. The result of the negotiations processes is memorialized in memoranda of understanding reached between the City and the City employee associations. The City currently recognizes one employee organization, the California Teamsters, Public, Professional and Medical Employees Union Local 911. The majority (approximately two-thirds) of City employees are unrepresented in a variety of regular full-time and temporary part-time classifications. In particular, the City employs approximately 382 part-time employees, the majority of which are in the City’s Parks and Recreation Department. The City has not experienced a major work stoppage by City Employees in the last ten years.
The table below lists the City’s employee associations and the approximate membership as of June 30, 2023, as well as the City’s unrepresented employees:
Unit/Affiliation
Contract
Expiration
Date
Number of
Members
Teamsters Local 911 June 30, 2026 61
Unrepresented Employees N/A 237
Part-time/Temporary N/A 382
Total 680
Source: City of Lancaster.
Police Services Within the City. The City contracts with the Los Angeles County Sheriff’s Department (“LASD”) to provide police services. The contract with LASD is composed of personnel costs, pension expenses and a liability insurance component, and the City’s LASD contract costs has increased less than three percent per year on average since fiscal year 2013-14. Separate from the LASD contract, the City has developed a hybrid A-3
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policing model to utilize sworn and non-sworn City staff to handle lower priority calls and provide support for LASD.
On April 3, 2024 the City filed suit against the County regarding the LASD contract. The suit is pending in Los Angeles Superior Court, Case No. 24STCV08440. The suit is brought as a putative class action on behalf of the City and all cities that contract with the County for law enforcement services (the “Contract Cities”). The City alleges the County has been overcharging Contract Cities for law enforcement services, in breach of contract and in violation of California Government Code section 51350. The suit seeks those alleged overcharges as damages. Per Court order the lawsuit is stayed pending a July 26, 2024 initial status conference. No trial date has been set.
Risk Management
The City is exposed to various risks of losses related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City handles those risks with the purchase of commercial insurance. The City maintains liability insurance coverage up to a limit of $10,000,000 with $250,000 self-insurance retention for its general liabilities. Workers’ compensation insurance is provided by Public Risk Innovation, Solutions, and Management, with statutory limit coverage. The City also maintains property coverage including earthquake and flood.
At June 30, 2023, $2,550,000 had been accrued for general liability claims. This amount represents an estimate of amounts to be paid for reported claims and incurred but not yet reported claims based upon past experience, modified for current trends and information. While the ultimate amount of losses incurred through June 30, 2023, is dependent on future developments, the City’s claims administrators, and others involved with the administration of the programs, City management believes the accrual is adequate to cover such losses.
For workers’ compensation insurance, the City has transferred all risk of loss with the purchase of commercial insurance policies and has not reported any estimated loss in the financial statements.
There were no significant reductions in insurance coverage from the previous year. In addition, insurance coverage exceeded the amount of settlements for each of the past three fiscal years. For additional information with respect to the City’s risk management program as the changes in claims liability for fiscal year 2021-22 and 2022-23, see Note 12 to the City’s audited financial statements for fiscal year 2022-23 attached hereto as Appendix C.
CITY FINANCIAL INFORMATION
Accounting and Financial Reporting
The City maintains its accounting records in accordance with Generally Accepted Accounting Principles (“GAAP”) and the standards established by the Governmental Accounting Standards Board (“GASB”).
All governmental funds are accounted for using the modified accrual basis of accounting. The City’s revenues are recognized when they become measurable and available as net current assets. Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred.
The exception to this general rule is principal and interest on general long-term debt, which is recognized when due. Some debts and obligations may be payable from self-supporting enterprises or revenue sources other than property taxation. Special assessment bonds are not included in the tabulation; lease revenue obligations payable from the General Fund or equivalent sources are included.
All proprietary funds are accounted for using the accrual basis for accounting. Revenues are recognized when they are earned, and expenses are recognized when they are incurred. Receivables are recorded and determined at the time of consumption, and unbilled receivables are not recorded.
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The General Fund is the general operating fund of the City and is used to account for resources and expenditures traditionally associated with general government, such as administration, public safety, library, parks, maintenance and recreation. The City expects to pay Base Rental Payments from amounts in the General Fund. Tables 1 through 4 below set forth certain historical and current fiscal year budget information for the General Fund. Information on the other governmental funds of the City as of June 30, 2023 is set forth in Appendix C.
City Blended Component Units and Discrete Component Units General. Under GASB guidelines, component units of a primary government (i.e. the City) generally include those that are legally separate entities but raise and hold economic resources for the direct benefit of the primary government. Blended component units, although separate legal entities are, in substance, part of the government’s operations. Their funds are treated similarly to funds of the primary government (other than the General Fund). Discrete component units do not meet the definition of a blended component unit as they do not share the same governing body and do not only provide services to the primary government unit.
The City’s Component units include the Authority, the Lancaster Housing Authority, the Lancaster Community Services Foundation and the Lancaster Power Authority, are described below.
Lancaster Financing Authority. The Authority was formed for the purpose of providing, through the issuance of debt, financing necessary for various capital improvements. The City Council serves as the Board of Authority. Separate financial statements are not available for the Authority. See the caption “THE AUTHORITY” in the Official Statement.
Lancaster Housing Authority. The Lancaster Housing Authority was formed for the purpose of providing affordable, decent housing for lower income residents of the City. The Housing Authority assumed responsibilities for the prior low/moderate Housing Fund. Separate financial statements are not available for the Lancaster Housing Authority.
Lancaster Community Services Foundation. The Lancaster Community Services Foundation (was formed to provide certain community services to the residents of the City. Separate financial statements are not available for the Lancaster Community Services Foundation.
Lancaster Power Authority. The Lancaster Power Authority was formed to own and operate a municipal gas and electric utility, for the benefit of the residents of the City and customers, businesses, and property owners in the City. Separate financial statements are not available for the Lancaster Power Authority.
Financial Policies
General. The City has adopted a comprehensive set of financial policies to serve as a guideline for financial matters as further described below.
Reserve Policy. The City has adopted a reserve policy (the “Reserve Policy”) which provides guidance on the establishment and maintenance and reserve levels for operating funds, including the General Fund. With respect to the General Fund, the City’s Reserve Policy provides for the following reserve levels.
Working Capital Reserve. The Reserve Policy provides that the City will maintain a minimum fund balance of at least 10% of annual revenues in the Working Capital Fund Reserve. The Working Capital Reserve is intended to ensure sufficient resources to pay budgeted operating expenses, recognizing the timing differences between payment of expenditures and receipt of revenues. The Working Capital Fund Reserve will provide cash flow for the times of the year where cumulative expenditures exceed cumulative revenues.
Emergency Operational Reserves. The Reserve Policy provides the City will maintain a minimum fund balance of at least 15% of annual operating revenues in any given year. Funds in the Emergency Operation A-5
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Reserves may be used to fund normal operations related to unforeseen catastrophic events or economic downturns that result in a loss of revenues or a significant increase in expenditures.
Emergency Response Reserves. The Reserve Policy provides the City will maintain a minimum fund balance of at least 5% of annual operating revenues in any given year for emergency response needs that may arise. This amount may be replenished either from surplus revenues that are surplus year-end end or from reimbursement from either Federal, State, or private sources.
Business Opportunity/Pension Resiliency Reserves. The Reserve Policy provides the City will maintain a minimum fund balance of at least 10% of annual operating revenues in any given year to respond to new enterprise opportunities that may arise from time to time. This amount may be replenished either from surplus revenues that are surplus at year end or gains from enterprise opportunities. Additionally, this reserve can be used to fund any significate increases in pension costs caused by poor investment performance of the CalPERS investment pool.
The City met its Reserve Policy targets described above in fiscal year 2022-23. The City currently expects to meet such targets at the end of fiscal year 2023-24, with projected General Fund reserves at approximately $43.5 million or approximately 40% of General Fund operating revenues included in the adopted budget for fiscal year 2024-25.
Debt Management Policy. The City has adopted a debt management policy (the “Debt Management Policy”) in compliance with California Government Code Section 8855. The Debt Management Policy sets forth the purposes for which long-term debt financings may be undertaken (i.e. for projects that will provide benefit to constituents over multiple years). The Debt Management Policy provides that short-term financings may be undertaken for operational cash flow purposes and for short-lived capital projects (i.e. equipment leases).
The City’s Debt Management Policy is implemented in conjunction with annual budgeting and the City’s capital improvement program.
Investment Policy. Funds held by the City are invested in accordance with the City’s Statement of Investment Policy (the “Investment Policy”) prepared by the Treasurer as authorized by Section 53601 of the Government Code of California.
The City believes that its funds are prudently invested and that the investments therein are scheduled to mature at the times and in the amounts that are necessary to meet the City’s expenditures and other scheduled withdrawals.
The City’s statement of Investment Policy rendered to the City Council by the City Treasurer pursuant to Section 53646 of the California Government Code states that the basic premise underlying the City’s investment philosophy is to minimize credit and market risks while maintaining a competitive yield on its portfolio. Hence, safety of principal is the foremost objective of the City, followed by liquidity and yield. Under provisions of the Investment Policy, the City may invest in time deposits, bankers acceptances, money market funds, U.S. Treasury Bills and notes, governmental agency securities, repurchase agreements, reverse repurchase agreements, commercial paper, medium term notes of corporations operating within the United States rated “A” or better by S&P Global Ratings or by Moody’s Investors Services, and State Local Agency Investment Fund (“LAIF”), which is under the oversight of the State Treasurer.
The City Treasurer is required to provide a monthly report to the City Manager and the City Council showing the type of investment, date of maturity, amount invested, current market value, rate of interest, and other such information as may be required by the City Council. As of April 30, 2024, the City had an investment portfolio with a market value of approximately $123.7 million. As of such date, the City had invested approximately 9.51% of its investment portfolio in LAIF, 48.38% in California CLASS, 14.83% in United States Treasury Securities, 7.89% in United States Government Sponsored Agency Securities, 5.29% in Medium-Term Corporate Notes, 2.18% in Municipal Bonds, 0.12% in Certificates of Deposits, and 11.79% of its investment portfolio in cash and money markets. For additional information with respect to the City’s cash and investments, A-6
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see Note 3 to the audited financial statements for fiscal year 2022-23 attached to the Official Statement as Appendix C.
Budget Procedure
December - January: The City’s operating budget preparation begins with determination of the base budget for the upcoming year. The base budget establishes the current year adopted budget service levels with updated costs, removes one-time revenue and expenses (including grants), and adds ongoing expenditures as approved by the City Council. The capital budget preparation process begins with a department staff meeting to review and discuss potential modifications to the five-year capital plan.
In January, the Finance Department distributes the Budget Guide to departments. The Budget Guide includes budget preparation calendar, budget priorities, instructions, and sample worksheets to be used in budget development. The Finance Department prepares budget worksheets that include base budget amounts and year to date actuals for current year. Various City departments use these worksheets to submit small dollar budget requests and for submitting the current year-end estimates.
February - March: The City departments develop year-end estimates for the current fiscal year and prepare their revenue and expenditure projections for the coming fiscal year.
Early in March, capital improvement project proposals are submitted to the Finance Department, and a meeting is held to review each requested project in detail. A few weeks later, a second meeting is held to determine the highest priority projects.
The selected projects are then incorporated into the budget model, and fund balances are projected for the capital project funds. Since capital projects tend to span more than one fiscal year, the practice is to appropriate the total amount needed to fund the project (or one “self-contained” phase of the project). This ensures there is sufficient funding to complete the project the following year. Any unexpended funds at the end of the current fiscal year automatically roll over to the next fiscal year.
April: The City’s budget team and various City departments meet to review and discuss their budget submittals. The budget meetings are interactive and informative in making critical policy and funding decisions, as well as strategic and economic decisions for long-term planning.
Subsequent meetings are held to review capital outlay, capital replacement and information technology needs. The purpose of the meetings is to ensure consistency and accuracy for equipment needs, and to develop funding strategies to meet these needs.
By the end of April, rewrites of the department budgets take place as the program expenditures are brought into alignment with the available resources. During periods of abundant resources, additional improvements may be made, or additional reserves created; during periods of economic downturns, this can be a very hard, frustrating time as budget requests may be reduced substantially, depending on how they align with the overall goals, mission, and vision of the City.
May: Budget briefings are held with the City Council. Special meetings are scheduled individually with each Council member to ask questions and/ or make modifications to the budget. Based on the questions and concerns of the City Council, these meetings may be as few as one or as many as necessary.
June: The City Manager and budget team formally present the budget to the City Council at the first Council meeting in June. This is a noticed, formal hearing for the budget that allows for input from the citizens regarding the budget. Modifications may be made to the budget at this time. At the second City Council meeting in June, the City Council formally adopts the budget with a roll call vote by resolution. The budget then becomes effective at the beginning of the fiscal year, which begins July 1. It is the City’s policy to adopt the annual budget prior to the beginning of each fiscal year.
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The budget is a flexible document that, once adopted, may be modified to adapt to necessary changes for efficient City operations. The City Manager has the authority to modify line items within each fund as long as the total appropriation for that fund remains the same. An increase to the total budget appropriation requires City Council approval.
Budget Information
Fiscal Year 2023-24 Budget. The fiscal year 2023-24 was approved on June 27, 2023 (the “Adopted Budget”). In the Adopted Budget, the General Fund revenue projection for fiscal year 2022-23 was approximately $109.6 million, which was approximately 0.2% less than the fiscal year 2022-23 adjusted budget.
In the Adopted Budget, General Fund operating expenditures were approximately $118.5 million, which was approximately 9.5% less than the fiscal year 2022-23 final budget.
Fiscal Year 2023-24 Budget Updates. On March 26, 2024, the City Council adopted the Mid-Year Budget Amendment. After a review of the first seven months of revenue and expenditure activity staff suggested an increase in budgeted operating expenditures of $1.5 million, which was offset by a savings in expected personnel costs in a similar amount. As a result, there was no notable change for the General Fund as part of the Mid-Year Budget Amendment. There was a total $5.07 million in budget adjustments affecting other special revenue and enterprise funds. Additionally, a total $349,730 adjustment was made to revenues.
Preliminary Fiscal Year 2024-25 Budget. The City is in the process of preparing its budget for fiscal year 2024-25. The City currently estimates that revenues for the fiscal year 2024-25 General Fund budget (the “2024-25 Preliminary Budget”) will be approximately $115.7 million, excluding transfers in. The 2024-25 Preliminary Budget reflects moderate increases in property tax and sales tax revenues. The 2024-25 Preliminary Budget includes approximately $115.6 million in General Fund expenditures, which is generally in line with the 2023-24 budget, as updated in the Mid-Year Budget Amendment.
The City expects to present the 2024-25 Preliminary Budget to the City Council Study Session on June 11, 2024 and to the City Council for adoption on June 25, 2024. The 2024-25 Preliminary Budget described herein is subject to revision prior to adoption. The Budget will be available after City Council approval on June 25, 2025. The budget document will also include prior year actuals for Fiscal-Year 2022-23 and estimated actual results for current fiscal year 2023-24.
Each year, any unspent capital expenditures or contractually obligated budgeted funds in one year are rolled forward to be spent in the subsequent year. For the fiscal year 2024-25 budget, these adjustments are expected to be made in the September or October 2024 as the City will close out the previous year after receiving final accrued invoicing through June 30, 2024. It is expected at this time, that fiscal year 2023-24 will be closed under budget as there are salary savings in a number of departments, namely in the Public Safety department.
As shown in Table 2 below, adjustments to the fiscal year 2023-24 budget based on capital projects which were budgeted in fiscal year 2022-23 and not completed by June 30, 2023 resulted in an increase of approximately $39.5 million in amounts available for appropriation in fiscal Year 2023-24 and an $44.9 million in total expenditures. Such unspent capital expenditures are largely attributable to the increase in expenditures over fiscal years 2021-22 and 2022-23 due to the City’s receipt of approximately $36.3 million in funds under the American Rescue Plan Act in fiscal years 2020-21 and 2021-22.
Historical and Preliminary Budget Information. Set forth in Table 1 below are the final General Fund budgets for fiscal years 2021-22 and 2022-23, and the actual results for fiscal years 2021-22 and 2022-23 (shown on a budgetary basis). Set forth in Table 2 are the Adopted Budget for fiscal year 2023-24, the Revised Budget for fiscal year 2023-24 and the 2024-25 Preliminary Budget. The General Fund budgets and actuals shown in Tables 1 and 2 below do not reflect the application of GAAP and therefore differ in certain respects to the audited General Fund Statement of Revenues, Expenditures and Change in Fund Balance shown in Table 3 below.
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TABLE 1
CITY OF LANCASTER
BUDGETARY COMPARISON STATEMENT
GENERAL FUND
Fiscal Year 2021-22 Fiscal Year 2022-23
Final Budget Actual Variance Final Budget Actual Variance BUDGETARY FUND BALANCE—
BEGINNING OF YEAR $ 86,205,564 $ 86,205,564 -- $124,911,511 $ 124,911,511 --
RESOURCES (INFLOWS)
Taxes $ 58,270,984 $ 63,086,138 $ 4,815,154 $ 60,793,486 $ 92,519,614 $ 1,726,128 Licenses and Permits 6,434,370 7,472,997 1,038,627 7,761,419 7,876,861 115,442 Intergovernmental 47,257,720 55,404,803 8,147,083 29,762,709 29,158,404 (604,305) Charges for Services 3,089,008 2,434,116 (654,892) 2,767,312 3,534,972 767,660 Investment Earnings 1,136,337 (1,625,182) (2,761,519) 918,091 3,059,418 2,141,327 Fines and Forfeitures 646,623 758,010 111,387 623,403 643,406 20,003 Rental Income 525,000 25,613 (499,387) 150,000 -- (150,000) Miscellaneous 9,445,557 9,466,070 20,513 4,861,192 5,610,062 748,870 Sale of Capital Assets 267,942 576,405 308,463 -- 256,272 256,272 Lease Proceeds -- 62,519 62,519 -- 888,875 888,875
Transfers In 7,222,470 9,440,627 2,218,157 12,681,499 11,746,051 (935,448) Amounts Available for
Appropriations $134,296,011 $ 147,102,116 $ 12,806,105 $120,319,111 $ 125,293,935 $ 4,974,824
CHARGES TO APPROPRIATIONS
(OUTFLOWS)
General Government $ 37,081,078 $ 32,756,0557 $ 4,325,021 $ 37,533,630 $ 35,243,477 $ 2,290,153 Public Safety 36,916,992 35,083,490 1,833,502 41,127,070 38,974,589 2,152,481 Park, Recreation, and Arts 23,662,986 20,747,670 2,915,316 26,614,202 22,550,970 4,063,232 Development Services 24,895,879 19,731,144 5,164,735 20,413,221 16,965,701 3,447,520 Capital Outlay 38,772 1,764,793 (1,726,021) 38,772 9,258,605 (9,219,833) Debt Service
Principal Retirement 568,876 504,964 63,912 -- 2,579,351 (2,579,351) Interest and Fiscal Charges 64,606 49,280 15,326 -- 231,434 (231,434) Transfers Out 8,806,106 758,771 8,047,335 14,582,688 5,164,867 9,417,821 Total Charges to Appropriations $132,035,295 $ 111,396,169 $ 20,639,126 $140,309,583 $ 130,968,994 $ 9,340,589 BUDGETARY FUND BALANCE –
END OF YEAR $ 88,466,280 $ 121,911,511 $ 33,445,231 $104,921,039 $ 119,236,452 $14,315,413 Source: City of Lancaster Annual Comprehensive Financial Reports for fiscal years 2021-22 and 2022-23.
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TABLE 2
CITY OF LANCASTER
BUDGETARY COMPARISON STATEMENT
GENERAL FUND BUDGETS
FISCAL YEARS 2023-24 AND 2024-25
2023-24
Adopted Budget
2023-24
Final Budget(1)
2024-25
Preliminary Budget
BUDGETARY FUND BALANCE, JULY 1 $ 79,644,614 $ 118,253,855 $ 72,574,079
RESOURCES (INFLOWS)
Taxes $ 80,197,899 $ 80,475,899 $ 83,368,839
Licenses and Permits 4,338,100 4,338,100 5,456,700
Charges for Services 4,606,885 4,759,491 3,846,165
Fines and Forfeitures 1,174,403 1,743,114 1,434,000
Franchise Fees 9,273,079 9,273,079 9,273,000
Other Revenues and Internal Service Funds 927,772 927,772 1,212,772 Reimbursements from other Funds 7,398,849 7,398,849 7,854,618 Use of Money and Property 1,950,859 1,950,859 3,571,837 Total Revenues $ 110,026,697 $ 110,867,163 $ 116,017,931 Transfers in 993,851 1,084,324 1,211,989
Amounts Available for Appropriations $ 190,665,162 $ 230,205,342 $ 189,803,999
CHARGES TO APPROPRIATIONS (OUTFLOWS)
Personnel Services $ 35,824,288 $ 38,923,788 $ 42,235,494 Operating Expenditures 36,658,419 43,703,537 36,024,918 Sheriff Contract 32,200,496 32,441,022 33,812,284
Debt Service and Capital Outlay 8,005,696 38,444,790 $3,574,574 Transfers Out -- 4,118,126 999,444
Total $ 112,688,899 $ 157,631,263 $ 116,646,714
Net Available Resources $ 77,976,263 $ 72,574,079 $ 73,157,285 (1) Increases between Adopted Budget and Final Budget for fiscal year 2023-24 due to unspent capital expenditures or contractually obligated budgeted funds from fiscal year 2022-23 being rolled forward to be spent in fiscal year 2023-24 following adopted of the Adopted Budget for fiscal year 2023-24. Such unspent capital expenditures are largely attributable to the increase in expenditures over fiscal years 2021-22 and 2022-23 due to the City’s receipt of approximately $36.3 million in funds under the American Rescue Plan Act in fiscal years 2020-21 and 2021-22. See the caption “—Preliminary Fiscal Year 2024-25 Budget” above.
Source: City of Lancaster.
Capital Improvement Program
The City adopts an annual capital improvement program (“CIP”) that covers the current and next succeeding four fiscal years and serves as the City’s short and long-term plan for capital projects. Development of the CIP involves the Public Works department, input from other department heads and the City Manager in connection with the development of the City’s annual budget. The City’s adopted fiscal year 2023-24 Budget includes approximately $28.9 million in new capital projects, approximately $7.4 million of which is expected to be funded from the City’s General Fund. The projects include upgrades and/or new construction of general City facilities, park improvements, storm drain improvements, sanitary sewer projects and street and traffic projects.
The amounts described above do not include the costs of the MARRC Project or the Stadium Project to be funded with a portion of the proceeds of the Series 2024 Bonds. See “THE PROJECTS” in the forepart of this Official Statement for a description of the foregoing projects to be funded with proceeds of the Series 2024 Bonds.
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Comparative Change in Fund Balance of the City General Fund The table below presents the City’s audited General Fund Statement of Revenues, Expenditures and Change in Fund Balance for fiscal years 2018-19 through 2022-23.
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TABLE 3
CITY OF LANCASTER GENERAL FUND STATEMENT OF
REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCE
2018-19 2019-20 2020-21 2021-22 2022-23
REVENUES
Taxes(1) $ 41,044,283 $ 35,373,412 $ 42,460,689 $ 63,086,138 $ 62,519,614 Licenses and Permits 5,042,944 4,640,853 7,332,396 7,472,997 7,876,861 Intergovernmental(2) 24,989,348 23,223,083 40,330,617 55,404,803 29,158,404 Charges for Services 4,257,414 2,451,513 794,723 2,434,116 3,534,972 Investment Earnings 1,956,653 1,932,646 389,212 (1,625,182) 3,059,418 Fines and Forfeitures 1,016,675 805,740 535,740 758,010 643,406 Rental Income 156,958 128,893 -- 25,613 --
Miscellaneous(3) 4,061,738 4,513,108 6,934,303 9,466,070 5,610,062 Total Revenues $ 82,526,013 $ 73,069,248 $ 98,777,680 $137,022,565 $ 112,402,737
EXPENDITURES
Current
General Government $ 28,339,704 $ 25,391,804 $ 28,827,512 $ 32,756,057 $ 35,243,477 Public Safety(4) 30,290,409 31,325,203 32,319,382 35,083,490 38,974,589 Community Development 1,454,161 231 -- -- --
Parks, Recreation, and Arts(5) 15,101,506 14,447,241 12,801,400 20,747,670 22,550,970 Development Services(6) 7,246,112 7,484,481 7,795,380 19,731,144 16,965,701 Capital Outlay 232,545 383,192 273,583 1,764,793 9,258,605 Debt Service
Principal Retirement 581,675 585,116 568,876 504,964 2,579,351 Interest and Fiscal Charges 84,125 80,685 64,606 49,280 231,434 Total Expenditures $ 83,330,237 $ 79,697,953 $ 82,650,739 $110,637,398 $ 125,804,127
EXCESS OF REVENUE OVER (UNDER)
EXPENDITURES $ (804,224) $ (6,628,705) $ 16,126,941 $ 26,385,167 $ (13,401,390)
OTHER FINANCING SOURCES (USES)
Sale of Capital Assets $ 202,197 $ 353,574 $ 40,457 $ 576,405 $256,272 Lease Proceeds 232,545 -- -- 62,519 888,875
Transfers in(7) 8,210,825 9,087,949 8,681,059 9,440,627 11,746,051 Transfers out(8) (1,116,085) (438,468) (1,142,756) (758,771) (5,164,867) Total Other Financing Sources (Uses) $ 7,529,482 $ 9,003,055 $ 7,578,760 $ 9,320,780 $ 7,726,331 NET CHANGE IN FUND BALANCES $ 6,725,482 $ 2,374,350 $ 23,705,701 $ 35,705,947 $ (5,675,059) Fund Balance (Deficit) – Beginning of Year, As
Restated(9) $ 56,182,359 $ 62,907,617 $ 62,499,863 $ 86,205,564 $ 124,911,511 FUND BALANCES (DEFICIT) –END OF YEAR $ 62,907,617 $ 65,281,967 $ 86,205,564 $121,911,511 $ 119,236,452 (1) Includes receipts from property taxes, Measure LC sales tax, franchise taxes, transient occupancy taxes and other miscellaneous taxes. Fiscal year 2021-22 was the first full year the City collected the Measure LC sales tax, which was approved by the voters in November 2020 and authorized an additional 0.75% sales tax within the City. See the caption “—General Fund Tax Revenues.” (2) Includes the City’s share of the sales and use tax distributed by the State. See the caption “—General Fund Tax Revenues.” Increases in fiscal years 2020-21 and 2021-22 due to the receipt of $18,170,280.50 and $18,170,280.50, respectively, in funding under the American Rescue Plan Act.
(3) Includes election fees, city property sales, interest income, funds from Internal Service Funds and insurance reimbursements. Increase in fiscal year 2021-22 due to the addition of Internal Service Funds which consist of allocated costs from other City funds which are reimbursed to the General Fund.
(4) Consists of costs of Sheriff’s and animal control services are provided under contract with the County. (5) Increases in fiscal years 2021-22 and 2022-23 due to increased programs and community services being budgeted, which costs were generally funded from the proceeds of the Measure LC sales tax.
(6) Increases in fiscal years 2021-22 and 2022-23 due to increased services and programs being budgeted, which costs were generally funded from the proceeds of the Measure LC sales tax
(7) Transfers in represents transfers from other Governmental Funds, Special Revenue Funds and Enterprise Funds for administrative and retiree health benefit costs incurred.
(8) Transfers out represents costs to cover Development Services-Engineering Fund and Recycled Water Fund operating costs and to cover ineligible grant expenditures.
(9) Beginning fund balance in fiscal year 2020-21 restated due to the implementation of GASB Statement No. 84, Fiduciary Activities. Beginning fund balance in fiscal year 2022-23 restated due to the reclassification of a land acquisition in the General Fund rather tan for the Lancaster Housing Authority.
Source: City of Lancaster Annual Comprehensive Financial Reports for fiscal years 2018-19 through 2022-23.
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Comparative General Fund Balance Sheets of the City
The table below presents the City’s audited General Fund Balance Sheets for fiscal years 2018-19 through 2022-23.
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TABLE 4
CITY OF LANCASTER
GENERAL FUND BALANCE SHEETS
FIVE YEAR COMPARISON
2018-19 2019-20 2020-21 2021-22 2022-23
ASSETS
Pooled Cash and Investments $ 13,501,351 $ 22,314,237 $ 11,647,352 $ 28,526,918 $ 61,567,028 Receivables:
Accounts 4,224,971 3,916,687 2,619,540 2,247,598 4,933,467 Taxes 4,138,262 4,954,959 9,680,642 9,438,627 10,401,996 Accrued Interest 334,226 85,752 190,418 234,140 530,373 Leases -- -- -- 974,371 700,774
Due from Other Governments 2,614,743 313,398 10,688,520 10,717 314,409 Notes and Loans, Net 716,814 1,150,839 820,439 1,039,376 1,048,279 Prepaid Items 37,111 150,277 1,050 507,965 978,157
Due from Other Funds(1) 16,163,504 13,041,586 35,624,019 66,812,094 43,259,191 Inventories 193,718 32,313 26,416 58,392 21,915
Land Held for Resale 2,782,104 2,782,104 -- -- --
Advances to Successor Agency 40,176,918 42,673,865 43,442,156 44,210,447 44,978,738 Total Assets $ 84,883,722 $ 91,416,017 $ 114,740,552 $154,060,645 $ 168,734,327
LIABILITIES
Accounts Payable(2) $ 5,034,252 $ 7,378,812 $ 7,666,617 $ 7,658,141 $ 21,416,276 Accrued Liabilities 1,032,414 488,186 1,168,155 2,237,190 2,351,961 Unearned Revenues 67,483 82,260 71,601 95,006 77,909
Deposits Payable 1,241,584 1,070,145 1,263,926 2,075,910 1,812,495 Total Liabilities $ 7,375,733 $ 9,019,403 $ 10,170,301 $ 12,066,247 $ 25,658,641
DEFERRED INFLOWS OF
RESOURCES
Deferred Inflows – Leases(3) -- -- -- $ 945,776 $ 664,561 Unavailable Revenues $ 14,600,372 $ 17,114,647 $ 18,364,687 19,137,111 23,174,673 Total Deferred Inflows of
Resources $ 14,600,372 $ 17,114,647 $ 18,364,687 $ 20,082,887 $ 23,839,234
FUND BALANCES
Nonspendable(4) $ 26,480,707 $ 26,892,647 $ 26,457,074 $ 27,214,902 $ 27,657,520 Committed(5) 3,365,000 1,614,733 8,083,847 47,957,898 49,046,805 Assigned(6) 23,159,000 9,055,493 14,132,994 14,132,994 9,418,787 Unassigned(FN) 7,120,806 24,936,990 37,531,649 32,605,717 33,113,340 Total Fund Balances (Deficit) $ 62,907,617 $ 65,281,967 $ 86,205,564 $121,911,511 $ 119,236,452 Total Liabilities, Deferred Inflows
of Resources, and Fund Balances $ 84,883,722 $ 91,416,017 $ 114,740,552 $154,060,645 $ 168,734,327 (1) Increases in fiscal years 2020-21 through 2022-23 due to $30.4 million receivable from multiple funds for temporary cash balance deficit General Fund as a result of power purchases for which the General Fund is reimbursed. (2) Increase in fiscal year 2022-23 due to advance of $12,455,458 to Waste Management for disposal fees associated with property taxes. (3) Effective July 1, 2021, the City implemented GASB Statement No. 87, Leases. (4) Nonspendable fund balance includes amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. Also includes long-term portion of notes and loan’s receivable with no constraints on how the eventual proceeds can be spent.
(5) Committed fund balance includes amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government’s highest authority, the City Council. The formal action required to be taken to establish, modify, or rescind a fund balance commitment is a resolution. Consists of the City’s Contingency Reserve, which was revised beginning in fiscal year 2021-22. See the caption “—Financial Policies.”
(6) Assigned fund balance includes amounts that are constrained by the City’s intent to be used for specific purposes but are neither restricted nor committed. Consists of assigned balances for employee benefits, legal claims, capital projects, and various services.
Source: City of Lancaster Annual Comprehensive Financial Reports for fiscal years 2018-19 through 2022-23.
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General Fund Tax Revenues
The City derives its General Fund tax revenues from a variety of sources including ad valorem property taxes, sales taxes, franchise taxes, transient occupancy tax and other miscellaneous taxes. The City’s total General Fund tax revenues for the past five fiscal years are set forth below.
TABLE 5
CITY OF LANCASTER
GENERAL FUND TAX REVENUES BY SOURCE
(AMOUNTS IN THOUSANDS)
Revenue Category 2018-19 2019-20 2020-21 2021-22 2022-23 Property Taxes(1) $ 22,584 $ 24,297 $26,148 $ 27,184 $ 30,603 Sales Taxes(2) 23,611 21,961 26,735 28,326 27,548
Measure LC(3) -- -- 5,070 22,625 21,682
Franchise Taxes(4) 7,638 7,663 7,732 9,262 7,451
Transient Occupancy Tax(5) 2,211 1,965 2,013 2,709 2,676 Other Taxes(6) 1,924 3,080 1,741 2,392 1,706
Total $ 57,968 $ 58,967 $69,439 $ 92,498 $ 89,256
(1) Inclusive of Department of Motor Vehicles license fees. See “—Property Taxes” below. (2) The general sales tax collected and distributed by the California Department of Tax and Fee Administration is categorized in the City’s audited financial statements, and in Tables 1 and 3 herein, as an intergovernmental revenue. See also the caption “—Sales Taxes.”
(3) The Measure LC sales tax is categorized in the City’s audited financial statements, and in Tables 1 and 3 herein, as a tax revenue. See also the caption “—Sales Taxes.”
(4) Decrease in franchise taxes due to a payment from Waste Management for fiscal year 2022-23 which was made after June 30, 2023.
(5) See the caption “—Other Revenues—Transient Occupancy Tax.” (5) Other taxes primarily consist of contract impact fees charged to Waste Management.
Source: City of Lancaster.
The following table shows the source of General Fund property taxes for the past five fiscal years.
TABLE 6
CITY OF LANCASTER
GENERAL FUND PROPERTY TAX REVENUES BY SOURCE
(AMOUNTS IN THOUSANDS
Revenue Category(1) 2018-19 2019-20 2020-21 2021-22 2022-23 Ad Valorem $6,132 $6,479 $7,176 $8,746 $8,694
VLF In-Lieu Property Taxes 14,652 15,792 16,545 17,492 19,070 RPTTF Residual(2) 1,799 2,026 2,427 1,029 1,998
Vehicle License Fees
Total $22,584 $24,297 26,148 27,267 29,762
(1) See the caption “—Property Taxes” for a description of each of the different sources of General Fund property tax revenues. (2) Amounts represent previous redevelopment tax increment following the statutory dissolution (effective February 1, 2012) of all redevelopment agencies in the State, including the former Lancaster Redevelopment Agency. See the caption “—Property Taxes.”
Source: City of Lancaster.
Sales Taxes
A sales tax is imposed on retail sales or consumption of personal property. The basic sales tax rate is established by the State Legislature, and local overrides may be approved by voters. Sales tax is collected and A-15
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distributed by the California Department of Tax and Fee Administration. As of July 2, 1990, the City was authorized to receive an amount equal to one percent (1.00%) of taxable sales within its jurisdiction.
On November 3, 2020, voters in the City approved “Measure LC,” which established a ¾-cent sales tax (increasing the total sales tax rate in the City from 9.5% to 10.25%) within the incorporated territory of the City.
Measure LC is intended to protect the City’s long-term financial stability, maintain essential city services, repair streets/potholes, address homelessness, maintain 911 emergency response, keep public areas safe/clean for all, retain local businesses, protect local water sources, maintain veterans, senior, mental health, community programs. Measure LC does not have a termination date; however, the measure may be terminated by lawful vote of the electorate or as required or authorized by law. The measure took effect on April 1, 2021. While the Measure LC sales tax revenues are available to the General Fund for general City projects and services, the City’s current practice for budgetary purposes is to separate such portion of the sales tax from the General Fund.
During fiscal year 2022-23, sales tax receipts of approximately $49.2 million (which includes approximately $21.7 million of revenues from the Measure LC Sales Tax) provided the largest General Fund revenue source for the City, contributing approximately 43.8% of total General Fund revenues. The City has budgeted for sales tax receipts of approximately $47.7 million in fiscal year 2023-24, which includes approximately $20.8 million of revenues from Measure LC Sales Tax.
The following table shows the General Fund sales tax revenues from the City’s share of the basic sales tax, Measure LC Sales Tax revenues and total sales tax revenues since the 0.75% increase went into effect on April 1, 2021.
TABLE 10
CITY OF LANCASTER
SALES TAX REVENUES
Fiscal Year
General Sales Tax
Revenues
Measure LC Sales
Tax Revenues
Total Sales Tax
Revenues
2018-19 $23,611,132 -- $23,611,132
2019-20 21,961,474 -- 21,961,474
2020-21 26,734,737 $ 5,070,608 31,805,345
2021-22 28,325,781 22,625,166 50,950,947
2022-23 27,547,477 21,682,349 49,229,826
Source: City of Lancaster.
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The table below provides the top twenty-five sales taxpayers (in alphabetical order) within the City as of June 30, 2023. The top 25 sales tax generators produced approximately 53.48% of total sales tax revenues for the twelve month period ending on June 30, 2023.
TABLE 11
CITY OF LANCASTER
TOP 25 SALES TAX GENERATORS
(in alphabetical order)
Property Owner Property Owner
1. 7 Eleven
2. Antelope Valley Chevrolet
3. Arco
4. Bobby Wayne’s RV
5. Circle K
6. Conserv Fuel
7. Consolidated Electrical
8. Costco
9. Diamond Ford
10. G&M Oil
11. Home Depot
12. Honda Lancaster
13. Hunter Dodge Chrysler Jeep
14. Hughes Water & Sewer
15. Lowes
16. Quinn CAT Company
17. Ride Coach & Bus
18. Ross
19. Stater Bros
20. Subaru Antelope Valley
21. Sky Ready Mix
22. Target
23. Toyota of Lancaster
24. United Rental
25. Walmart Supercenter
Source: City of Lancaster.
The table below summarizes the annual volume of taxable transactions within the City for the years 2019 through 2023.
TABLE 12
CITY OF LANCASTER
TOTAL TAXABLE TRANSACTIONS
(Dollars in Thousands)
Year Number of Outlets
Total Taxable
Transactions Amount
2019 3,761 $1,950,531
2020 4,114 1,862,311
2021 3,982 2,241,539
2022 4,189 2,338,091
2023 3,929 2,195,411
Source: Taxable Sales in California, California Department of Tax and Fee Administration.
Property Taxes
During fiscal year 2022-23, property tax receipts of approximately $30.6 million provided the second largest tax revenue source of the City, contributing approximately 29.3% of total General Fund revenues.
General Fund property tax revenues of approximately $29.6 million are budgeted to be received during fiscal year 2023-24. The City also received a portion of Department of Motor Vehicles license fees (“VLF”) collected Statewide. Several years ago, the State-wide VLF was reduced by approximately two-thirds. However, the State continued to remit to cities and counties the same amount that those local agencies would have received if A-17
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the VLF had not been reduced, known as the “VLF backfill.” The State VLF backfill was phased out, and as of Fiscal Year 2011-12, all of the VLF is now received through an in-lieu payment from State property tax revenues.
Under current State law, a portion of property tax revenues in each county are transferred to a county account known as the Educational Revenue Augmentation Fund (“ERAF”) to offset a portion of the State’s obligation to fund local K-14 school districts and community college districts. In certain counties, including the County, amounts in the ERAF in each fiscal year have historically exceeded the amount of the State’s obligation to fund such local educational agencies. Such excess amounts are commonly referred to as “excess ERAF.” Under current State law, a portion of the excess ERAF are returned to local agencies, such as the City.
In California, property which is subject to ad valorem taxes is classified as “secured” or “unsecured.” The secured classification includes property on which any property tax levied by a county becomes a lien on that property. A tax levied on unsecured property does not become a lien against the taxed unsecured property, but may become a lien on certain other property owned by the taxpayer. Every tax which becomes a lien on secured property has priority over all other liens, arising pursuant to State Law, on the secured property, regardless of the time of the creation of other liens. The valuation of property is determined as of January 1 each year, and installments of taxes levied upon secured property are due November 1 and February 1 and become delinquent on the following December 10 and April 10, respectively. Taxes on unsecured property are due July 1, and become delinquent August 31.
Secured and unsecured properties are entered separately on the assessment roll maintained by the county assessor. The method of collecting delinquent taxes is substantially different for the two classifications of property. The exclusive means of enforcing the payment of delinquent taxes with respect to property on the secured roll is the sale of the property securing the taxes of the State for the amount of taxes that are delinquent.
The taxing authority has four methods of collecting unsecured personal property taxes: (1) a civil action against the taxpayer; (2) filing a certificate in the office of the county clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer; (3) filing a certificate of delinquency for record in the County Recorder’s Office in order to obtain a lien on certain property of the taxpayer, and (4) seizure and sale of personal property, improvement or possessory interest belonging or taxable to the assessee.
A ten percent penalty is added to delinquent taxes which have been levied with respect to property on the secured roll. In addition, beginning on the July 1 following a delinquency, interest begins accruing at the rate of 1 1/2% per month on the amount delinquent. Such property may thereafter be redeemed by the payment of the delinquent taxes and the ten percent penalty, plus interest at the rate of 1 1/2% per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the county tax collector. A ten percent penalty also applies to the delinquent taxes or property on the unsecured roll, and further, an additional penalty of 1 1/2% per month accrues with respect to such taxes beginning on the varying dates related to the tax billing date.
Legislation enacted in 1984 (Section 75 et seq. of the Revenue and Taxation Code of the State of California), provides for the supplemental assignment and taxation of property as of the occurrence of a change in ownership or completion of new construction. Previously, statutes enabled the assessment of such changes only as of the next tax lien date following the change and thus delayed the realization of increased property taxes from the new assessment for up to 14 months. Collection of taxes based on supplemental assessments occurs throughout the year. Taxes due are prorated according to the amount of time remaining in the tax year, with the exception of tax bills dated January 1 through May 31, which are calculated on the basis of the remainder of the current fiscal year and the full 12 months of the next fiscal year.
The City also receives certain property tax amounts representing previous redevelopment tax increment following the statutory dissolution (effective February 1, 2012) of all redevelopment agencies in the State, including the former Lancaster Redevelopment Agency. Residual amounts of incremental redevelopment project area property taxes, after allocations for tax sharing and enforceable obligation of the former Lancaster Redevelopment Agency and the Successor Agency to the Lancaster Redevelopment Agency and administrative costs of the County and the Successor Agency are distributed to the City in proportion to the City’s share of A-18
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property tax revenues in the tax rate are for the applicable fiscal year. As enforceable obligations of the former Lancaster Redevelopment Agency and the Successor Agency are paid and retired, this residual amount distributed to the City is expected to increase over time.
The table below sets forth the secured and unsecured assessed valuations for property in the City for the fiscal years 2014-15 through 2023-24.
TABLE 7
CITY OF LANCASTER
ASSESSED VALUATION
FISCAL YEARS 2014-15 THROUGH 2023-24
Fiscal Year Local Secured Utility Unsecured Total
2014-15 $ 9,184,033,113 $2,485,723 $277,564,641 $ 9,464,083,477 2015-16 9,821,154,854 2,485,723 284,805,531 10,108,446,108 2016-17 10,369,851,928 2,485,723 308,531,016 10,680,868,667 2017-18 10,879,417,629 2,115,850 281,909,209 11,163,442,688 2018-19 11,518,606,212 1,440,455 279,144,753 11,799,191,420 2019-20 12,356,881,324 1,440,659 358,418,903 12,716,740,886 2020-21 12,914,281,003 1,438,981 407,473,164 13,323,193,148 2021-22 13,708,230,996 1,233,892 376,652,237 14,086,117,125 2022-23 14,926,260,276 1,229,595 429,505,413 15,356,995,284 2023-24 15,729,624,396 1,226,867 464,649,571 16,195,500,834 Source: California Municipal Statistics, Inc.
The twenty largest local secured property taxpayers in the City for fiscal year 2023-24 based on total assessed valuation, the land use and the percentage of the City’s total assessed value attributable to each are shown in the below table. The information in Table 8 has been obtained from third-party sources and is included for general information purposes only. The City has not verified the information in Table 8 and does not guarantee the accuracy of such information.
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TABLE 8
CITY OF LANCASTER
LARGEST 2023-24 LOCAL SECURED TAXPAYERS
Property Owner Primary Land Use Assessed Valuation
Percentage
of Total(1)
1. Westcore Bravo Lancaster LLC Industrial $ 146,072,160 0.93%
2. AG Cordova Park Owner LP Apartments 87,815,730 0.56
3. Rami Darghalli Commercial and Residential 76,747,046 0.49
4. Granada Villas REI LLC Apartments 68,616,621 0.44
5. AG Sienna Heights Owner LP Apartments 63,919,303 0.41
6. Wal Mart Real Estate Business Trust Shopping Center 62,120,395 0.39
7. Vereit Real Estate LP Industrial 49,378,113 0.31
8. Grandis Land Holding LLC Undeveloped 42,085,421 0.27
9. BYD Coach and Bus LLC Industrial 41,740,938 0.27
10. CP Antelope Shops LLC Shopping Center 37,683,438 0.24
11. B33 Valley Central II LLC Shopping Center 35,235,312 0.22
12. AG Sunset Ridge Owner LP Apartments 33,482,345 0.21
13. Castleblack Lancaster Hotel 30,554,058 0.19
14. Woodlands West REI LLC Apartments 30,244,379 0.19
15. Eretz Lancaster Properties LLC Skilled Nursing Center 28,284,258 0.18
16. Lancaster Realty Holdings LLC Apartments 27,928,212 0.18
17. Sygma Network Inc. Industrial 25,943,690 0.16
18. Charter Communications Communications 25,686,494 0.16
19. Quartz Hill Station LLC Shopping Center 24,855,772 0.16
20. 2018-3 IH Borrower LP Residential Properties 22,720,940 0.14 Total $ 961,114,625 6.11%
(1) 2023-24 Local Secured Assessed Valuation: $15,729,624,396.
Source: California Municipal Statistics, Inc.
Set forth in the table below are property tax collections (including amounts that do not constitute General Fund moneys) and delinquencies in the City as of June 30 for the last five Fiscal Years.
TABLE 9
CITY OF LANCASTER
PROPERTY TAX LEVIES AND COLLECTIONS
Fiscal Year Secured Tax Charge
Amount Delinquent
June 30
Percent Delinquent
June 30
2018-19 $ 8,495,552.83 $116,908.33 1.38%
2019-20 9,105,371.69 206,837.24 2.27
2020-21 9,492,363.27 162,964.16 1.72
2021-22 9,970,257.24 156,693.33 1.57
2022-23 10,738,764.92 168,981.13 1.57
Source: California Municipal Statistics, Inc.
Franchise Taxes
The City imposes franchise taxes on businesses for the privilege of operating in public rights-of- way within the City, including franchise taxes for natural gas, electricity, cable television and solid waste franchisees. Franchise taxes range from 2% to 17% and the businesses include Southern California Edison, The Gas Company, Time Warner (cable), AT&T U-Verse, Verizon and Waste Management. In fiscal year 2022-23, the City collected approximately $7.5 million in franchise taxes, providing approximately 7.2% of total A-20
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General Fund revenues. Franchise taxes of approximately $9.3 million are currently budgeted to be received during fiscal year 2023-24.
Licenses and Permits
The City collects fees for licenses and permits provided by the City, including, but not limited to, regulatory permits, conditional use permits, development permits, plan check and permitting, building permits and inspections and other development fees. In fiscal year 2022-23, the City collected approximately $7.9 million, providing approximately 7% of total General Fund revenues. License and permit fees of approximately $5.4 million are currently budgeted to be received during fiscal year 2023-24.
Other Revenues
Charges for Services. In fiscal year 2022-23, charges of approximately $29.2 million (approximately 26% of total General Fund revenues) were collected for services including paramedic and basic life support service fees, certain police service fees, charges for recreational classes, day care, and library programs, as well as the General Fund administration fee charged to other funds. Charges for services are currently budgeted at approximately $11.5 million in fiscal year 2023-24.
Transient Occupancy Tax. A transient occupancy tax of 7.00% is imposed on persons staying 30 days or less in a hotel within the City. In fiscal year 2022-23, transient occupancy tax receipts were approximately $2.7 million, providing approximately 2.4% of total General Fund revenues. In the Adopted Budget for fiscal year 2023-24, the City projected transient occupancy tax revenues of approximately $2.7 million for fiscal year 2023-24.
Miscellaneous Other Revenues. Other sources of revenue for the City include investment earnings, fines and forfeitures, grants and other miscellaneous revenue sources.
Appropriations Limit
Section 7910 of the Government Code of the State of California requires the City to adopt a formal appropriations limit for each fiscal year. The City’s appropriations limit for Fiscal Year 2023-24 is $250,768,962. Based on this, the appropriations limit is not expected to have any impact on the ability of the City to continue to budget and appropriate the Base Rental Payments as required by the Lease Agreement.
Indebtedness
Long-Term General Fund Debt.
Lancaster Financing Authority 2018 Lease Revenue Bonds. The Lancaster Financing Authority Lease Revenue Bonds, Series 2018 (Public Improvements Project) (the “2018 Bonds”) were issued on December 1, 2018 in the initial aggregate principal amount of $14,955,000 for the purpose of financing improvements to City facilities. The 2018 Bonds bear interest at rates from 3% to 4% and mature on May 1, 2048. The 2018 Bonds are payable from rental payments made by the City to the Authority. As of June 30, 2023, the 2018 Bonds were outstanding in the aggregate principal amount of $13,255,000.
Lancaster Power Authority 2021 Bonds. The Lancaster Power Authority Taxable Revenue Refunding Bonds, Series 2021 (Solar Renewable Energy Program) (the “2021 Bonds”) were issued on October 12, 2021 in the initial aggregate principal amount of $19,305,000 for the purpose of refinancing the cost of prepaying a specified supply of electricity. The 2021 Bonds bear interest at rates from 0.417% to 2.908% and mature on November 1, 2036. The 2021 Bonds are payable from certain solar revenues and, to the extent such solar revenues are insufficient to pay debt service on the 2021 Bonds, from rental payments made by the City to the Lancaster Power Authority. As of June 30, 2023, the 2021 Bonds were outstanding in the aggregate principal amount of $17,940,000.
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Equipment Purchase Agreement. On March 1, 2011, the City entered into an equipment purchase agreement for various capital improvements including lighting upgrades, athletic field lighting upgrades, HVAC system replacement, plumbing fixture upgrades, irrigation weather stations, and solar hot water heating. The total cost of the equipment acquired under the agreement was $1,600,000. The financing was obtained from Municipal Finance Corporation on March 1, 2011, for $1,600,000 with an interest rate of 4.35% per annum and annual payments of $146,341 through the end of the lease (March 2026). The outstanding balance at June 30, 2023, is $407,431.
Promissory Note. In December 2021, the City entered into a promissory note in the amount of $5,870,000 for the purchase of land. The note bears interest at 5.9% per annum, with interest due and payable beginning December 2022. The entire principal balance of the note matures on December 27, 2026. The outstanding balance at June 30, 2023 is $5,870,000.
As of the June 30, 2023, the City also had various other equipment purchase agreements and loans payable from the City’s General Fund in the outstanding aggregate principal amount of $737,601. See Note 8 to the City’s audited financial statements for fiscal year 2022-23 attached hereto as Appendix C for a description of the City’s outstanding indebtedness payable from the City’s General Fund.
Other Long-Term Debt. The City also has outstanding obligations payable from sources other than the City’s General Fund, including the Authority’s 2016 Assessment Revenue Bonds (Streetlights Acquisition) payable form certain assessments levied by a street lighting maintenance assessment district formed by the City and the Authority’s Revenue Bonds, Series 2019 (Measure M & R Street Improvements Project), which are payable from sales tax revenues received by the City pursuant to the Countywide sales tax imposed pursuant to Measures M and R.
See Note 8 to the City’s audited financial statements for fiscal year 2022-23 attached hereto as Appendix C for a description of the City’s outstanding indebtedness payable from sources other than the City’s General Fund.
Short-Term Debt. The City currently has no short-term debt outstanding.
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Estimated Direct and Overlapping Bonded Debt. The estimated direct and overlapping bonded debt of the City as of May 31, 2024 is set forth in Table 13. The information in Table 13 has been derived from data assembled and reported to the City by California Municipal Statistics, Inc. None of the City, the Authority or the Underwriter has independently verified the information in Table 13 and the City, the Authority and the Underwriter do not guarantee its accuracy.
TABLE 13
CITY OF LANCASTER
ESTIMATED DIRECT AND OVERLAPPING BONDED DEBT
2023-24 Assessed Valuation: $16,195,500,834
OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 6/1/24 Antelope Valley Joint Community College District 34.473% $145,615,991 Antelope Valley Union High School District 39.066 9,043,729 Eastside Union School District 63.993 9,435,768
Lancaster School District 97.543 61,905,077
Westside Union School District 29.466 10,467,973
Westside Union School District Community Facilities Districts 100. 20,974,389 City of Lancaster School District Community Facilities District No. 2004-1 100. 9,505,000 City of Lancaster Lighting Maintenance District 100. 10,250,000 California Statewide Community Development Authority Assessment Districts 100. 6,070,000 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $283,267,927
DIRECT AND OVERLAPPING GENERAL FUND DEBT:
Los Angeles County General Fund Obligations 0.808% $20,032,176 Los Angeles County Superintendent of Schools Certificates of Participation 0.808 23,087 Antelope Valley Joint Community College District General Fund Obligations 34.473 3,419,722 Antelope Valley Union High School District General Fund Obligations 39.066 1,976,740 Lancaster School District Certificates of Participation 97.543 5,511,180 City of Lancaster Power Authority Revenue Bonds 100. 33,289,000 (1) TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND DEBT $64,251,905 Less: Lancaster Power Authority Revenue Bonds supported by solar utility revenues 17,155,000 TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND DEBT $47,096,905 OVERLAPPING TAX INCREMENT DEBT (Successor Agency): 100. % $117,595,000 GROSS COMBINED TOTAL DEBT $465,114,832 (2)
NET COMBINED TOTAL DEBT $447,959,832
Ratios to 2023-24 Assessed Valuation:
Total Overlapping Tax and Assessment Debt .................................................1.75% Total Gross Direct Debt ($33,289,000)........................................................0.21% Total Net Direct Debt ($16,134,000)............................................................0.10% Gross Combined Total Debt ............................................................................2.87% Net Combined Total Debt................................................................................2.77% Ratios to Redevelopment Successor Agency Incremental Valuation ($10,803,063,802):
Total Overlapping Tax Increment Debt...........................................................1.09% (1) Excludes general obligation bonds to be sold.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations.
Source: California Municipal Statistics, Inc.
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Retirement System
This caption contains certain information relating to the California Public Employees Retirement System (“CalPERS”). The information is primarily derived from information produced by CalPERS, its independent accountants and actuaries. The City has not independently verified the information provided by CalPERS and makes no representations nor expresses any opinion as to the accuracy of the information provided by CalPERS.
The comprehensive annual financial reports of CalPERS are available on its Internet website at www.calpers.ca.gov. The CalPERS website also contains CalPERS’ most recent actuarial valuation reports and other information concerning benefits and other matters. Such information is not incorporated by reference herein. The City cannot guarantee the accuracy of such information. Actuarial assessments are “forward- looking” statements that reflect the judgment of the fiduciaries of the pension plans, and are based upon a variety of assumptions, one or more of which may not materialize or be changed in the future. Actuarial assessments will change with the future experience of the pension plans.
Plan Description. The City contributes to the California Public Employees Retirement System (“CalPERS”), an agent multiple-employer public employee defined benefit pension plan. CalPERS provides retirement and disability benefits, annual cost-of-living adjustments and death benefits to plan members and beneficiaries. CalPERS acts as a common investment and administrative agent for participating public entities within the State of California. Benefit provisions and all other requirements are established by state statute.
Copies of CalPERS’ annual financial report may be obtained from their executive office: 400 P Street, Sacramento, California 95814..
All qualified regular and probationary employees are eligible to participate in the City’s Miscellaneous Plan, an agent multiemployer defined benefit pension plan administered by CalPERS. Benefit provisions under the Miscellaneous Plan are established by state statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions, and membership information that can be found on the CalPERS website.
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 to 62 with statutorily reduced benefits. All members are eligible for nonindustrial disability benefits after five 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.
AB 340, Public Employee Pension Reform Act of 2013 (PEPRA). On September 12, 2012, the California Governor signed Assembly Bill 340 (“AB 340”), which implements pension reform in California.
Effective January 1, 2013, AB 340: (i) requires public retirement systems and their participating employers to share equally with employees the normal cost rate for such retirement systems; (ii) prohibits employers from paying employer-paid member contributions to such retirement systems for employees hired after January 1, 2013; (iii) establishes a compulsory maximum non-safety benefit formula of 2.5% at age 67; (iv) defines final compensation as the highest average annual pensionable compensation earned during a 36-month period; and (v) caps pensionable income at $110,100 ($132,120 for employees not enrolled in Social Security) subject to Consumer Price Index increases. Other provisions reduce the risk of the City incurring additional unfunded liabilities, including prohibiting retroactive benefits increases, generally prohibiting contribution holidays, and prohibiting purchases of additional non-qualified service credit.
Pursuant to AB 340, the City established new pension tiers: 2.0% at 62 for Miscellaneous and 2.7% at 62 for employees hired on or after January 1, 2013 who were not previously CalPERS members.
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The Miscellaneous Plan’s provisions and benefits in effect at year ended June 30, 2023, are summarized as follows:
Miscellaneous
Hire Date
Classic Members
Hired Prior to
January 1, 2013
Classic Members
Hired On or After
January 1, 2013
New Members
Hired On or After
January 1, 2013
Benefit Formula 2.7% @ 55 2.0% @ 60 2% @ 62
Benefit Vesting Schedule 5 Years of Service 5 Years of Service 5 Years of Service Benefit Payments Monthly for Life Monthly for Life Monthly for Life Retirement Age 50-55 50-63+ 52-67+
Monthly Benefits, as a % of Eligible
Compensation 2.0% to 2.7% 1.092% - 2.418% 1.0% - 2.5%
Required Employee Contribution Rates 8% 7% 6.25%
Required Employer Contribution Rates:
Normal Cost Rate 11.57% 11.57% 11.57%
Payment of Unfunded Liability $5,845,814 -- --
As of the June 30, measurement date, the following employees were covered by the benefit terms for the Miscellaneous Plan:
Description Miscellaneous Plan
Inactive Employees or Beneficiaries Currently Receiving Benefits
336
Inactive Employees Entitled to But Not Yet Receiving Benefits 508 Active employees 258
Total 1,102
Contributions. Section 20814(c) of the California Public Employees’ Retirement Law 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 City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. City 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 contributions requirements are classified as plan member contributions. The City made contributions to the Miscellaneous Plan during fiscal year ended June 30, 2023, of $8,632,023.
Beginning in Fiscal Year 2017-18, CalPERS began collecting employer contributions toward a pension plan’s unfunded liability as dollar amounts instead of the prior method of a percentage of payroll. According to CalPERS, this change was intended to address potential funding issues that could arise from a declining payroll or a reduction in the number of active members in the plan. Funding the unfunded liability as a percentage of payroll could lead to underfunding of pension plans. Due to stakeholder feedback regarding internal needs for total contributions expressed as an estimated percentage of payroll, the CalPERS reports include such results in the contribution projection for informational purposes only. Contributions toward a pension plan’s unfunded liability will continue to be collected as set dollar amounts.
The City’s required contributions to CalPERS fluctuate each year and, as noted, include a normal cost component and a component equal to an amortized amount of the unfunded liability. Many assumptions are used to estimate the ultimate liability of pensions and the contributions that will be required to meet those obligations. The CalPERS Board of Administration has adjusted and may in the future further adjust certain assumptions used in the CalPERS actuarial valuations, which adjustments may increase the City’s required contributions to CalPERS in future years. Accordingly, the City cannot provide any assurances that the City’s required contributions to CalPERS in future years will not significantly increase (or otherwise vary) from any A-25
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past or current projected levels of contributions. CalPERS earnings reports for Fiscal Years 2012-13 through 2022-23 report investment gains (and losses) of approximately 13.2%, 18.4%, 2.4%, 0.6%, 11.2%, 8.6%, 6.7%,
4.7%, 21.3%, (6.1%), and 6.1%, respectively. Future earnings performance may increase or decrease future contribution rates for plan participants, including the City CalPERS’ discount rate was lowered from 7.00% to 6.80% in fall 2021. Lowering the discount rate means that employers that contract with CalPERS to administer their pension plans will see increases in their normal costs and unfunded actuarial liabilities. Active members hired after January 1, 2013 who were not previously CalPERS members will also see their contribution rates rise under AB 340.
The tables below are derived from the City of Lancaster Annual Valuation Report with valuation dates as of June 30, 2022 and delivered in July 2023 for the Miscellaneous Plan (the “2023 Report”) and show the required and projected employer contributions (before cost sharing) for the next six fiscal years. Projected results reflect the adopted changes to the discount rate described in the 2023 Report. Such projections also assume that all actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur during the projection period. The projected normal cost percentages in the projections below does not reflect that the normal cost will decline over the time as new employees are hired into AB 340 or other lower cost benefit tiers.
The foregoing projections assumed the investment return for fiscal year 2022-23 would be 6.8%. As described above, CalPERS announced a investment returns of 6.1% for fiscal year 2022-23. As a result, the actual contribution requirements for the fiscal years 2024-25 and the following years shown below can be expected to differ from such projections. No assurance can be provided that the City’s CalPERS plan expenses will not increase significantly in the future.
Required
Contribution
Projected Future Employer Contributions
(Assumes 6.80% Return for Fiscal Year 2022-23 and Beyond) Fiscal Year 2024-25 2025-26 2026-27 2027-28 2028-29 2029-30 Normal Cost % 12.15% 11.9% 11.6% 11.4% 11.2% 11.0%
UAL Payment $3,810,700 $7,259,000 $7,698,000 $8,067,000 $8,824,000 $9,006,000 Total as a % of Payroll* 39.05% 39.8% 40.4% 40.8% 42.4% 41.9% Projected Payroll $25,322,712 $26,031,748 $26,760,638 $27,509,935 $28,280,213 $29,072,059 * Illustrative only and based on the projected payroll shown.
Source: CalPERS’ 2023 Report.
Portions of the above disclosures are primarily derived from information that has been produced by CalPERS, its independent accountants and its actuaries. The City has not independently verified such information and neither makes any representations nor expresses any opinion as to the accuracy of the information that has been provided by CalPERS.
The comprehensive annual financial reports of CalPERS are available on CalPERS’ Internet website at www.calpers.ca.gov. The CalPERS website also contains CalPERS’ most recent actuarial valuation reports and other information that concerns benefits and other matters. The textual reference to such Internet website is provided for convenience only. None of the information on such Internet website is incorporated by reference herein. The City cannot guarantee the accuracy of such information. Actuarial assessments are “forward-looking” statements that reflect the judgment of the fiduciaries of the pension plans, and are based upon a variety of assumptions, one or more of which may not materialize or be changed in the future.
Net Pension Liability. The City’s net pension liability for the Miscellaneous Plan is measured as the total pension liability, less the pension plan’s fiduciary net position. The net pension liability of the Miscellaneous Plan 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 shown below.
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Valuation Date June 30, 2021
Measurement Date June 30, 2022
Actuarial Cost Method Entry Age Normal Cost Method
Actuarial Assumptions
Discount Rate 6.90%
Inflation 2.3%
Projected Salary Increase Varies by Entry Age and Service Mortality Rate Table(1) Derived using CalPERS’ Membership Data for all Funds Post Retirement Benefit Increase Contract COLA up to 2.50% until Purchasing Power Protection Allowance Floor on Purchasing Power applies, 2.50% thereafter (1) The mortality table used was developed based on CalPERS’ specific data. The table includes 15 years of mortality improvements using Society of Actuaries Scale 90% of MP 2016.
The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2021 valuation were based on the results of a December 2017 actuarial experience study for the period from 1997 to 2015. For more information regarding the actuarial assumptions used to calculate the City’s net pension liability, see Note 9 to the City’s audited financial statements for fiscal year 2022-23 attached hereto as Appendix C.
The following table shows the changes in net pension liability recognized over the measurement period.
Total Pension
Liability
Plan Fiduciary Net
Position
Net Pension
Liability (Asset)
Balance at June 30, 2021 (Measurement Date) $ 206,399,246 $ 162,484,538 $ 43,914,708 Changes in the Year
Service Cost 4,222,786 - 4,222,786
Interest on Total Pension Liability 14,305,083 - 14,305,083 Changes of Assumptions 7,974,044 - 7,974,044
Differences Between Expected and Actual Experience (4,406,814) - (4,406,814) Contributions – Employer - 7,691,954 (7,691,954)
Contributions – Employee - 1,681,343 (1,681,343)
Net Investment Income - (12,367,601) 12,367,601
Administrative Expense -- -- --
Benefit Payments, Including Refunds Of Employee Contributions (9,515,662) (9,515,662) - Other Miscellaneous Income/(Expense) - (101,218) 101,218 Net Changes 12,579,437 (12,611,184) 25,190,621
Balance at: June 30, 2022 (Measurement Date)(1) $ 218,978,683 $ 149,873,354 $ 69,105,621 On June 25, 2012, the Governmental Accounting Standards Board approved GASB Statement No. 68 (“GASB 68”) with respect to pension accounting and financial reporting standards for state and local governments and pension plans. GASB 68 states that, for pensions within the scope of the statement, a cost- sharing employer that does not have a special funding situation is required to recognize a net pension liability, deferred outflows of resources, deferred inflows of resources related to pensions, and pension expense based on its proportionate share of the net pension liability for benefits provided through the pension plan. While the new accounting standards change financial statement reporting requirements, they do not impact funding policies of the pension systems. The audited financial statements of the City for fiscal years 2018-19 and thereafter reflect the application of the GASB 68. GASB 68 is a change in accounting reporting standards but it does not change the City’s CalPERS plan funding obligations.
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The following presents the net pension liability of the City for the Miscellaneous Plan, calculated using the discount rate of the Miscellaneous Plan, as well as what the City’s net pension liability would be if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate:
Discount Rate – 1%
(5.90%)
Current Discount Rate
(6.90%)
Discount Rate + 1%
(7.90%)
Net Pension Liability $ 99,903,373 $ 69,105,329 $ 43,832,485 For the year ended June 30, 2023, the City recognized pension expense of $9,032,577. At June 30, 2023, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:
Deferred
Outflows of
Resources
Deferred Inflows
of Resources
Pension Contributions Made Subsequent to Measurement Date $ 8,632,023 $ -- Differences Between Expected and Actual Experience 331,200 (2,711,886) Change in assumptions 4,907,104 --
Net Differences Between Projected and Actual Earnings on Plan Investments $ 7,501,211 $ --
Total $ 21,371,538 $ (2,711,886)
Deferred outflows of resources of $8,632,023 that are related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending June 30, 2024.
Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:
Year Ending June 30, Amount
2024 $ 2,886,999
2025 1,889,212
2026 539,729
2027 4,711,689
2028 --
Thereafter --
Total $ 10,027,629
At June 30, 2023, the City had no outstanding contributions to the CalPERS pension plan required for the year ended June 30, 2023.
Funded Status. The tables below are derived from the 2023 Report and show the funded status of the Miscellaneous Plan as of the valuation dates shown.
Valuation
Date
Accrued
Liability
Market Value of
Assets
Unfunded
Liability Funded Ratio
Annual
Covered
Payroll
6/30/2018 $179,739,272 $119,768,294 $59,970,978 66.6% $19,844,295 6/30/2019 190,809,279 127,352,452 63,456,827 66.7 19,488,806 6/30/2020 201,419,561 132,713,326 68,706,235 65.9 20,317,694 6/30/2021 212,660,037 162,474,716 50,185,321 76.4 20,569,696 6/30/2022 230,435,149 149,869,741 80,565,408 65.0 23,309,388 Source: CalPERS’ 2021 Report.
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Public Agency Retirement System. Until December 29, 2012, the City, pursuant to sections 401(a) and 501(a) of the Internal Revenue Code, the City adopted a tax-qualified single-employer governmental defined benefit plan that is to be administered for the City by Public Agency Retirement Service (“PARS”), a third-party administrator. The PARS plan was established to provide eligible employees supplemental retirement benefits in addition to the benefits employees will receive from CalPERS. The PARS plan has been closed to employees hired on or after January 1, 2013. In 2023, the City discontinued the PARS plan and replaced the PARS plan with a new defined benefit platform managed by Shuster Advisory Group. For more information regarding the City’s defined benefit pension plan, see Note 9 to the City’s audited financial statements for fiscal year 2022-23 attached hereto as Appendix C.
Other Post-Employment Benefits
Plan Description. The City provides other postemployment benefits (“OPEB”) through an agent- employer defined benefit health care plan by contributing a portion of premiums charged under the health benefit plan for all eligible employees. These medical, dental, vision, and long-term care benefits are provided per contract between the City and union employee associations and unrepresented employees. The OPEB Plan has been closed to new employees and the future benefit levels were frozen as of January 1, 2016.
The City established a Section 115 Trust administered by Shuster Advisory Group in 2023 to partially pre-fund the City’s OPEB liability. The City has made annual contributions to the Section 115 OPEB Trust since it was established, and the balance in the Section 115 OPEB Trust as of April 30, 2024 was approximately $18.2 million.
As of the June 30, 2022 measurement date, the following current and former employees were covered by the benefit terms under the OPEB Plan:
Inactive Employees, Spouses or Beneficiaries Currently Receiving Benefit Payments
138
Inactive Employees Entitled to But Not Receiving Benefits 1 Active Employees 246
Total 385
Source: City Annual Comprehensive Financial Report for fiscal year 2022-23.
Contributions. Contribution requirements are established by City policy and may be amended by the City Council. The annual contribution is based on the actuarially determined contribution. For the year ended June 30, 2023, the City’s cash contributions were $2,813,547 in payments to the trust and the estimated implicit subsidy was $224,887, resulting in total contributions of $3,038,434.
Net OPEB Liability. The City’s net OPEB liability was measured as of June 30, 2022, and the total OPEB liability used to calculate the net OPEB liability was determined by using an actuarial valuation as of June 30, 2021, rolled forward to June 30, 2022, using standard update procedures. For the actuarial assumptions used to determine the City’s total OPEB liability as of June 30, 2020, see Note 10 to the audited financial statements for fiscal year 2022-23 attached hereto as Appendix C.
In June 2015, GASB issued Statement No. 75, which became effective for fiscal years beginning after June 15, 2017. The primary objective of Statement No. 75 is to improve accounting and financial reporting by state and local governments for postemployment benefits other than pensions (i.e. OPEB). Statement No. 75 is also intended to improve information provided by state and local governmental employers about financial support for OPEB that is provided by other entities. Statement No. 75 results from a comprehensive review of the effectiveness of existing standards of accounting and financial reporting for all postemployment benefits (pensions and OPEB) with regard to providing decision-useful information, supporting assessments of accountability and inter-period equity, and creating additional transparency.
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More specifically, Statement No. 75 requires the liability of employers to be measured as the portion of the present value of projected benefit payments to be provided to current active and inactive employees that is attributed to those employees’ past periods of service (total OPEB liability), less the amount of the OPEB plan’s fiduciary net position. Statement No. 75 requires the recognition of the total OPEB liability in the Statement of Net Position.
The changes in the net OPEB liability are as follows.
Increase (Decrease)
Total OPEB
Liability
Plan
Fiduciary Net
Position
Net OPEB
Liability
Balance at June 30, 2021 (Measurement Date) $ 23,129,441 $ 14,420,652 $ 8,708,789 Changes in the Year:
Service Cost 416,520 - 416,520
Interest on the Total OPEB Liability 1,262,548 - 1,262,548 Difference Between Actual and Expected Experience
Changes in Assumptions (643,491) - (643,491)
Changes in Benefit Terms -- --
Changes of Assumptions (1,858,796) - (1,858,796)
Contributions—Employer 3,027,605 (3,027,605)
Net Investment Income - (2,062,879) 2,062,879
Administrative Expenses - (4,093) 4,093
Benefit Payments (1,181,090) (1,181,090) -
Net Changes (145,513) (220,457) 74,944
Balance at June 30, 2022 (Measurement Date) $ 22,983,928 $ 14,200,195 $ 8,783,733 Sensitivity of the Net OPEB Liability to Changes in Discount Rate. The following presents the net OPEB liability of the City, calculated using the discount rate for the OPEB Plan, as well as what the City’s net OPEB liability would be if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate:
1% Decrease
(4.75%)
Discount Rate
(5.75%)
1% Increase
(6.75%)
$11,540,245 $8,783,733 $6,472,014
Sensitivity of the Net OPEB Liability to Changes in Healthcare Cost Trend Rates. The following presents the net OPEB liability of the City, as well as what the City’s net OPEB liability would be if it were calculated using health-care cost trend rates that are one percentage point lower (5.5% Non-Medicare, 4.65% Medicare (Non-Kaiser) and 3.60% Medicare (Kaiser)) or one percentage point higher (7.5% Non-Medicare,
6.65% Medicare (Non-Kaiser) and 5.60% Medicare (Kaiser)) than current health-care cost trend rates.
Plan’s Total OPEB Liability/(Asset)
1% Decrease
Current Healthcare Cost Trend
Rates 1% Increase
$6,141,633 $8,783,733 $11,955,534
For additional information with respect to the City’s OPEB plan, see Note 10 to the audited financial statements for fiscal year 2022-23 attached hereto as Appendix C.
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ECONOMIC AND DEMOGRAPHIC INFORMATION
Population
The City’s population as of January 1, 2023 was approximately 173,376. This represents a decrease of approximately 0.7 percent from January 1, 2022. The following table shows the population for the City, the County and the State of California from 2019 through 2023.
POPULATION
For Years 2019 through 2023
Year
(January 1)
City of
Lancaster
County of
Los Angeles
State of
California
2019 161,880 10,163,139 39,605,361
2020 176,499 10,014,009 39,538,223
2021 175,962 9,942,011 39,286,510
2022 174,590 9,834,503 39,078,674
2023 173,376 9,761,210 38,940,231
Source: State of California, Department of Finance, E-4 Population Estimates for Cities, Counties, and the State, 2011-2020, with 2010 Census Benchmark. Sacramento, California, May 2022, for 2019; State of California, Department of Finance, E-4 Population Estimates for Cities, Counties, and the State, 2021-2023, with 2020 Census Benchmark, Sacramento, California, May 2023, for 2020 through 2023.
Education
K-12 public instruction in the City is provided by the Antelope Valley Union High School District, the Eastside Union School District, Lancaster School District and Westside Union School District.
Building Activity
Residential and nonresidential building activity for 2018 through 2022 for the City is shown in the following tables.
NEW HOUSING UNITS BUILDING PERMITS
City of Lancaster
For Years 2018 through 2022
2018 2019 2020 2021 2022
Single Family Units 103 206 438 490 345
Multifamily Units 51 51 0 414 72
Total Units 154 257 438 904 417
Source: Construction Industry Research Board and California Homebuilding Foundation.
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BUILDING PERMIT VALUATIONS
City of Lancaster
(Dollars in Thousands)
2018 2019 2020 2021 2022
Residential
New Single Family $ 43,104 $ 53,900 $ 105,638 $ 104,921 $ 75,138 New Multifamily 2,726 2,726 0 43,545 8,177
Res. Alt. & Adds 472 $ 219 $ 730 $ 3,126 $ 3,183
Total Residential $ 46,302 $ 56,845 $ 106,368 $ 151,592 $ 86,498 Nonresidential
New Commercial $ 0 $ 1,866 $ 30,472 $ 13,032 $ 9,589
New Industrial 6,352 2,271 8,763 35,104 8,212
New Other(1) 31 3,446 8,714 19,345 14,513
Alters. & Adds. 6,588 2,177 5,516 16,077 10,687
Total Non-Residential $ 12,971 $ 9,760 $ 53,465 $ 83,558 $ 43,001 Total All Building $ 59,273 $ 66,605 $ 159,833 $ 235,150 $ 129,499 (1) Includes churches and religious buildings, hospitals and institutional buildings, schools and educational buildings, residential garages, public works and utilities buildings.
Note: “Total All Building” is the sum of Residential and Nonresidential Building Permit Valuations. Totals may not add to sum because of independent rounding.
Source: Construction Industry Research Board and California Homebuilding Foundation.
Personal Income
Personal Income is the income that is received by all persons from all sources. It is calculated as the sum of wage and salary disbursements, supplements to wages and salaries, proprietors’ income with inventory valuation and capital consumption adjustments, rental income of persons with capital consumption adjustment, personal dividend income, personal interest income, and personal current transfer receipts, less contributions for government social insurance.
The personal income of an area is the income that is received by, or on behalf of, all the individuals who live in the area; therefore, the estimates of personal income are presented by the place of residence of the income recipients.
The following table summarizes per capita personal income for the County, the State of California and the United States for the years 2013 through 2022. This measure of income is calculated as the personal income of the residents of the area divided by the resident population of the area.
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PER CAPITA PERSONAL INCOME(1)
County of Los Angeles, State of California, and United States 2013-2022
Year
County of
Los Angeles California United States
2013 47,541 48,549 44,894
2014 50,052 51,332 47,017
2015 53,067 54,632 48,891
2016 54,750 56,667 49,812
2017 56,635 58,942 51,811
2018 59,004 61,663 54,098
2019 62,573 64,513 56,047
2020 67,383 70,192 59,510
2021 73,385 76,991 64,143
2022 74,142 77,036 65,470
(1) Per capita personal income is the total personal income divided by the total mid-year population estimates of the U.S. Bureau of the Census. All dollar estimates are in current dollars (not adjusted for inflation).
Source: U.S. Department of Commerce, Bureau of Economic Analysis.
Employment
The following table summarizes the annual average labor force, employment and unemployment figures from 2019 to 2023 for the City, the County, the State of California and the nation as a whole.
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LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT
Yearly Average for Years 2019 through 2023
Year and Area Labor Force Employment(1) Unemployment(2) Unemployment
Rate (%)(3)
2019
City of Lancaster 65,500 61,200 4,300 6.5%
Los Angeles County 5,148,600 4,917,700 230,900 4.5
State of California 19,409,400 18,612,600 796,800 4.1
United States(4) 163,539,000 157,538,000 6,001,000 3.7
2020
City of Lancaster 63,400 54,200 9,100 14.4%
Los Angeles County 4,974,700 4,363,300 611,300 12.3
State of California 18,931,100 16,996,700 1,934,500 10.2 United States(4) 160,742,000 147,798,000 12,947,000 8.1 2021
City of Lancaster 64,700 56,600 8,100 12.4%
Los Angeles County 5,007,600 4,558,900 448,700 9.0
State of California 18,923,200 17,541,900 1,381,200 7.3 United States(4) 161,204,000 152,581,000 8,623,000 5.3
2022
City of Lancaster 63,900 59,200 4,700 7.3%
Los Angeles County 5,013,400 4,764,500 248,800 5.0
State of California 19,169,300 18,348,900 820,400 4.3
United States(4) 164,287,000 158,291,000 5,996,000 3.6
2023
City of Lancaster 63,400 59,200 4,200 6.7%
Los Angeles County 5,015,600 4,763,600 252,000 5.0
State of California 19,308,300 18,388,300 920,000 4.8
United States(4) 167,116,000 161,037,000 6,080,000 3.6
(1) Includes persons involved in labor-management trade disputes. (2) Includes all persons without jobs who are actively seeking work. (3) The unemployment rate is computed from unrounded data; therefore, it may differ from rates computed from rounded figures in this table.
(4) Not strictly comparable with data for prior years.
Note: Data is not seasonally adjusted.
Source: California Employment Development Department, based on March 2023 benchmark and U.S. Department of Labor, Bureau of Labor Statistics.
The table below summarizes employment by industry in the Los Angeles Long Beach Glendale Metropolitan Division from 2019 to 2023.
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AVERAGE ANNUAL INDUSTRY EMPLOYMENT 2019-2023
Los Angeles Long Beach Glendale Metropolitan Division
(Los Angeles County)
2019 2020 2021 2022 2023
Total Farm 4,400 4,400 4,600 4,800 4,700
Total Nonfarm 4,562,600 4,168,100 4,305,100 4,533,000 4,543,500 Total, All Industries 4,566,900 4,172,500 4,309,700 4,537,900 4,548,200 Goods Producing 493,000 463,700 463,800 474,700 471,900 Natural Resources, Mining and
Construction 151,800 148,300 150,700 153,000 152,700
Manufacturing 341,200 315,400 313,100 321,700 319,200
Service Providing 4,069,500 3,704,400 3,841,300 4,058,300 4,071,600 Trade, Transportation and Utilities 848,600 784,600 814,000 834,500 826,400 Wholesale Trade 221,900 201,100 202,600 204,400 200,400 Retail Trade 413,600 375,700 396,100 406,500 407,200
Transportation, Warehousing and
Utilities 213,100 207,900 215,200 223,600 218,800
Information 215,600 191,100 208,800 234,900 193,000
Financial Activities 224,300 213,200 213,200 215,700 211,000 Professional and Business Services 648,400 601,000 630,800 666,900 652,500 Educational and Health Services 840,100 821,700 844,400 871,100 914,500 Leisure and Hospitality 547,300 393,700 434,200 512,400 534,100 Other Services 158,400 128,800 135,700 153,000 157,800
Government 586,900 570,200 560,200 570,000 582,300
Note: The “Total, All Industries” data is not directly comparable to the employment data found herein.
Source: State of California, Employment Development Department, Labor Market Information Division, Los Angeles Long Beach Glendale Metropolitan Division (Los Angeles County) Annual Average Labor Force and Industry Employment, March 2023 Benchmark.
Industry
The City serves as a primary commercial center of the Greater Antelope Valley, which covers 3,514.2 square miles of area and includes the City, Edwards Air Force Base, certain unincorporated areas of the County and the cities of Palmdale, Tehachapi, Mojave and Ridgecrest. The table below lists the ten largest employers in the Greater Antelope Valley area for 2020. Major private employers in the area include those in the military, health care and retail industries. Major public sector employers include the County and several local school districts.
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MAJOR EMPLOYERS
City of Lancaster
2023
Rank Name of Business Employees
Percentage of
Total Valley
Employment(1)
1. Edwards Air Force Base 10,000 11.54%
2. Northrop Grumman 8,000 9.23
3. China Lake NWD 7,100 3.46
4. Palmdale School District 3,000 3.00
5. Antelope Valley Hospital Medical Center 2,600 8.19
6. Walmart 2,075 2.36
7. County of Los Angeles 2,045 2.39
8. Antelope Valley Union High School
District
1,087 1.25%
9. BYD 750 0.87
10. Lancaster School District 638 0.74
Total 86,688 43.02%
(1) Total employment as used above may represent figures from total employment located within the Greater Antelope Valley region. The Greater Antelope Valley is considered to be the City's economic region and covers 3,514.2 square miles of area and includes Lancaster, Palmdale, Tehachapi, Mojave, Edwards Air Force Base, and Ridgecrest.
Source: City of Lancaster Annual Comprehensive Financial Report for the Fiscal Year Ending June 30, 2023.