“Our mission is to maintain the character of our “small town” community while striking an appropriate balance between economic development and preservation of our quality of life. We help create a dynamic and vital City by providing quality, cost-effective municipal services and by forming partnerships with residents and organizations in the constant pursuit of excellence.”
Page Item STANDING AGENDA ITEMS
1. Call to Order and Flag Salute
2. Roll call
3. Special Presentation:
4. Public Comment:
This time is set aside for citizens to address the City Council on matters listed on the Consent Agenda as well as other items not included on the Regular Agenda. If your comments concern an agenda item noted on the regular agenda, please address the Council when that item is open for public comment.
Each speaker is allocated three (3) minutes to speak. Speakers may not cede their time. Comments should be limited to matters within the jurisdiction of the City. Council discussion or action cannot be taken on items not listed on the agenda other than to receive comments. If you have documents to present to members of Council, please provide a minimum of seven (7) copies to the Deputy City Clerk. Email Comments may be submitted to the City Clerk’s Office ([email protected]). Items received no later than 12:00 pm on the day of the meeting will be provided to the City Council prior to the meeting. These items will NOT be read into the record.
5. Council and Staff Comments:
6. Committee Updates:
a) Downtown Enhancement Advisory Committee
b) Library Tax Advisory Committee
c) Beautification Committee
d) Active Transportation Committee
Mt. Shasta City Council Regular Meeting Agenda
Monday, January 27, 2025, 5:30 p.m.
Mt. Shasta City Park Upper Lodge, 1315 Nixon Rd. Mt. Shasta, CA The meeting can also be viewed online at the
following link:
MountShasta.22Ave.tv
For the safety of our staff, the council, and public, we are no longer allowing members of the audience to carry large bags, backpacks, or other items outside of small personal items such as purses or satchels. Only service animals are allowed inside council chambers; nonservice pets are not allowed under any circumstances. Violators will be asked to remove the bag and/or animal, and refusal to do so will be cause for removal from the meeting. 1 CITY COUNCIL BUSINESS
All Resolutions and Ordinances on this agenda, or added hereto, shall be introduced or adopted, as applicable, by title only, and the full reading thereof is hereby waived. a. Approval of Minutes: January 13, 2025 Special Meeting b. Approval of Minutes: January 13, 2025 Regular Meeting c. Approval of Disbursements: Accounts Payable: 1/21/25; Total Gross Payroll and Taxes: For Periods Ending 1/5/225 and 1/19/25
d. Chamber of Commerce Funding CCR-25-XX
e. Acceptance of Brownell Parcels CCR-25-XX
f. Monthly Investment Report
Background: As a part of its contract with CALPERS, the City must make up the difference between CALPERS funds and pension obligations. CALPERS has implemented gradual rate increases to help cities adjust to rising costs over time. However, as interest grows, so does the overall cost to the City.
Adopting a Pension Management Policy can help the City mitigate its liabilities and provide guidance for budgetary decisions.
Report By: Malisa Dodd
Recommended Council Action: Approve Resolution CCR-25-XX, Adopting a Pension Management Policy
Background: The City’s Independent Auditor, Charles Pillon, CPA, has completed the audit of the financial statements for the 2023-2024 fiscal year. There was an additional audit required for the Mount Shasta Public Financing Authority, which is presented for the Council’s approval. The audited financial statements have been distributed and the final report will now be issued.
Report By: Malisa Dodd, Finance Director
Recommended Council Action: Staff respectfully requests that City Council review and adopt Resolution CCR-25-XX, A Resolution of the City Council of the City of Mt. Shasta Accepting the Independent Audit Reports for Fiscal Year 2023-2024.
CITY COUNCIL/STAFF REPORTING PERIOD
10. Reports on Outside Meetings
11. Future Agenda Items and Meetings(Appearing on the agenda within 60-90 days):
a. First Reading of an Ordinance Pertaining to Snow Removal in the Downtown – 2/10/2025 b. Military Equipment Annual Report – 2/10/2025
c. Condemnation of Chestnut Parcels - TBD
d. Beautification Committee Presentation to Council – TBD e. Survey of Washington Avenue – TBD
f. Discussion and Possible Action: Rental, Lease, or Purchase of Lot Located at the northwest corner of Alma and N. Mt. Shasta Blvd – TBD
Future Agenda Items Over 90 Days: None
4-34
35-51
52-150
2 12. Adjourn
I, Rachel Agron, declare under penalty of perjury that this agenda has been posted at least 72 hours in advance at the Mt.
Shasta City Hall, 305 N. Mt. Shasta Blvd, Mt. Shasta, CA, in the glass case and on the City website at www.mtshastaca.gov.
Agendas and packets shall be made available at least 72 hours in advance of regular meetings and 24 hours in advance of special meetings on the City’s web site. Any writings or documents pertaining to an open session item provided to a majority of the City Council less than 72 hours prior to the meeting shall be made available on the City’s web site www.mtshastaca.gov.
Availability of Public Records: All public records related to an open session item on this agenda, which are not exempt from disclosure pursuant to the California Public Records Act, that are distributed to a majority of the legislative body will be available for public inspection at City Hall located at 305 North Mt. Shasta Blvd.
The City of Mt. Shasta does not discriminate on the basis of race, color, national origin, sex, religion, age or disability in employment or provision of services. In compliance with the Americans with Disabilities Act, if you need special assistance, a disability-related modification or accommodation, agenda materials in an alternative format, or auxiliary aids to participate in this meeting, please contact the Office of the City Clerk at 530-326-7516 or [email protected] as soon as possible. Providing at least 72 hours’ notice will help ensure that reasonable arrangements can be made.
Type text here
3 Mt. Shasta City Council Special Meeting DRAFT Minutes Monday, January 13th, 2020; 5:00 p.m.
City Park Upper Lodge 1315 Nixon Road, Mt. Shasta
&
Hyatt Place Washington DC, 1522 K St, NW, Washington D.C., 20005 (Councilmember Glaubman via teleconference)
“Our mission is to maintain the character of our “small town” community while striking an appropriate balance between economic development and preservation of our quality of life. We help create a dynamic and vital City by providing quality, cost-effective municipal services and by forming partnerships with residents and organizations in the constant pursuit of excellence.”
STANDING AGENDA ITEMS
1. Call to Order: At the hour of 5:21 p.m. Mayor John Redmond called the meeting to order.
Roll Call: Council Members Present: Clure, Collings, Redmond, Glaubman (Councilmember Glaubman attended via teleconference). Councilmember Stackfleth arrived at 5:23pm.
Council Members Absent: None
CITY COUNCIL BUSINESS
2. Interview of Applicant and Possible Appointment of Downtown Enhancement Advisory Committee Member:
a. Joseph Markert
COUNCIL ACTION: Appoint Joseph Markert to the Downtown Enhancement Advisory Committee MOTION TO APPROVE: Clure
SECOND: Collings
AYES: Clure, Collings, Stackfleth, Glaubman, Redmond
NOES: None
ABSENT: None
ABSTAIN: None
3. Adjourn: There being no further business, the meeting was adjourned at 5:24 p.m.
Respectfully Submitted by: Rachel Agron, Deputy City Clerk 4 “Our mission is to maintain the character of our “small town” community while striking an appropriate balance between economic development and preservation of our quality of life. We help create a dynamic and vital City by providing quality, cost-effective municipal services and by forming partnerships with residents and organizations in the constant pursuit of excellence.”
Item STANDING AGENDA ITEMS
1. Call to Order and Flag Salute: At the hour of 5:30, Mayor Redmond called the meeting to order and led the audience in the flag salute.
2. Roll call:
Council Members Present: Clure, Collings, Stackfleth, Redmond, Glaubman (remote) Council Members Absent: None
3. Special Presentation: None
4. Public Comment:
Johanna Altorfer – Comments regarding waste bins and emergency warning system Chase Castello – Comments regarding process for changing sales tax rates David Ream – Comments regarding the daylighting of Castle Creek Tim Beldon – Comments regarding overnight parking for vans and RVs
5. Council and Staff Comments:
Todd Juhasz, City Manager – Comments regarding surplus land declarations, the Enhanced Infrastructure Financing District, and the cleanup at the site of the old hospital Ken Kellogg, Public Works Director – Comments regarding ongoing shock chlorination
6. Committee Updates:
a) Downtown Enhancement Advisory Committee
b) Library Tax Advisory Committee
c) Beautification Committee
d) Active Transportation Committee
Todd Juhasz, City Manager – Notes the upcoming DEAC meeting. No other updates.
Mt. Shasta City Council Regular Meeting DRAFT Minutes
Monday, January 13, 2025, 5:30 p.m.
Mt. Shasta City Park Upper Lodge, 1315 Nixon Rd. Mt. Shasta, CA &
Hyatt Place Washington DC, 1522 K St, NW, Washington D.C., 20005 (Councilmember Glaubman via teleconference)
5 CITY COUNCIL BUSINESS
7. Consent Agenda – Approved the following Consent Agenda items. All Resolutions and Ordinances on this agenda, or added hereto, shall be introduced or adopted, as applicable, by title only, and the full reading thereof is hereby waived.
a. Approval of Minutes: December 9, 2024 Regular Meeting b. Approval of Disbursements: Accounts Payable: 12/5, 12/18, and 12/31/2024; Total Gross Payroll and Taxes: For Periods Ending 12/8 and 12/22/2024 c. Police Department Monthly Report December 2024
Council Action: Approve Items a-c
Motion to Approve: Collings
Second: Clure
Ayes: Clure, Collings, Stackfleth, Glaubman, Redmond
Noes: None
Absent: None
Abstain: None
8. Plowing Everitt Memorial Highway
Public Comment:
Dani Williams – Expresses appreciation for interagency collaboration Rene Casterline – Offers Siskiyou Outdoor Recreation Alliance resources Tim Velt – Suggests possible funding sources
Ed Valenzuela, District 2 Supervisor, and Tom Keane, Siskiyou County Public Works Director – Present on the plowing of Everitt Memorial Highway. Questions and Council discussion follow. Ed Valenzuela notes upcoming interagency meeting to further discuss this topic.
Council Action: None
9. Proposal for Engineering Services: Title 22 Report
Ken Kellogg, Public Works Director – Presents on effluent discharge reporting requirements Council Action: Adopt Resolution CCR-25-01 approving budget adjustment for state required Title 22 engineering in the wastewater treatment plant (WWTP) fund for $45,000 Motion to Approve: Stackfleth
Second: Clure
Ayes: Clure, Collings, Stackfleth, Glaubman, Redmond
Noes: None
Absent: None
Abstain: None
10. Recommendation of Award for the Mount Shasta Boulevard Rehabilitation Project Ken Kellogg, Public Works Director – Reports on the status of the Mount Shasta Boulevard Rehabilitation Project Council Action: Approve the award of a contract to S. T. Rhoades to perform asphalt overlay work on N Mt.
Shasta Blvd. between Ski Village Dr. and Springhill Dr.
Motion: Stackfleth
Second: Clure
Ayes: Clure, Collings, Stackfleth, Glaubman, Redmond
Noes: None
Absent: None
Abstain: None
35-51
6 11. Consideration of Granting Three Easements to Pacificorp for Wildfire Mitigation Todd Juhasz, City Manager – Introduces item.
Clarifying questions from Council.
Council Action: Approve Resolution 25-02 authorizing the perpetual utility easements to Pacificorp at three City owned locations
Motion: Stackfleth
Second: Clure
Ayes: Clure, Collings, Stackfleth, Glaubman, Redmond
Noes: None
Absent: None
Abstain: None
12. Fiscal Year 2024/25 Budget Review
Malisa Dodd, Finance Director – Gives presentation on the 2024/25 Fiscal Year Council Action: None
13. Budget Adjustment for COPS Funding
Malisa Dodd, Finance Director – Reports on COPS fund allocation Council Action: Adopt Resolution CCR-25-03 Approving budget adjustment no. 2024/2025-03 appropriating $29,663 from the COPS funding for purchases
Motion: Stackfleth
Second: Clure
Ayes: Clure, Collings, Stackfleth, Glaubman, Redmond
Noes: None
Absent: None
Abstain: None
14. Closeout of Fund 90 – Public Works Reimbursable Projects Malisa Dodd, Finance Director – Reports on Fund 90
Council Action: Approve the closing of Fund 90 and reallocation of funds Motion: Stackfleth moves to approve the closing out of Fund 90: Public Works Reimbursable Projects and to reallocate the $19,532.60 cash-on-hand balance to Fund 12: Equipment Replacement Reserve Second: Clure
Ayes: Clure, Collings, Stackfleth, Glaubman, Redmond
Noes: None
Absent: None
Abstain: None
15. Chamber of Commerce Request for Funds
Todd Juhasz, City Manager – Reports
Casey Clure, Mount Shasta Chamber of Commerce President – Addresses the Council regarding the City of Mount Shasta’s historical contributions to the Chamber of Commerce Kaila Burns, Executive Director – Answers Council questions Council discussion.
Council Action:
Motion: Stackfleth moves to increase permanently the stipend from the City to the Chamber of Commerce for running the Visitor Center exclusively starting this fiscal year Second: Clure
Ayes: Clure, Collings, Stackfleth, Glaubman, Redmond
Noes: None
Absent: None
Abstain: None
7 16. Discussion and Possible Action: Surplus Lands / Exempt Surplus Lands Declaration Jeff Mitchem, Planning Director – Presents on processes relating to Surplus Lands Declaration Public Comment: Johanna Altorfer comments on affordable housing and wetlands Council Action: Adopt Resolution CCR-25-04 declaring portions of APNs 067-010-010 and 067-010-020, and all of APN 067-010-140 as “Surplus Land,” and portions of APNs 067-010-010 and 067-010-020 as “Exempt Surplus Land,” and directing Staff to prepare and submit a Notice of Availability.
Motion: Stackfleth
Second: Clure
Ayes: Clure, Collings, Stackfleth, Glaubman, Redmond
Noes: None
Absent: None
Abstain: None
17. Adjourn: There being no further business, the meeting was adjourned at 7:38 p.m.
Respectfully Submitted By: Rachel Agron, Deputy City Clerk 8 City Council Agenda Item #7c
Staff Report
Meeting Date: January 27, 2025
To: Mayor and City Council
From: Malisa Dodd, Finance Director
Subject: Approval of Warrants and Payroll
Recommendation:
Staff requests the Mayor and City Council Approve warrants paid including payroll benefits and withholding, and payroll distribution, in the amount of $646,327.36 Background & Summary:
Approval of Check Numbers 53278-53341 $ 346,087.25
Total Payroll Distribution $ 168,316.48
Total EFTPS – CalPERS, Nationwide, child support $ 56,773.54 Total Payroll EFTPS Taxes $ 75,150.09
$ 646,327.36
Financial Impact:
Expenditures are consistent with the Budget that the City Council has adopted.
Attachments:
1.) Check Registers – 1/21/2025
2.) ACH Payroll Distribution – 1/9/2025, 1/23/2025
3.) EFTPS Reports – Payroll/CalPERS – 1/9/2025, 1/23/2025 Regular
x Consent
Closed
Presentation
9 Accounts Payable
User:
Printed:
[email protected]
1/22/2025 8:26 AM
Checks by Date - Summary by Check Number
Check No Vendor No Vendor Name Check Date Check Amount
53278 10229 AMAZON CAPITAL SERVICES 01/21/2025 571.61
53279 10338 APEX TECHNOLOGY MANAGEMENT 01/21/2025 10,466.97 53280 10404 AT&T 01/21/2025 567.73
53281 10402 AT&T MOBILITY FIRSTNET 01/21/2025 1,747.26
53282 11146 BAXTER AUTO PARTS 01/21/2025 289.59
53283 11156 YOLANDE DIEDRE BELL 01/21/2025 200.50
53284 300127 BIOMETRICS4ALL, INC. 01/21/2025 495.00
53285 11220 BLACK BEAR DINER 01/21/2025 64.44
53286 11359 ALAN BROWNELL 01/21/2025 900.00
53287 12152 CALIFORNIA BUILDING STANDARDS COMMISSION 01/21/2025 29.00 53288 300157 California Municipal Advisors, LLC 01/21/2025 4,960.00 53289 12200 CALIFORNIA SAFETY COMPANY 01/21/2025 225.00 53290 12213 CAL-ORE COMMUNICATIONS 01/21/2025 1,586.00
53291 12260 CASCADE FIRE EQUIPMENT 01/21/2025 12,639.08 53292 300155 TYLER CERVELLI 01/21/2025 300.00
53293 300156 DEVON COATES 01/21/2025 300.00
53294 12269 COMCAST 01/21/2025 417.17
53295 13071 DELTA HEALTH SYSTEMS 01/21/2025 42,148.00
53296 13180 DEPT OF CONSERVATION 01/21/2025 79.89
53297 13251 DEVELOPMENT COMPLIANCE SOLUTIONS 01/21/2025 5,917.50 53298 13198 DIVISION OF THE STATE ARCHITECT 01/21/2025 13.80 53299 14140 DON ERICKSON OIL INC 01/21/2025 246.45
53300 13224 DRY CREEK LANDFILL INC 01/21/2025 1,672.84
53301 15010 FASTENAL COMPANY 01/21/2025 63.96
53302 15030 FERGUSON ENTERPRISES, INC. #1423 01/21/2025 1,861.43 53303 16030 GANNETT CALIFORNIA LOCALIQ 01/21/2025 1,899.80 53304 14160 GENE ERICKSON TRUCKING, INC. 01/21/2025 2,220.00 53305 16066 DANIEL GIACOMARO 01/21/2025 200.00
53306 16088 STEPHEN GOLDSBERRY 01/21/2025 600.00
53307 300132 Green DOT Transportation Solutions 01/21/2025 16,239.50 53308 17000 HACH COMPANY 01/21/2025 109.90
53309 18063 INTERSTATE BATTERY 01/21/2025 547.64
53310 22140 KENNY & NORINE 01/21/2025 3,588.38
53311 300107 Laboratory Corporation of American Holdings01/21/2025 27.00 53312 22059 MERCY MEDICAL CENTER - CASHIER 01/21/2025 39.00 53313 22133 MEYERS POLICE K-9 TRAINING LLC 01/21/2025 700.00 53314 22343 MT. SHASTA POINT S TIRE & AUTO 01/21/2025 1,393.80 53315 22317 MT. SHASTA VALERO 01/21/2025 42.49
53316 22353 MUNICIPAL MAINTENANCE EQUIP. 01/21/2025 7,682.45 53317 28120 NAPA AUTO PARTS 01/21/2025 508.70
53318 24000 OFFICE DEPOT 01/21/2025 66.91
53319 11140 PACE ANALYTICAL SERVICES LLC 01/21/2025 10,340.34 53320 25020 PACE ENGINEERING INC 01/21/2025 8,290.16
53321 25080 PACIFIC POWER & LIGHT 01/21/2025 164.68
53322 11241 CARSON PELLETIER 01/21/2025 200.00
53323 25126 PETERSON MACHINERY CO 01/21/2025 16,501.93
53324 25198 CHARLES W PILLON 01/21/2025 21,233.17
AP Checks by Date - Summary by Check Number (1/22/2025 8:26 AM) Page 1 10 Check No Vendor No Vendor Name Check Date Check Amount 53325 27000 RAMSHAW'S ACE HARDWARE INC 01/21/2025 162.02 53326 11350 SHASTA BROWN, INC. 01/21/2025 8,879.00
53327 28338 SISKIYOU COUNTY AIR POLLUTION 01/21/2025 144.84 53328 28372 SISKIYOU COUNTY ECONOMIC DEVELOPMENT COUNCIL 01/21/2025 3,000.00 53329 28378 SISKIYOU COUNTY GENERAL SERVICES01/21/2025 930.67 53330 28560 SISKIYOU OPPORTUNITY CENTER 01/21/2025 887.50 53331 32060 SOLANOS INC 01/21/2025 238.07
53332 28815 STERLING HEALTH ADMINISTRATION 01/21/2025 200.00 53333 13090 SWRCB - ELAP FEES 01/21/2025 4,615.00
53334 300154 The Ascension Aesthetic 01/21/2025 9,600.00 53335 30069 US BANK CORPORATE PAYMENT SYS 01/21/2025 12,605.44 53336 28857 USA WASTE OF CALIFORNIA INC 01/21/2025 108,755.22 53337 31023 VALLEY PACIFIC PETROLEUM 01/21/2025 9,357.20 53338 31050 VERIZON CONNECT FLEET USA LLC 01/21/2025 199.45 53339 31031 VESTIS 01/21/2025 537.86
53340 31040 VWR SCIENTIFIC 01/21/2025 1,015.91
53341 34055 YREKA TRANSFER, LLC 01/21/2025 4,600.00
Report Total (64 checks): 346,087.25
AP Checks by Date - Summary by Check Number (1/22/2025 8:26 AM) Page 2 11 12
52-150
13 52-1
14 15
16 From: Tri Counties Bank
To: Malisa Dodd
Subject: Tri Counties Bank - ACH Payment Status Change Notification Date: Wednesday, January 8, 2025 1:05:48 PM
ACH Notification
Report Date/Time 01/08/25 13:05:09 PST
This transaction has been successfully completed.
Transaction Number: ACH-01502484
ACH Company: City Mt Shasta
Company Entry Description: ACHTRANS
Payment Date: 01/09/2025
Total Credits: $86,817.10 (50)
Total Debits: $0.00 (0)
Status: Completed
17 From: Tri Counties Bank
To: Malisa Dodd
Subject: Tri Counties Bank - ACH Payment Status Change Notification Date: Wednesday, January 22, 2025 8:01:54 AM
ACH Notification
Report Date/Time 01/22/25 08:00:33 PST
This transaction has been successfully completed.
Transaction Number: ACH-01516582
ACH Company: City Mt Shasta
Company Entry Description: ACHTRANS
Payment Date: 01/23/2025
Total Credits: $81,499.38 (45)
Total Debits: $0.00 (0)
Status: Completed
18 19
20 21
22 23
City Council Agenda Item #7d
Staff Report
Meeting Date: 1/27/2025
To: Mayor and City Council
From: Rachel Agron, Deputy City Clerk
Subject: Resolution
Recommended Action: Consider the passage of a resolution finalizing the City of Mount Shasta’s increased contribution to the Mount Shasta Chamber of Commerce Background:
During a regular meeting of the City Council on January 13th 2025, the Council voted to increase the amount of the City’s annual contribution to the Mount Shasta Chamber of Commerce. While the amount of the increase was agreed upon during discussion, a number was not named in the motion. The attached resolution would finalize the City’s $10,000 increase for a total annual contribution of $75,000 for the exclusive purpose of operating the Visitor Center.
Regular
X Consent
Closed
Presentation
24 RESOLUTION CCR-25-XX
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF MT. SHASTA
APPROVING BUDGET ADJUSTMENT FOR THE CITY’S ANNUAL CONTRIBUTION
TO THE MOUNT SHASTA CHAMBER OF COMMERCE
IN PERPETUITY FOR THE AMOUNT OF $75,000
WHEREAS, the Chamber of Commerce operates the Visitor Center that directs visitors to, and works to promote tourism in, the City of Mount Shasta; and WHEREAS, the City of Mount Shasta relies on tourism as a source of revenue; and WHEREAS, the City of Mount Shasta has made it a tradition to contribute to the Chamber of Commerce each year; and
WHEREAS, in spite of inflation, the amount of contribution has remained the same since 2016, NOW THEREFORE BE IT RESOLVED by the City Council of the City of Mt. Shasta that the City’s annual contribution to the Mount Shasta Chamber of Commerce shall be increased to $75,000 per year, in perpetuity, beginning in 2025, to be used exclusively for the operation of the Visitor Center.
The foregoing resolution was passed and adopted this 27thday of January,2025 by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
DATED: January 27th, 2025
ATTESTED: CITY OF MOUNT SHASTA
______________________________ _________________________________ Rachel Agron, Deputy City Clerk John Redmond, Mayor
25 City Council Agenda Item #7e
Staff Report
Meeting Date: 1/27/2025
To: Mayor and City Council
From: Todd Juhasz, City Manager
Subject: Resolution and Certificate of Acceptance for Purchase of Brownell Parcels Recommended Action: Consider the passage of a resolution and a Certificate of Acceptance in support of the purchase of two privately owned parcels.
Background:
At a City Council meeting in December of 2024, Council approved the sale of two vacant parcels to be used as a parking lot in support of a project to daylight Castle Creek. The two parcels are owned by Alan Brownell and are identified with the APNs: 057- 191-180 and 057-191-150. The City Manager was informed by Mt Shasta Title that a resolution and a Certificate of Acceptance must be passed by City Council before the purchase can be transacted. The owner has been informed of this requirement as our existing lease expires at the end of January.
Regular
X Consent
Closed
Presentation
26 RESOLUTION NO. CCR-25-XX
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF MT. SHASTA
AUTHORIZING THE PURCHASE OF REAL PROPERTY PARCELS,
APN 057-191-180 AND APN 057-191-150 FOR THE SUM OF $80,0000 WHEREAS, Alan Brownell owns APN 057-191-180 and APN 057-191-150 and desires to sell these parcels to the City of Mt Shasta; and WHEREAS, The City of Mt. Shasta has determined that it is the best interest of the City to purchase these parcels; and
WHEREAS, Alan Brownell and the City of Mt Shasta have agreed upon the purchase price of $80,000; and;
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Mt.
Shasta does hereby authorize the City Manager to sign the attached Certificate of Acceptance as authorized under California Government Code Section 27281.
The foregoing resolution was passed and adopted this 27thday of January,2025 by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
DATED: January 27th, 2025
ATTESTED: CITY OF MOUNT SHASTA
______________________________ _________________________________ Rachel Agron, Deputy City Clerk John Redmond, Mayor
27 City Council Agenda Item # 7f
Staff Report
Meeting Date: January 27, 2024
To: Mayor and City Council
From: Malisa Dodd, Director of Finance
Subject: Revenue Status Update, Monthly Investment and Financial Report for the Period Ending December 31, 2024
Recommendation:
Staff respectfully requests the City Council review the provided information regarding the City’s revenue and investments.
Background & Summary:
Sales Tax Revenue:
The City has received $646,029 through November 30, 2024 in sales tax for fiscal year 24-25.
The budgeted amount for fiscal year 24-25 is $1,760,000 with 36.71% collected, while 41.67% of the way through the year.
Current Year 24-25 Sales Tax Information
Budget Projection Jul-Nov Expected Jul-Nov Received 24-25 Deficit $1,760,000 $733,333 $646,029 ($87,304)
Prior Year 23-24 Sales Tax Information
YTD Received Jul-Nov Received CY vs PY difference % difference $1,631,309 $738,813 ($92,784) 14.36%
Transient Occupancy Tax:
The City has received $735,359 through January 22, 2025 in TOT for fiscal year 24-25. The budgeted amount for fiscal year 24-25 is $1,468,000. The actual amount received is about $46,833 over prior year received up about 6.8%. With the increase of TOT from 10% to 12% for fiscal year 24-25, we should be close to a 20% increase.
Current Year 24-25 Transient Occupancy Tax Information
Budget Projection Jul-To date as of 1/22/25 Received
$1,468,000 $735,359
Prior Year 23-24 Transient Occupancy Tax Information
Actual Received Jul-Jan Received CY vs PY difference
$1,290,177 $688,526 $46,833
Regular
X Consent
Closed
Presentation
28 As of December 31, 2024, the combined funds the City of Mt. Shasta had invested in the Local Agency Investment Fund (L.A.I.F.) totaled $262,863.39. The December 2024 LAIF statement is attached, along with the performance data as of January 15, 2025. Most surplus funds over which the City has control are currently invested in Concourse with a balance of $1,110,350.06.
The balance of the City’s cash funds are held in the pooled accounts with Tri Counties Bank.
Current investment rates are:
L.A.I.F. October 31, 2024 4.434%
Treasury Note – 3 month September 30,2024 4.49%
Treasury Note – 2 Yr. September 30,2024 4.15%
Treasury Note – 5 Yr. September 30,2024 4.05%
Treasury Note – 10 Yr. September 30,2024 4.17%
Treasury Note – 30 Yr. September 30,2024 4.36%
Bloomberg as reported by Chandler Asset Management
The LAIF average decreased slightly from last month, all notes had a small increase. We continue to anticipate the LAIF rate staying just above 4%. The LAIF rate remains the best available rate that meets the City’s requirement for liquidity and safety.
Financial Impact:
The investments are in compliance with the City’s investment policy and provides for meeting the City’s cash flow needs for the next month and 6 month periods.
Attachments:
• LAIF Monthly Statement
• LAIF Performance Report
• LAIF Monthly Balances
• Chandler Asset Management
29 Carrying Cost Plus
Description Accrued Interest Purch. Amortized Cost Fair Value Accrued Interest United States Treasury:
Bills $ 37,200,362,729.27 $ 37,578,467,975.08 $ 37,598,038,116.50 NA Notes $ 49,665,562,393.13 $ 49,643,342,570.29 $ 49,613,793,037.00 $ 456,248,631.50 Federal Agency:
SBA $ 222,988,043.71 $ 222,988,043.71 $ 224,917,838.54 $ 986,692.09 MBS-REMICs $ 1,239,158.24 $ 1,239,158.24 $ 1,224,593.17 $ 5,405.72 Debentures $ 7,776,611,325.51 $ 7,776,123,304.68 $ 7,750,461,150.00 $ 83,135,528.50 Debentures FR $ - $ - $ - $ -
Debentures CL $ 2,550,000,000.00 $ 2,550,000,000.00 $ 2,548,389,000.00 $ 21,607,623.50 Discount Notes $ 25,790,437,970.76 $ 26,046,333,391.63 $ 26,049,911,000.00 NA Supranational Debentures $ 2,896,697,399.81 $ 2,896,274,656.75 $ 2,873,776,000.00 $ 30,191,592.50 Supranational Debentures FR $ - $ - $ - $ -
CDs and YCDs FR $ - $ - $ - $ -
Bank Notes $ - $ - $ -
CDs and YCDs $ 13,150,000,000.00 $ 13,150,000,000.00 $ 13,151,991,371.89 $ 189,510,569.41 Commercial Paper $ 9,942,308,583.28 $ 10,047,868,071.48 $ 10,051,627,805.51 NA Corporate:
Bonds FR $ - $ - $ - $ -
Bonds $ 898,812,556.16 $ 898,667,140.88 $ 888,168,435.00 $ 8,541,998.72 Repurchase Agreements $ - $ - $ - $ -
Reverse Repurchase $ - $ - $ - $ -
Time Deposits $ 5,088,500,000.00 $ 5,088,500,000.00 $ 5,088,500,000.00 NA PMIA & GF Loans $ 194,249,000.00 $ 194,249,000.00 $ 194,249,000.00 NA TOTAL $ 155,377,769,159.87 $ 156,094,053,312.74 $ 156,035,047,347.61 $ 790,228,041.94 Fair Value Including Accrued Interest $ 156,825,275,389.55 Repurchase Agreements, Time Deposits, PMIA & General Fund loans, and Reverse Repurchase agreements are carried at portfolio book value (carrying cost).
The value of each participating dollar equals the fair value divided by the amortized cost (0.999621985).
As an example: if an agency has an account balance of $20,000,000.00, then the agency would report its participation in the LAIF valued at $19,992,439.69 or $20,000,000.00 x 0.999621985.
State of California
Pooled Money Investment Account
Market Valuation
12/31/2024
30 DAX
FTSE (UK)
Nikkei
S&P 500
NASDAQ
Hang Seng
DOW JONES
World Stock Market Indices
As 2024 drew to a close, the resilient consumer continued to drive growth. Inflationary trends have subsided, but some components remain sticky, and core levels remain above the Fed’s target. The labor market reflects an improved balance between supply and demand for workers. While job creation has been robust, continuing jobless claims remain elevated. Given the economic outlook, we expect gradual normalization of monetary policy and a steepening yield curve.
As anticipated, the Federal Open Market Committee (FOMC) reduced the Fed Funds Rate by 25 basis points to the range of 4.25-4.50% at the December meeting.
Although the cut was widely anticipated, market participants viewed the trajectory of rates in the SEP as ‘hawkish.’ Chair Jerome Powell reiterated previous statements indicating the economy is in a good place and that monetary policy is well positioned.
The Fed released the quarterly Summary of Economic Projections (SEP), which now forecasts a higher central tendency of core inflation and a higher longer run Fed Funds forecast. In the Chandler team’s view, the updated SEP reflects the continued resiliency of the US economy and the corresponding risk of inflation taking longer to reach the FOMC’s two percent objective in 2025.
At the end of December, the 2-year Treasury yield was 1 basis point lower, and the 10-Year Treasury yield was 69 basis points higher, year-over-year. The spread between the 2-year and 10-year Treasury yield points on the curve increased to +33 basis points at December month-end versus +2 basis points at November month-end.
The yield curve inversion which began in July 2022 was historically long. The average historical spread (since 2004) is about +99 basis points. The 3-month and 10-year Treasury yield curve normalized to +25 basis points in December from -32 basis points in November.
Bond yields fell slightly in the last weeks of 2024 after a period of strength building through the month of December. The 2-year US Treasury yield fell to 4.25%, the 5- year at 4.38%, and the 10-year yield is 4.57%. The yield curve continued to normalize with the 2-year/10-year spread widening out to 33 basis points. The yield curve steepening can be partially attributed to the December FOMC rate cut, but yields on the longer-end of the curve were notably higher to end the year.
Market Summary
BOND MARKET REVIEW
A M o n t h l y R e v i e w o f F i x e d I n c o m e M a r k e t s January 2025
(Japan)
(Germany)
(Hong Kong)
TREASURY YIELDS Trend 12/30/24 11/29/24 Change
Chandler Asset Management | 800.317.4747 | chandlerasset.com | Page 1 5,906.94
8,121.01
19,486.79
42,573.73
19,909.14
20,041.42
(125.44)
(166.92)
617.81
268.62
282.69
(2,336.92)
data as of 12/31/2024
Change
(11/29/2024)
-2.08%
-2.01%
1.44%
Source: Bloomberg. Please see
descriptions of indices on Page 2.
-5.20%
1.40%
%CHG
3.18%
3-Month
2-Year
3-Year
5-Year
7-Year
10-Year
30-Year
4.28 4.24
4.27 4.36
4.45 4.53
4.75 -0.21
0.09 0.18
0.31 0.34
0.36 0.39
Source: Bloomberg
Market Data
Toll Free: 800.317.4747
[email protected]
chandlerasset.com
Source: Bloomberg
(▲/▼)
▼
TREASURY YIELD CURVE STEEPENS IN DECEMBER
39,894.54 1,686.51 4.41%
4.49 4.15
4.09 4.05
4.11 4.17
4.36 ▼
▼
▼
▼
▼
▼
31 Economic Roundup
Retail Sales
Labor Market
Housing Starts
Consumer Prices
Crude Oil Prices Began To Increase in December
Credit Spreads Were Tighter in December
ECONOMIC INDICATOR
Trade Balance
Gross Domestic Product
Unemployment Rate
Prime Rate
Refinitiv/CoreCommodity CRB Index
Oil (West Texas Int.)
Consumer Price Index (y/o/y)
Producer Price Index (y/o/y)
Euro/Dollar
CREDIT SPREADS
3-month top rated commercial paper
2-year A corporate note
5-year A corporate note
5-year Agency note
Spread to Treasuries
(%) 4.32
0.29 0.49
0.04 One Month Ago
(%) 4.56
0.26 0.52
0.05 Change
(0.24)
0.03 (0.03)
(0.01)
Chandler Asset Management | 800.317.4747 | chandlerasset.com | Page 2 U.S. Housing Starts fell in November for the third consecutive month on both a month-over-month and year-over-year basis.
Single family home starts increased 6.7% month-over-month, however the surprising drop in multifamily starts of -23.2% dragged the aggregate figure into negative territory at -1.8%. Year-over-year Housing Starts also fell -14.6% following the prior -3.9% decrease in October. Again, it was a substantial drop in multifamily starts that led to lower year-over-year metrics as well.
The U.S. economy added 256,000 jobs in December, far exceeding consensus expectations. Gains were led by health care, retail, and leisure sectors, while manufacturing shed jobs. The three-month moving average and six-month moving average payrolls totaled 170,000 and 165,000 respectively. The unemployment rate declined to 4.1% in December, and the labor participation rate was unchanged at 62.5%, remaining below the pre-pandemic level of 63.3%. The U-6 underemployment rate, which includes those who are marginally attached to the labor force and employed part time for economic reasons fell to 7.5%.
Average hourly earnings moderated to an increase of 3.9% year-over-year in December.
Although December Retail Sales data came in slightly below consensus estimates, the data was positive and continued to show consumer resilience. Retail Sales increased 0.4% month-over-month and 3.9% year-over-year. Miscellaneous store retailers led discretionary spending categories as they increased 4.3% in December. The holiday season, which encompasses October through December, surpassed the National Retail Federation estimates as it came in strong at $994.1 billion. Expectations were high, but holiday sales did not disappoint.
CPI came in at 0.3% month-on-month and 2.7% on a year-on-year basis for December. Excluding the more volatile components of food and energy, ‘core’ CPI came in at 0.3% month-on-month and 3.3% year-on-year. While core CPI inflation has reaccelerated in the last few months and remains elevated, the underlying drivers are more benign with the increase driven by goods rather than services which have been stickier. Indeed, the largest and most persistent component of service inflation, rents, continued to decelerate to the lowest level since early 2021 in November which will provide comfort to the Fed. The markets did receive some positive news on the inflation outlook to end the year, as the headline and core Personal Consumption Expenditures (PCE) index came in a tenth below expectations on a month-over-month basis, each at 0.1%, for December. However, the year-over-year numbers remained elevated 2.4% and 2.8%, respectively.
BOND MARKET REVIEW
World Stock Market Index Descriptions
S&P 500–The S&P 500 is a market value-weighted index of 500 large-capitalization stocks. The 500 companies included in the index capture approximately 80% of available US market capitalization.
NASDAQ–The NASDAQ Composite Index is the market capitalization-weighted index of over 3.300 common stocks listed on the NASDAQ stock exchange. Dow Jones–The Dow Jones Industrial Average is an index that tracks 30 large, publicly-owned companies trading on the New York Stock Exchange and the NASDAQ. The Financial Times Stock Exchange Group (FTSE)–The FTSE is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. DAX–The Deutscher Aktienindex (DAX) is a blue chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. Hang Seng–The Hang Seng Index is a freefloat-adjusted market-capitalization- weighted stock market index in Hong Kong.
It is used to record and monitor daily changes of the largest companies of the Hong Kong stock market and is the main indicator of overall market performance in Hong Kong. Nikkei–Japan's Nikkei 225 Stock Average is a price-weighted index composed of Japan's top 225 blue-chip companies traded on the Tokyo Stock Exchange. © 2025 Chandler Asset Management, Inc. An Independent Registered Investment Adviser. Data source: Bloomberg, Federal Reserve, and the US Department of Labor. This report is provided for informational purposes only and should not be construed as specific investment or legal advice. The information contained herein was obtained from sources believed to be reliable as of the date of publication, but may become outdated or superseded at any time without notice. Any opinions or views expressed are based on current market conditions and are subject to change. This report may contain forecasts and forward-looking statements which are inherently limited and should not be relied upon as an indicator of future results. Past performance is not indicative of future results. This report is not intended to constitute an offer, solicitation, recommendation, or advice regarding any securities or investment strategy and should not be regarded by recipients as a substitute for the exercise of their own judgment. Fixed income investments are subject to interest rate, credit, and market risk. Interest rate risk: The value of fixed income investments will decline as interest rates rise.
Credit risk: the possibility that the borrower may not be able to repay interest and principal. Low-rated bonds generally have to pay higher interest rates to attract investors willing to take on greater risk.
Market risk: the bond market, in general, could decline due to economic conditions, especially during periods of rising interest rates. The S&P Corelogic Case-Shiller home price index tracks monthly changes in the value of residential real estate in 20 metropolitan regions across the nation.
Source: Bloomberg
Source: Bloomberg
Data as of 12/31/2024
Since 1988, Chandler
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Current Release
(64.75) $B ln NOV. 30
4.40% SEP. 30
3.80% DEC. 31
8.50% DEC. 23
263.83 DEC. 23
$71.65 DEC. 23
3.40% DEC. 31
0.10% DEC. 31
1.10 DEC. 23
(73.62) $B ln OCT. 31
3.10% SEP. 30
4.20% NOV. 30
7.75% NOV. 29
286.94 NOV. 29
$68.72 NOV. 27
2.70% NOV. 30
2.00% NOV. 30
1.06 NOV. 29
Prior Release
(78.19) $B ln NOV. 30
3.10% SEP. 30
4.10% DEC. 31
7.50% DEC. 31
296.73 DEC. 30
$70.99 DEC. 30
2.90% DEC. 31
2.80% DEC. 31
1.04 DEC. 30
One Year Ago
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34 City Council Agenda Item #8
Staff Report
Meeting Date: January 27th, 2025
To: Mayor and City Council
From: Malisa Dodd
Subject: Discussion/Action Regarding a Resolution Adopting a Pension Management Policy
Recommended Action:
Adopt Resolution CCR-25-XX Adopting a Pension Management Policy.
Background:
The City currently has a contract (the “Contract”) with the California Public Employees Retirement System (CalPERS) to provide retirement benefits for all full-time miscellaneous and safety employees. As part of the Contract, the City is obligated to pay any unfunded accrued liability (UAL) under each of the Pension Plans. UAL is the amount by which CalPERS is short of the amount that will be necessary, without further payments from the City, to pay benefits already earned by current and former employees covered by CalPERS (collectively, the “UAL Obligation”).
To better manage the City’s pension plans, staff is recommending the adoption of a pension management policy (the “Pension Management Policy”) to, among other things, set forth the following goals and objectives:
1. Establish, attain, and maintain targeted pension plan funding levels for the Pension Plans.
2. Ensure sufficient assets are available to pay all benefits under the Pension Plans.
3. Manage and control future contribution volatility to the extent reasonably possible.
4. Strive to make Annual Discretionary Payments to accelerate UAL pay-down, reduce interest costs, and stabilize future payments.
5. Maintain the City’s sound financial position and creditworthiness.
6. Provide guidance in making annual budget decisions.
7. Support the creation of sustainable and fiscally sound future budgets.
8. Demonstrate prudent financial management practices
9. Enhance transparency regarding pension funding processes and rationale.
10. Ensure that pension funding decisions protect both current and future stakeholders 35 CalPERS has implemented UAL amortization methods designed to help public agencies gradually adjust to UAL increases. These methods introduce new UAL amortization “bases” incrementally, with a five-year ramp-up period and, in some cases, additional small annual increases. While the ramp-up period eases short-term cash flow impacts, it increases the City’s overall UAL repayment costs by delaying repayment.
Since UAL balances accrue interest at the current Discount Rate (currently 6.8%), the delayed payments during the ramp-up period and reduced payments that do not fully cover interest costs lead to negative amortization, further increasing the UAL balance. As a result, even though the City is meeting all payment obligations requested by CalPERS, the overall liability continues to grow.
The City’s unfunded liability is not unique—all agencies contracting with CalPERS and lacking a pension management policy face similar challenges. Currently, the City does not have such a policy in place. A comprehensive pension management policy would:
1. Identify potential cost mitigation measures.
2. Require annual reviews of pension management actions during the budgeting process.
3. Provide financial analysis of each cost mitigation measure and its impacts.
4. Define preferred pension liability management strategies and key variables.
Developing and adopting the proposed Pension Management Policy is essential to addressing the City’s unfunded liability and ensuring sustainable financial management.
Adoption of a Pension Management Policy:
The City’s Pension Plans are currently approximately 69% funded based on the most recent CalPERS Actuarial Valuation Reports. The 31% unfunded portion represents the UAL, which presently totals approximately $6 million, and is required to be paid off over the next 20 years at a
6.8% interest rate. However, each year, the possibility exists that CalPERS will accrue new pension liabilities due to several factors, including:
• Changes in actuarial assumptions and experience changes (e.g., changes in the discount rate, changes in demographic experience, etc.).
• Changes in actuarial gains and losses due to asset returns being higher or lower than expected.
• Changes in plan benefits.
On June 30 of each year, CALPERS completes a new actuarial valuation that will provide the City with a calculation of the City’s total pension liability as of the new valuation date. Based on that 36 annual valuation report, the City will then know whether it has developed any new UAL at that point in time.
To ensure future pension liabilities remain manageable, staff has developed a proposed Pension Management Policy for Council consideration.. If approved, the Pension Management Policy would require any changes in liability from the annual CalPERS actuarial valuation be explicitly identified each year during the budget cycle. The City would then consider making discretionary contributions using City or other legally available resources to improve the funded status of each Pension Plan, reduce the UAL, and lower ongoing pension costs.
The proposed policy reflects best practices in sustainable financial management. A key component is the use of a 115 Trust Pension Reserve Fund to support a sustainable fiscal model.
The Pension Management Policy will also provide clear guidance for annual budget decisions, demonstrate prudent financial management, create fiscally sustainable budgets, and reassure bond rating agencies and investors that the City is proactively managing its fiscal responsibilities.
Other Financial Considerations:
None at this time.
Alternatives:
1. Adopt the Resolution as presented, thereby adopting the Pension Management Policy.
2. Do not approve but provide alternative direction to staff.
Attachments:
A. Resolution No. CCR-25-XX
B. Pension Management Policy (attached as Exhibit A to Resolution CCR-25-XX) 37 RESOLUTION CCR-25-XX
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF MT.
SHASTA ADOPTING AN PENSION MANAGEMENT POLICY
WHEREAS, the City Council (the “Council”) of the City of Mt. Shasta (the “City”) is obligated by the Public Employees’ Retirement Law, commencing with Section 20000 of the Government Code of the State of California, as amended (the “Retirement Law”), to make payments to the California Public Employees’ Retirement System (“CalPERS”) relating to pension benefits accruing to current and former City employees who are CalPERS members, including retired employees (the “CalPERS Obligations”); and
WHEREAS, the City currently has an unfunded accrued liability (the “UAL”) in respect of the CalPERS Obligations; and
WHEREAS, the CalPERS Obligations, including the UAL, and all other aspects of the pension plan arrangements between CalPERS and the City, is evidenced by a contract or contracts with CalPERS with respect to public safety and miscellaneous employees of the City, as heretofore and hereafter amended from time to time (collectively, the “Pension Plans”); and WHEREAS, the City currently has UAL account balances of around $6 million, which is required to be paid off during the next 20 years at 6.8% interest; and WHEREAS, each year it is possible that the City will incur new UAL costs if the City’s market value of plan assets are not equivalent to the actuarially determined liability amounts; and WHEREAS, the City desires to establish a framework for mitigating Pension Plan expenses by funding new UAL costs that may arise in the future and maintaining the Pension Plans at certain targeted funded status levels whenever possible; and
WHEREAS, to facilitate payment of future UAL costs in a timely manner and to reduce the risk that future UAL costs pose to the City’s financial position, the City desires to adopt the Pension Management Policy (the “Pension Management Policy”); and NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Mount Shasta hereby orders and determines as follows:
Section 1. Recitals and Findings. The Council hereby specifically finds and declares that all of the facts set forth in the Recitals of this Resolution are true and correct.
Section 2. Adoption of Pension Management Policy. The Council hereby finds and declares that the Pension Management Policy, attached as Exhibit “A” hereto, is hereby approved and adopted as the official City of Mt. Shasta Pension Management Policy to be effective February 1st, 2025.
38 Section 3. Authorized Official Actions. The Mayor, City Manager, Finance Director, and all other appropriate officers of the City are hereby authorized and directed, jointly and severally, to do any and all things to effectuate the purposes of this Resolution and to implement and administer the Pension Management Policy.
Section 4. Effective Date. This Resolution shall take effect from and after the date of its passage and adoption.
The foregoing Resolution was passed and adopted at a regular meeting of the City Council of the City of Mount Shasta held on this 27th day of January, 2025 by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
DATED: January 27th, 2025
CITY OF MT. SHASTA
________________________________
John Redmond, Mayor
ATTEST:
_______________________________
Rachel Agron, Deputy City Clerk
39 EXHIBIT A
PENSION MANAGEMENT POLICY
CITY OF MT. SHASTA
Adopted by the City Council of the
City of Mt. Shasta
Pursuant to Resolution CCR-25-XX
1-27-2025
40 Section 1. Purpose
The purpose of this Pension Management Policy (the “Policy”) is to strategically address the existing and any future unfunded accrued liability (the “UAL”) associated with the City of Mt. Shasta’s (the “City”) California Public Employees’ Retirement System (CalPERS) pension plans (the “Pension Plans”). This Policy also addresses some of the principal elements and core parameters central to the policy objectives discussed in this Policy. In the development of this Policy, the City strives to reduce its UAL and the associated financing costs in the most cost-efficient and fiscally responsible manner possible.
The City is committed to fiscal sustainability by employing long-term financial planning efforts, striving to maintain appropriate reserve levels, and employing prudent practices in governance, management, budget administration, and financial reporting. This Policy is intended to make all relevant information readily available to decision-makers and the public to improve the quality of decisions and transparency, identify policy goals, and to demonstrate a commitment to long-term financial planning. Development of this Policy signals to rating agencies and capital markets that the City is willing to set policies that improve its ability to meet its obligations in a timely manner.
The Policy is intended to reflect a reasonable and conservative approach to managing the UAL costs associated with the Pension Plans. This Policy recognizes that the Pension Plans are subject to market volatility and that actual economic and demographic experience of the plans will differ from the actuarial assumptions. Accordingly, it is intended to allow for adaptive responses to changing circumstances, providing flexibility to address such volatility in a financially sound manner. As such, the City will be required to continually monitor its Pension Plans and the corresponding UAL.
Section 2. Policy Goals and Objectives
The overarching goals and objectives of this Policy are as follows:
• Establish, attain, and maintain targeted pension plan funding levels for the Pension Plans. • Ensure sufficient assets are available to pay all benefits under the Pension Plans. • Manage and control future contribution volatility to the extent reasonably possible. • Strive to make Annual Discretionary Payments to accelerate UAL pay-down, reduce interest costs, and stabilize future payments.
• Maintain the City’s sound financial position and creditworthiness. • Provide guidance in making annual budget decisions.
• Support the creation of sustainable and fiscally sound future budgets. • Demonstrate prudent financial management practices
• Enhance transparency regarding pension funding processes and rationale. • Ensure that pension funding decisions protect both current and future stakeholders 41 Section 3. Background and Discussion
In General. Each Pension Plan is a multiple-employer defined benefit pension plan administered by CalPERS.
All full-time and certain part-time City employees are eligible to participate in the CalPERS retirement and disability benefits, annual cost of living adjustments and death benefits offered to plan members and their 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.
The financial objective of a defined benefit pension plan is to fund the long-term cost of benefits provided to the plan participants. In order to ensure its financial soundness and sustainability, the plan should accumulate adequate resources in a systematic and disciplined manner to ensure sufficient resources are available to meet employee benefit requirements. This Policy outlines the practices the City will utilize to address its actuarially determined contributions to fund the long-term cost of benefits to the Pension Plan participants and annuitants.
Pension Costs and Liabilities. In order to fund its employees’ pension benefits, the City is required to make annual contributions to CalPERS, a portion of which may be sourced from the employee contributions.
CalPERS then invests these contributions to generate returnsthat offset the overall pension costs. The required ongoing contributions, known as the “Normal Cost,” are calculated as a percentage of salaries and represent the annual cost of service accrual for the upcoming fiscal year for active employees. However, if the actual Pension Plan experience, such as investment performance or demographic factors, falls short of actuarial assumptions, the Pension Plan may become underfunded (i.e., the Pension Plan’s Total Accrued Liability exceeds the Plan’s Market Value of Assets). This shortfall is known as Unfunded Accrued Liability (UAL) which must be covered by the City through a series of UAL Payments, which are above and beyond the Normal Cost contributions. The UAL Payments are calculated in total dollar amounts, not as a percentage of salaries.
The UAL can be caused by multiple factors, including but not limited to, changes to actuarial policy, retroactive pension benefit enhancements, investment underperformance, actuarial assumption changes, demographic shifts, and discount rate reductions.
UAL is Debt. The UAL balance at any given point in time is a debt of the City owed to CalPERS which is amortized over a set period of time with interest accruing at the prevailing CalPERS discount rate (the “Discount Rate”). However, this debt can be prepaid at any time without penalties. Recognizing the UAL as debt helps the City identify proper steps to address it and minimize the associated financing costs.
Ongoing CalPERS Practices. Each year CalPERS prepares updated actuarial valuation reports for each of the City’s Pension Plans wherein it calculates the City’s total pension liability as of the end of the prior fiscal year (each a “Valuation Report”). If the investment performance during that fiscal year differs from the Discount Rate, or if CalPERS made any changes to its actuarial assumptions, or if the actual demographic or compensation experience within the Pension Plans diverges from the actuarial assumptions, new line items known as UAL amortization “bases,” (referred to as a “Base” or “Bases”) may be added to the plan and result in a change to the UAL balance. Such UAL amortization Bases may be positive (indicating funding shortfall for the Pension Plans) or negative (indicating funding surplus for the Pension Plans). Because CalPERS can add new UAL amortization Bases every year, the Pension Plans must be monitored annually and managed continuously – there is no one-time solution.
42 CalPERS amortizes each new Base over a 20-year period using level-dollar payments. Each Base accrues interest at the Discount Rate (currently 6.8%). This is similar to a 20-year fully amortizing home mortgage bearing an interest rate of 6.8%. However, the amortization methodology used by CalPERS for each Base differs from a home mortgage during the first five years in that initially, there is a ramp-up period: payments start at 20% of the required amount in the first year, increasing by 20% each year until reaching the full payment amount in the fifth year (hereafter referred to as “5-Year Ramping”). Afterward, payments stabilize at this level for the remaining 15 years. CalPERS has adopted this 5-Year Ramping practice in an effort to help public agencies “ease into” paying for UAL increases.
However, because CalPERS immediately applies interest at 6.8% from the inception of each new Base, agencies incur “negative amortization” during the 5-Year Ramping period, meaning that accrued interest is added to the Base until payments reach full coverage in the fifth year. This delayed start to full payments increases the overall cost to member agencies as compounded interest accumulates on unpaid UAL balances.
To help reduce the overall costs of the UAL repayment, this Policy supports avoiding the 5-Year Ramping for new Bases whenever possible. By making full or accelerated payments, the City can reduce compounded interest costs and achieve faster progress toward full funding.
Section 4. Policy
A. Funding Level Objective. It is the City’s policy to strive to achieve and maintain a Pension “Funded Ratio” (being the ratio by which the Market Value of Assets—as set forth in the most recently published Valuation Report—compares to the Entry Age Normal Accrued Liability or “Total Accrued Liability”—as set forth in the most recently published Valuation Report) for each Pension Plan of not less than 85% (the “Funding Level Objective”).
Funding Level Objective = 85%
Achieving and maintaining the 85% Funding Level Objective ensures that the ongoing contributions of the City and its employees are properly and adequately funding the retirement benefits of today’s workers. This concept is commonly referred to as “intergenerational equity.” The reason for a Funding Level Objective of 85% rather than 100% is to allow some cushion for the possibility that good investment returns by CalPERS in a given year might push the funded level of a Pension Plan above 100% (commonly referred to as “superfunded status”), which means that the City and its employees had contributed into the Pension Plan more than was necessary. Thus, while the City remains committed to achieving a 100% funded level it is not uncommon for a pension plan to be maintained at a lower percentage. The City will strive to manage the 15% differential (i.e., the difference between 85% and 100%) through its own investment process by virtue of a “115 Trust Pension Reserve Fund” discussed herein.
Guidance: To achieve the Funding Level Objective and ensure compliance with best management practices, this Policy provides the following guidance:
3. Base Targeting Objectives. Due to the compounding interest and extended accrual associated with new UAL Bases subject to CalPERS’ 5-Year Ramping, the City will prioritize ADPs to newly established Bases over older ones. By focusing on the newest Bases first, the City can reduce compounding costs more effectively. Secondarily, the City will apply ADPs toward 43 Bases that facilitate smoother year-over-year pension payments (collectively referred to as the “Base Targeting Objectives”). This approach seeks to balance near-term payment obligations with long-term pension cost stability.
4. Avoiding 5-Year Ramping. When CalPERS establishes new Bases that would otherwise be subject to 5-Year Ramping, every effort will be made to preemptively instruct CalPERS to fully amortize these Bases immediately, thereby avoiding the costs associated with delayed payments and negative amortization. This proactive approach requires careful evaluation to ensure ADPs do not compromise the City’s operational or fiscal health. Staff should annually reach out to the City’s CalPERS actuary to request a calculation of flat payments (rather than ramp-up payments) for all outstanding and new Bases.
5. Labor Cost Allocation Requirements. The City is required to document how much time each City employee spends working within the general fund and/or each of the enterprise funds (the “Benefiting Funds”). This documentation is used to allocate labor costs appropriately among the various Pension Plans (the “Labor Cost Allocation Analysis”). This becomes the basis upon which Normal Cost and UAL payments are allocated and charged (the “Pension Cost Allocation”) to the general fund and/or each of the enterprise funds, respectively (the “Benefitting Funds”).
The Labor Cost Allocation Analysis and Pension Cost Allocation are essential for compliance with legal issues associated with Proposition 218 (“Prop 218”) and the “Gift of Public Funds Doctrine.”
For example, if the water enterprise fund pays more than its fair share of Normal Cost or UAL, then the General Fund and/or any other enterprise funds will have likely unjustly benefited, potentially resulting in a Prop 218 violation for the water enterprise fund. Conversely, if the General Fund pays more than its fair share, then the enterprise funds will have likely unjustly benefited, possibly resulting in a violation of the Gift of Public Funds Doctrine due to the General Fund’s overpayment. Therefore, it is crucial to ensure that the Labor Cost Allocation Analysis is current and accurate and that the Pension Cost Allocation methodology is being consistently applied.
6. Pre-Pay the Entire Annual UAL Payment by July 31st of each year. On or before July 31st of each year, the City receives its annual CalPERS UAL invoice. The City has two payments options. The invoice can (1) be paid in equal monthly increments or (2) be fully pre-paid at the beginning of the fiscal year by July 31st. By prepaying the entire invoice amount due by July 31st, the City can concurrently save approximately 3.3% compared to making the monthly payments. As such, every effort shall be made to pre-pay the UAL payment upon receipt of the annual invoice so long as all Benefitting Funds are able to contribute their allocable fair share up front in accordance with Section 4A4 below.
7. Pre-Pay UAL from Reserves, One-Time Revenues and Fund Surpluses. Reserves (often invested in LAIF) regularly do not earn returns that can offset the interest rate that CalPERS charges on the outstanding UAL balance. Supplemental contributions into the Pension Plans and/or the 115 Trust Pension Reserve Fund (see Section 4C below entitled “Establishment and 44 Operation of a 115 Trust Pension Reserve Fund”) from available reserves, one-time revenues and fund surpluses can generate substantial long-term net savings. Each supplemental ADP contribution reduces the UAL balance, the Annual Required Contributions (ARC) for future years, and the total interest costs associated with the UAL. CalPERS does not apply any prepayment penalties to ADPs. Therefore, during each budget cycle, the City staff shall review all available reserves, one-time revenues and fund surpluses to determine whether any such funds could be used to make an ADP to pay down the UAL in accordance with Section 4B, keeping in mind operational and capital budgetary constraints while maintaining adequate reserves and balancing the fiscal soundness of eliminating the high-interest UAL debt.
8. ADPs Shared Between All Benefiting Funds. Whenever an ADP or a contribution to the 115 Trust Pension Reserve Fund (see Section 4C below entitled “Establishment and Operation of a 115 Trust Pension Reserve Fund”) is made, the City must ensure that all Benefitting Funds contribute their fair share in accordance with the City’s Labor Cost Allocation Analysis and the Pension Cost Allocation method of charging off its pension costs.
For example, if the water enterprise fund makes an ADP, the City must collect and send an allocable share from the General Fund and any other enterprise funds to CalPERS. Similarly, if the water enterprise fund makes a contribution to the 115 Trust Pension Reserve Fund, the City must collect an allocable share from the General Fund and any other enterprise funds; however, in this case, the contribution will be made to the 115 Trust Pension Reserve Fund instead of being sent to CalPERS.
9. Capital Financing. When considering capital improvement projects, staff regularly reviews and plans for reserving cash to fund some or all of these capital improvement projects. When considering how to pay for current and future capital improvement projects, staff should review the current tax-exempt market to assess if it would be more cost effective to borrow at taxexempt rates to pay for the capital projects and redirect the reserved cash (and/or such other appropriate funds of the City) to make ADPs to CalPERS.
If there are projected cost savings by using this method, and a capital financing strategy is to be implemented, the City Council, as well as the governing bodies of other plan participants, would need to approve of the ADPs being paid to CalPERS prior to the financing to ensure that the once reserved capital project funding is applied to UAL paydowns.
10. Utilize Savings Achieved from Refunding Outstanding Non-Pension Related Debt to Pre-Pay UAL. During each budget cycle, staff should review all outstanding long-term non-pension related debt of the City to determine whether a refunding of such debt might result in net present value (NPV) savings of greater than 3%, and if so, consider a structure and strategy that frontloads the savings from such debt refunding, which can then be used to pay down the UAL or make a contribution to the 115 Trust Pension Reserve Fund discussed herein. This strategy should only be used if the interest rates on the currently outstanding debt is sufficiently below the then-current Discount Rate to ensure that overall NPV savings of greater than 3% are achieved by the City.
45 11. Rates and Fees to Include Applicable Pension Costs. Whenever possible, all fees, rates and charges should incorporate forecasted applicable Normal Cost and UAL payments, as well as an ADP component. While funds cannot legally contribute more than their fair share, they must also never contribute less than their fair share. Staff will review rate studies and cost of service justification to ensure that forecasted Normal Cost and UAL payments are appropriately included. Given that UAL is treated as equivalent to debt, carrying an interest rate of 6.8% and amortizing over 20 years, it is prudent to include an amount in the pertinent fees, rates, and charges to facilitate ADPs. This proactive approach allows for the UAL debt to be paid down earlier than its scheduled amortization, thereby reducing overall costs, directly benefiting ratepayers.
12. Pension Obligation Financing. The City shall consider issuing taxable municipal debt obligations (generically hereafter referred to as “Pension Obligations”) to refinance the UAL, in part or in whole, if such bond obligations are expected to produce minimum cash flow savings of at least 8%, taking into account all debt service and costs of issuance associated with such bond obligations, in comparison to CalPERS’ respective UAL amortization schedule and the then-current Discount Rate.
Pension Obligations shall not utilize swaps or derivatives of any kind and should be structured with reasonable and flexible call provisions (with a maximum of 10-year call provision).
Pension Obligations shall be used only to prepay the UAL liabilities and shall not be used to finance Normal Cost payments. The issuance of Pension Obligations must be voted upon and approved by the City Council as well as the governing bodies of other plan participants.
To the extent directed by the City Council after due consideration, annual savings achieved by issuing the Pension Obligations should be used to either (i) directly prepay new UAL amortization Bases as they arise, (ii) make deposits into the 115 Trust Pension Reserve Fund, (iii) offset operational costs, and/or (iv) fund any other legally permissible activities of the City.
13. Annual Review of the CalPERS Actuarial Valuation Reports and Associated Tasks. The City staff shall review or cause to be reviewed the annual CalPERS Valuation Reports once they are made public by CalPERS. The review should focus on identifying the annual changes to each of the Pension Plan’s UAL and quantifying the associated cost impacts and the corresponding implications on the goals and objectives set forth in this Policy.
B. City Contributions.
1. Annual Contribution Relative to Payroll. Recognizing the benefit of long-term returns and the need to proactively manage the high long-term costs associated with carrying UAL, the City will proactively contribute funds to the CalPERS Pension Plans and/or the 115 Trust Pension Reserve Fund based on a percentage of each Fiscal Year’s forecasted payroll.
In each Fiscal Year where the Pension Plans total Market Value of Assets combined with the 115 Trust Pension Reserve Fund balance is less than 110% of the Entry Age Normal Accrued Liability (which summation is hereafter referred to as the “115 Trust Pension Reserve Fund Ceiling”), during the City’s normal budget adoption process, beginning with the 2025-26 Fiscal 46 Year budget, the City will strive to contribute amounts to either the CalPERS Pension Plans if funded less than 85% (and assuming that all Benefitting Funds are able to contribute their allocable fair share in accordance with Section 4A6), and if not, the Annual Contribution shall be made to the 115 Trust Pension Reserve Fund, in amounts that are between 2% and 5% of the forecasted payroll for that Fiscal Year (the “Annual Contribution”), as recommended by the Finance Director and City Manager and approved by the City Council as part of the final Adopted Budget. Any ADPs made to the Pension Plans will adhere to the Base Targeting Objectives.
2. Other Contributions. If the Funded Ratio falls below 85%, all other discretionary contributions above and beyond the Annual Contributions (the “Other Contributions”) made by the City will be allocated to the CalPERS Pension Plans as an ADP (Note: ensure that all Benefitting Funds are able to contribute their allocable fair share in accordance with Section 4A4). However, if the Funded Ratio surpasses 85% but remains below the 115 Trust Pension Reserve Fund Ceiling, then such Other Contribution will be directed to the 115 Trust Pension Reserve Fund.
Any ADPs made to the Pension Plans will adhere to the Base Targeting Objectives.
C. Establishment and Operation of a 115 Trust Pension Reserve Fund.
1. Establishment of a 115 Trust Pension Reserve Fund. The City has or will have established a 115 Trust Pension Reserve Fund which is managed by a third-party investment manager (the “Investment Manager”). The 115 Trust Pension Reserve Fund may receive funds deposited into it at the discretion of the City Council, based on recommendations made by the Finance Director and City Manager during the annual budget process. Funds in the 115 Trust Pension Reserve Fund shall only be used for the City’s pension benefits costs (i.e., UAL and Normal Costs) associated with the City’s Pension Plans in accordance with the goals and objectives set forth in this Policy.
2. Funding the 115 Trust Pension Reserve Fund.
(a) Annual Contributions and Other Contributions. The City will strive to make Annual Contributions and Other Contributions in the amounts and manner specified in Section 4B above until such time that the 115 Trust Pension Reserve Fund reaches the 115 Trust Pension Reserve Fund Maximum (as outlined in section 4C3 below).
(b) Sequestered Savings. Upon the issuance of each series of Pension Obligations, for each of the ensuing ten (10) consecutive years (or such other period of years as deemed appropriate by the City Council at the time of any subsequent issuances of Pension Obligations) following such issuance, a fixed dollar amount equal to 50% (or such other percentage as deemed appropriate by the City Council at the time of any subsequent issuances of Pension Obligations) of the “Total Sequestered Savings” (as calculated in the manner set forth below) achieved by issuing Pension Obligations (the “Annual Sequestered Savings Savings”), shall be transferred from the Benefiting Funds (in accordance with Section 4A6 above) and deposited into the 115 Trust Pension Reserve Fund until such time that the 115 Trust Pension Reserve Fund reaches the 115 Trust Pension Reserve Fund Maximum (as outlined in section 4C3 below), and thereafter all Sequestered Savings will be directed to a “Pension Obligation Prepayment Fund” which will be 47 established and maintained by the City for the purpose of prepaying any outstanding Pension Obligations.
𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑆𝑆𝑆𝑆𝑆𝑆 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 𝑆𝑆 𝑆𝑆𝑆𝑆 𝑆𝑆𝑆𝑆 = 𝑆𝑆𝑆𝑆𝑆𝑆 𝑥𝑥( 𝑈𝑈 𝑈𝑈𝑈𝑈 −
𝑌𝑌 )
SSP = Sequestered Savings Percentage
UALDS = Scheduled UAL debt service being paid off by the Pension Obligations DS = Total principal amount of Debt Service on the Pension Obligations Y = Number of years to pay back Sequestered Savings
Example of Annual Sequestered Savings Calculation
A $5M Pension Obligation was issued for the purpose of prepaying UAL. The total UAL debt service (UALDS) paid off with the Pension Obligation was $8,000,000 and the total debt service (DS) on the Pension Obligation is $7,000,000. The City elected to sequester 50% of the total savings over a 10-year period (Y), which in this example results in Annual Sequestered Savings of $50,000.
𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑆𝑆𝑆𝑆𝑆𝑆. 𝑆𝑆 𝑆𝑆𝑆𝑆 𝑆𝑆𝑆𝑆 = 0.5𝑥𝑥(
8,000,000 − 7,000,000
10 )
= $50,000
3. Operation of the 115 Trust Pension Reserve Fund. All Annual Contributions and Other Contributions that have been directed to the 115 Trust Pension Reserve Fund, along with all applicable Sequestered Savings, shall be used solely for the purpose of making ADP’s (and Normal Cost payments during a Fiscal Hardship, as defined below) to CalPERS for the purpose of achieving and maintaining the Funding Level Objective.
With the goal of achieving and maintaining the Funding Level Objective, each year during the budget cycle, City staff shall calculate, or cause to be calculated, the upcoming Fiscal Year’s estimated Funded Ratio by taking into account the most recent Valuation Report’s statement of Funded Ratio and adjusting for the estimated UAL amortization Base that will be either added or subtracted due to the prior Fiscal Year’s investment result of either exceeding or falling short of the then current Discount Rate for that Fiscal Year (the “Estimated Funded Ratio”). If the Estimated Funded Ratio is projected to be less than the Funding Level Objective, to the extent funds are available in the 115 Trust Pension Reserve Fund, the appropriate member of staff shall either make, or shall direct the Investment Manger to make, an ADP to CalPERS in the amount necessary to bring the Funded Ratio back up to the Funding Level Objective. Additionally, if sufficient funds are available in the 115 Trust Pension Reserve Fund, staff shall assess whether to fully amortize any new UAL amortization Bases in order to reduce the long-term interest costs associated with the “ramping” procedures used by CalPERS.
Except in the case of a Fiscal Hardship, as defined below, moneys in the 115 Trust Pension Reserve Fund shall not be used to pay Normal Costs until such time as the amount therein, when 48 combined with the Market Value of Assets (as set forth in the most recently published Valuation Report) exceeds the 115 Trust Pension Reserve Fund Maximum. To the extent monies in the 115 Trust Pension Reserve Fund on June 30th exceed the 115 Trust Pension Reserve Fund Maximum (after consideration has been given to the amounts therein required to be paid to CalPERS for the ensuing Fiscal Year to maintain the Estimated Funded Ratio at or above the Funding Level Objective), any accrued surplus over 110% may be used to offset the City’s Normal Cost payment made to CalPERS in such Fiscal Year, and any applicable Sequestered Savings will be directed to the Pension Obligation Prepayment Fund.
4. Fiscal Hardship. “Fiscal Hardship” means an economic hardship, or other unanticipated fiscal emergency, that has been declared by resolution of the City Council.
D. Transparency and Reporting. Funding of the Pension Plans should be transparent to all stakeholders, including plan participants, annuitants, the City Council, and City residents. To achieve this Policy objective, copies of the annual actuarial valuation reports for each Pension Plan shall be made available to the City Council and shall be posted on the City’s website. The City’s audited financial statements shall also be posted on the City’s website because they include, among other things, information on the City’s current and future annual Pension Plan contributions as well as the funded status of each Pension Plan.
E. Annual Budget to Contain Policy Directed Information. The City’s annual operating budget shall consider the items specified in this Policy for inclusion in each such annual budget.
F. Review of Policy. Funding a defined benefit pension plan requires a long-term horizon planning approach. This Policy is intended to provide general objectives and guidelines, which will require periodic review to consider changes in the City’s financial position and Pension Plan funded status over time. As such, City staff will review this Policy for implementation of new best practices and will provide such proposed changes to the City Council for adoption on an as needed basis, not to exceed 5 years. 49 Glossary of Terms
Policy: Means the Pension Management established by the City to strategically address the Unfunded Accrued Liability (UAL) and other critical elements related to its Pension Plans. This Policy defines objectives, procedures, and responsibilities for managing pension-related costs and promoting fiscal responsibility.
UAL: Means the City’s Unfunded Accrued Liability, being the difference between the Total Accrued Liability and the Market Value of Assets in the Pension Plans, representing the shortfall that the City must cover through UAL Payments. It arises when actuarial assumptions differ from actual performance or demographic changes.
City: Refers to the City of Mt. Shasta, California, the government entity responsible for the administration of pension benefits for its employees through the CalPERS system.
CalPERS: Means the California Public Employees’ Retirement System, being the state agency that manages pension and health benefits for California public employees, retirees, and their families. It invests contributions made by the City and employees to generate returns for funding pension benefits.
Pension Plans: The defined benefit plans administered by CalPERS in which City employees are enrolled.
These plans provide retirement, disability, and death benefits to plan members and their beneficiaries.
Normal Cost: The annual cost of pension benefits accrued by active employees, calculated as a percentage of salaries. This amount represents the baseline contribution for covering future retirement benefits.
Discount Rate: The expected rate of return on investments used by CalPERS to calculate liabilities. Currently set at 6.8%, it determines the interest rate applied to UAL balances.
Valuation Report: The annual actuarial report prepared by CalPERS, which calculates the City’s pension liabilities, asset values, and the resulting UAL. This report helps the City monitor its funding progress and adjust contributions as necessary.
Bases: Means the individual segments of UAL created when plan assumptions, investment returns, or demographics deviate from projections. Each Base is amortized over a 20-year period with 5-Year Ramping, adding complexity to the City’s pension obligations.
5-Year Ramping: The phased approach to UAL amortization used by CalPERS, where payments start at 20% in the first year, increasing annually by 20% until reaching full payment in year five. This structure creates negative amortization, increasing the City’s total interest costs over the repayment period.
ADP: Means each Additional Discretionary Payment made by the City toward reducing UAL, aiming to lower interest costs by accelerating debt reduction. ADPs are prioritized to meet Base Targeting Objectives and avoid 5-Year Ramping.
Base Targeting Objectives: The City’s approach for prioritizing ADPs to reduce the cost impact of new UAL Bases by focusing on the most recent ones. It also aims to stabilize annual pension contributions and prevent cost volatility.
50 Funding Level Objective: The City’s goal is to maintain a Pension Funded Ratio of at least 85% to ensure adequate funding for retiree benefits without reaching superfunded status. This target accounts for potential positive investment returns by CalPERS.
Benefiting Funds: The general fund and enterprise funds within the City that contribute to Normal Cost and UAL payments based on the Labor Cost Allocation Analysis.
Gift of Public Funds Doctrine: The California “Gift of Public Funds Doctrine” prohibits the use of public funds for private purposes, as outlined in the California Constitution (Article XVI, Section 6). It ensures that public money is used solely for public purposes, requiring that expenditures provide a tangible public benefit and are not mere donations to individuals or entities.
Labor Cost Allocation Analysis: A documentation process that allocates pension costs among City funds in proportion to employees’ time worked within each fund, ensuring that each Benefiting Fund covers its fair share of pension costs.
Pension Cost Allocation: The method used to distribute pension costs across Benefiting Funds based on the Labor Cost Allocation Analysis, ensuring compliance with Prop 218 and the Gift of Public Funds Doctrine.
Prop 218: A constitutional amendment that governs how local governments can impose taxes, assessments, and property-related fees. It aims to ensure taxpayer consent by requiring voter approval for certain charges, limiting the use of property assessments to fund public improvements, and mandating that fees correspond to the cost of services provided to property owners.
115 Trust Pension Reserve Fund: A reserve fund established by the City and managed by an Investment Manager to provide additional pension funding. This fund aims to support the City’s Funding Level Objective through ADPs and other strategic contributions.
Sequestered Savings: Savings generated from issuing Pension Obligations, a portion of which is deposited into the 115 Trust Pension Reserve Fund to further reduce the UAL.
Fiscal Hardship: A significant economic challenge or emergency, formally recognized by the City Council, that allows flexibility in using the 115 Trust Pension Reserve Fund to cover Normal Costs.
Pension Obligation Prepayment Fund: A fund established to accumulate excess Sequestered Savings, which are used to prepay Pension Obligations and further reduce the City’s UAL. 51 City Council Agenda Item #9
Staff Report
Meeting Date: January 27, 2024
To: Mayor and City Council
From: Malisa Dodd, Finance Director
Subject: 2023-2024 Audited Financial Statements City of Mt. Shasta and Mount Shasta Public Financing Authority
Recommendation:
Staff respectfully requests that City Council review and adopt Resolution CCR-25-XX, A Resolution of the City Council of the City of Mt. Shasta Accepting the Independent Audit Reports for Fiscal Year 2023-2024.
Background & Summary:
The City’s Independent Auditor, Charles Pillon, CPA, has completed the audit of the financial statements for the 2023-2024 fiscal year. There was an additional audit required for the Mount Shasta Public Financing Authority, which is presented for the Councils approval. The audited financial statements have been distributed and the final report will now be issued.
Derived from the same underlying basic financial statements information as the City’s Budget Reports which are reported on separately, the Audited Financial Statements differ significantly in the presentation of that information. The City’s Budget Reports are presented primarily on a cash basis to show the operating capabilities of each of the operational funds of the City during a single period. The Audited Financial Statements, based on “generally accepted accounting principles”(GAAP), promulgated by the Governmental Accounting Standards Board (GASB), focus more on presenting an overall picture of the financial position of the City. In addition to the financial information, the Audited Financial Statements includes two auditor’s reports, detailed notes to the financial statements, and the Auditor’s Schedule of Findings.
The initial report in the Audited Financial Statements is a Statement of Net Position for Governmental Activities and Business-Type Activities on page 5. This statement for Governmental Activities combines all of the City’s Funds except for the Enterprise Funds and Trust and Agency Funds under Governmental Activities and the City’s eight Enterprise Funds under Business-Type Activities.
The Governmental Activities portion of this statement includes all of the capital assets, accumulated depreciation, and long-term debt of the City’s General Fund and Special Revenue X Regular
Consent
Closed
Presentation
52 Funds to represent what purportedly is the City’s financial net worth, just as if they were any other private business entity. The Enterprise Funds are reported in the same manner. This year, the City reports Governmental assets, net of accumulated deprecation of $13.79 million dollars.
Net position is $4.80 million the difference being pension liabilities and long-term debt. Along with the Enterprise Funds, the City has reported net assets of just over $75.68 million.
The Business-Type Activities portion of the Statement of Net Assets has always been reported on a net assets basis although the terminology has been changed from reporting “retained earnings” to “net position”. Total Assets for the Enterprise Funds net of depreciation are just over $61.89 million. Total Net Position is $44.10 million which is higher than last year.
The second report is a Statement of Activities, again combining funds in the same manner, on page 6. This statement reformats the revenues and expenditures of the City as presented in the City’s internal Budget Reports adding depreciation and subtracting principle payments of debt and capital outlay. This statement shows expenditures and related program revenues by type of activity rather than by fund. The statement then adds the amounts of general revenues including taxes and investment earnings that are not committed to a particular activity. The result is the change in net assets for the 2023-2024 fiscal year. The City expended $8.50 million on governmental activities, and collected $456,711 in charges for services and $1,927,276 in grants and contributions. The City collected $5.20 million in taxes, investment earnings and extraordinary earnings. Net position went up down $598,166.
After these statements, the Financial Statements then present most of the familiar old form Balance Sheets and Changes in Fund Balance in substantially the same manner that government entities have always reported, with the exception of the addition of reconciliations back to the two prior statements. These statements correspond most directly to the Budget Reports that Council receives.
As always, we suggest that the most interesting and informative part of the financial statements are the accompanying notes to the financial statements on pages 13 through 38. Note 1 gives a detailed summary of the financial organization of the City and how municipal fund accounting is carried out, along with an explanation of any new Accounting Standards format and Funds groupings. Notes 3 through 9 basically follow the balance sheet categories. Note 2 discloses the impact of recently issued accounting standards. Notes 3 outlines cash and investments and 4 outlines receivables. Note 5 outlines operating transfers in and out. Note 6 recaps all of the capital asset reporting. Note 7 outlines the long-term debt. Note 8 explains the position of the pension obligation. Note 9 details fund balance following GASB 54 which redefined how fund balances of the governmental funds are presented in the financial statements. The remaining notes, 10, 11, 12, 13, 14, 15, 16, 17 and 18 details risk management, contingent liabilities, prior period adjustments, subsequent events, deferred conpensation plan, agreements, loan recievable, and stewardship, compliance and accountability that are required to be disclosed for the financials statements to be in compliance with GAAP. These statements do not necessarily include all financial data but are important for the reader of the financial statements to evaluate the City’s fiscal position.
53 The next section is the Required Supplementary Information that includes the Cost-sharing Multiple-employer Defined Benefit Pension Plan information. Included in this Supplementary Information are Budget Comparison Schedules, which are similar to our Final Budget Report.
The next section is the Supplementary Information that includes all of the non-major Government funds This information is combined and reported in the financials at the beginning of the audited financials in Other Governmental Funds. and Combining Statements which details the underlying non-major Fund information that makes up the Governmental Activities.
The last section is the Single Audit Schedules and Reports that are required when a government expends more than $750,000 of federal awards. Included in this last section are required reports, a schedule of expenditures of federal awards, notes to the schedule and a schedule of findings and questioned costs.
The primary purpose of an independent audit is to assure the users of the financial statements that they can rely on those statements to accurately present the financial status of the City. The audit is not a guarantee that the statements are absolutely perfect, nor that there have been no defalcations or misappropriation of City resources. The Auditor’s Report states that after studying and analyzing the City’s financial records, using their expertise, accepted standards, and due diligence, they have reached the conclusion that the financial statement “present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Mt. Shasta…”
One additional item, the Management Discussion and Analysis (MD&A), that GASB 34 suggested for inclusion as a part of the Financial Statements is not included in the statements. If the report is included it requires management to prepare in layman’s terms an analysis of the Financial Statements. Since the Council is already provided with the periodic budget reports along with the initial, amended, and final budget reviews, they have already received most of what would be included in the MD&A.
The Mount Shasta Public Financing Authority was created on May 13, 2019 as a result of a Joint Exercise of Powers Agreementbetween the City of Mt. Shasta and the Mount Shasta Industrial Development Authority. The purpose of the Authority is to finance public capital inmprovments for the benefit of the City, which included the refinance of the City’s Series 2008 Revenue Bond debt. The Authority is a component unit of the City and as such is included in the City of Mt.
Shasta Financials and is reported separately with its own financial statements and single audit.
The Authority undertook the sale and issuance of bonds. Bond proceeds are used to design, construct and acquire public capital improvemtns and lease, lease-back, sell or resell such improvements to the City. The projects included in this years reports are the New Corporate Yard Garage, Solar and Energy Efficient Improvements and Refinance of Debt and the Downtown Collection Sewer System Improvements. The notes to the financial statements detail this debt. 54 The opinion on the City of Mt. Shasta’s and the Mount Shasta Public Financing Authority’sFinancial Statements were considered qualified, or in laymen’s terms, a clean report.
However, material weaknesses were identified related to the Independent Auditor’s Report in Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards.
This finding was caused by not identifying and correcting misstatements before the start of the audit. A corrective action plan was implemented to ensure the recording of all adjustments are posted prior to the start of the audit.
Government code and practice requires that the City Council formally accept the independent auditor’s report. By the very nature of the independence of the auditor, the City cannot alter or change the reports, so the purpose of the practice is only to assure that the governing body has been presented with the report. Staff has prepared a resolution accepting the audit report.
Financial Impact:
There are no direct financial impacts associated with the City Council’s acceptance of the independent third party annual audit process.
Attachments:
• Financial Statements
• Proposed Resolution CCR-25-XX
55 RESOLUTION CCR-25-XX
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF MT. SHASTA
ACCEPTING THE INDEPENDENT AUDIT REPORTS AND SINGLE AUDIT FOR FISCAL YEAR 2023 – 2024
WHEREAS, the City Council has received the published financial statements for the City of Mt.
Shasta and Mount Shasta Public Financing Authority (A Component Unit of the City of Mt.
Shasta) for the 2023-2024 fiscal year; and,
WHEREAS, the Council has received and reviewed the reports of the independent auditor, Charles Pillon, on those financial statements; and,
WHEREAS, the Council has reviewed the reports of the Independent Auditor on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Mt. Shasta that the published City of Mt. Shasta Financial Statements and Mount Shasta Public Financing Authority Financial Statements for Fiscal Year ended June 30, 2024, and the Independent Auditor’s Report on those statements is accepted and made available to the interested public.
IT IS HEREBY CERTIFIED that the foregoing Resolution was introduced and duly adopted by the City Council of the City of Mt. Shasta at a regular meeting held on the 27th day of January, 2025 by the following vote:
ROLL CALL VOTE:
AYES:
NOES:
ABSENT:
ABSTAIN:
DATED: January 27th, 2025
ATTEST: CITY OF MT. SHASTA
_____________________________ _____________________________ Rachel Agron, Deputy City Clerk John Redmond, Mayor
56 1
Charles W. Pillon, C.P.A.
CERTIFIED PUBLIC ACCOUNTANT
4685 Pleasant Hills Dr
Anderson, CA 96007
Telephone (530) 949-4177
Email: [email protected]
Communication with Those Charged with Governance at the Conclusion of the Audit January 8, 2025
City Council and Audit Committee
City of Mt. Shasta
305 N. Mt. Shasta Blvd.
Mt. Shasta, California 96067
I have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Mt. Shasta (the City) for the year ended June 30, 2024.
Professional standards require that I provide you with information about my responsibilities under generally accepted auditing standards and Government Auditing Standards as well as certain information related to the planned scope and timing of my audit. I have communicated such information in my letter to you dated March 6, 2023, as well as an update to this information in the communication to you during planning dated September 25, 2024. Professional standards also require that I communicate to you the following information related to my audit.
Significant Audit Matters
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during fiscal year 2023-24. I noted no transactions entered into by the City during these years for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. I have evaluated all identified related parties, accounting for related party transactions, if any, and accounting for significant unusual transactions, if any, and required disclosures, and found no further disclosures to you are required.
Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events.
Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information’s financial statements were:
Management’s estimate of the allowance for doubtful accounts is based on historical utility service revenues (i.e., water, sewer, drainage, and garbage), historical loss levels, and an analysis of the collectability of individual accounts. I evaluated the key factors and assumptions used to develop the allowance in determining that it is reasonable in relation to the financial statements taken as a whole.
Management’s estimate of the useful lives of capital assets is based on experience with the length of usefulness of previously purchased capital assets. I evaluated the key factors and assumptions used to develop the useful lives, as described in Note 1 to the financial statements, in determining that they are reasonable in relation to the financial statements taken as a whole.
Management’s estimates and assumptions required to be used under GASB Statement No. 68, as amended by No. 71, for the calculation of the City’s Net Pension Liability, Pension Expense and related Deferred Outflows and Inflows, as well as the allocation to the various major funds of the City, was based on the work performed by an outside specialist hired by management. The allocation to the various major funds was based on the funds’ contributions to CalPERS taken as a percentage of the whole. I evaluated the key factors and assumptions used to develop the yearend balances and adjustments in determining that they are reasonable in relation to the financial statements taken as a whole.
57 (Continued)
2 Management’s estimate of the allocation of certain general government costs to the City’s businesstype activities is based on a historical analysis of trends used to determine the usage of certain general government resources by the business-type activities. I evaluated the key factors and assumptions used to develop the allocation in determining that it is reasonable in relation to the financial statements taken as a whole.
Management’s estimate of the incremental borrowing rate used in computing the net present value of the future lease payments to determine the right to use lease asset and the corresponding lease liability and interest expense for the several operating leases that were converted to lease financings of the right to use an underlying asset. I evaluated the key factors and assumptions used to develop the balance upon implementation and at year-end in determining that they are reasonable in relation to the financial statements taken as a whole.
Management’s estimate of the fair market value of investments at year-end. I evaluated the key factors and assumptions used to develop the fair value in determining that it is reasonable in relation to the financial statements taken as a whole.
Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. The most sensitive disclosures affecting the financial statements were:
The disclosure of prior period adjustments in Note 12 to the financial statements. This disclosure describes the material prior period adjustments to the City’s General Fund, as well as Governmental Activities, to correct several prior period errors.
The financial statement disclosures are neutral, consistent, and clear.
Difficulties Encountered in Performing the Audit
I encountered no significant difficulties in dealing with management in performing and completing my audit.
Corrected and Uncorrected Misstatements
Professional standards require me to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. Please see the list of audit adjustments in Attachment #1. Management has corrected all such adjustments.
Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to my satisfaction, that could be significant to the financial statements or the auditor’s report.
I am pleased to report that no such disagreements arose during the course of my audit.
Management Representations
I have requested certain representations from management that are included in the management representation letter dated January 8, 2025.
Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the City’s financial statements or a determination of the type of auditor’s opinion that may be expressed on those statements, my professional standards require the consulting accountant to check with me to determine that the consultant has all the relevant facts. To my knowledge, there were no such consultations with other accountants.
Other Audit Findings or Issues
In my separate report dated January 8, 2025, on my consideration of the City’s internal control over financial reporting and on my tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters, I noted a material weakness in internal control, Finding 2024-001, which reports on the City's lack of effective financial statement close and reporting, resulting in materially misstated financial statements that had to be corrected during the audit. This is a repeat finding.
In my separate report dated January 8, 2025, on my consideration of the City’s internal control over compliance for each major federal award program required by the Uniform Guidance, the results of my tests disclosed no instances of noncompliance or other matters that are required to be reported. 58 (Continued)
3 Also, during my audit, I noted the following matters involving internal control over financial reporting and its operation that required me to make recommendations to management:
The City does not have a policy for accounting for leases and the new requirements required by the new GASB 87 Lease standard or a policy on accounting for subscription-based information technology arrangements and the new requirements required by the new GASB 96 standard. Related to this standard, the City does not have a policy governing interest rates, such as incremental borrowing rates, discount rates, etc. I recommend writing these policies and approving it as soon as possible. This is a repeat matter. The City does not have written policies and procedures over subrecipient selection and monitoring for Federal and other types of award programs. This is a repeat matter.
I generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the City’s auditor. However, these discussions occurred in the normal course of my professional relationship and my responses were not a condition to my retention.
Other Matters
I applied certain limited procedures to budgetary comparison schedules for the City’s major funds and the City’s pension disclosure schedules, which are required supplementary information (RSI) that supplements the basic financial statements. My procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management’s responses to my inquiries, the basic financial statements, and other knowledge I obtained during my audit of the basic financial statements. I did not audit the RSI and do not express an opinion or provide any assurance on the RSI.
I was engaged to report on the combining and individual nonmajor fund financial statements and the schedule of expenditures of federal awards, which accompany the financial statements but are not RSI. With respect to this supplementary information, I made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to my audit of the financial statements. I compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves.
Restriction on Use
This information is intended solely for the information and use of City Council, Audit Committee and management of the City of Mt. Shasta and is not intended to be, and should not be, used by anyone other than these specified parties.
Very truly yours,
Charles W. Pillon, CPA
59 Client: CITY OF MT. SHASTA
Report: 23-24 Audit Adjustments
Account Description
Workpaper
Reference Debit Credit
Net Income
Effect
1 HH1
GASB 68 pension adjustments
98.600.601500 PERS G68 Adj - Public Safety 175,372.00 0.00
98.700.601500 PERS G68 Adj - Gen Govt 94,848.00 0.00
98.000.194900 Deferred Outflows 0.00 48,372.00
98.000.196700 Net Pension Liability 0.00 376,253.00
98.000.196900 Deferred Inflows 154,405.00 0.00
45.200.601500 P.E.R.S. 3,364.00 0.00
45.250.601500 P.E.R.S. 10,090.00 0.00
45.000.194900 Deferred Outflows 0.00 3,645.00
45.000.196700 Net Pension Liability 0.00 19,795.00
45.000.196900 Deferred Inflows 9,986.00 0.00
40.200.601500 P.E.R.S. 13,307.00 0.00
40.000.194900 Deferred Outflows 0.00 3,605.00
40.000.196700 Net Pension Liability 0.00 19,579.00
40.000.196900 Deferred Inflows 9,877.00 0.00
30.200.601500 P.E.R.S. 366.00 0.00
30.000.194900 Deferred Outflows 0.00 99.00
30.000.196700 Net Pension Liability 0.00 538.00
30.000.196900 Deferred Inflows 271.00 0.00
Total 471,886.00 471,886.00 (297,347.00)
2 ZZ1
Update 6.30.24 Library committed fund balance
68.000.391000 Fund Balance - Committed 9,650.00 0.00
68.000.390000 Fund Balance - Restricted 0.00 9,650.00
Total 9,650.00 9,650.00 0.00
3 14
Record additional RMRA accrual
29.000.120000 Accounts Receivable 7,836.94 0.00
29.000.426100 Road Maint & Rehab 0.00 7,836.94
Total 7,836.94 7,836.94 7,836.94
4 CC1
Correct interest payables
45.000.262500 Bank Loan Payable - Long Term 251,658.95 0.00
45.000.201300 Interest Payable 0.00 251,658.95
45.000.201300 Interest Payable 232,738.00 0.00
45.250.810000 Interest on Debt 0.00 232,738.00
45.000.201300 Interest Payable 1,875.00 0.00
45.250.810000 Interest on Debt 0.00 1,875.00
45.000.201300 Interest Payable 34,553.08 0.00
45.250.810100 Lease Interest Expense 0.00 3,016.25
45.250.810000 Interest on Debt 0.00 31,536.83
45.000.201300 Interest Payable 1,530.54 0.00
ATTACHMENT #1
60 Client: CITY OF MT. SHASTA
Report: 23-24 Audit Adjustments
Account Description
Workpaper
Reference Debit Credit
Net Income
Effect
45.200.810100 Lease Interest Expense 0.00 90.00
45.200.810000 Interest on Debt 0.00 1,440.54
40.000.201300 Interest Payable 1,788.60 0.00
40.200.810000 Interest on Debt 0.00 364.89
40.200.810100 Lease Interest Expense 0.00 1,423.71
98.000.201300 Interest Payable 427.89 0.00
98.000.810000 Interest on Debt 0.00 184.14
98.000.810100 Lease Interest Expense 0.00 243.75
Total 524,572.06 524,572.06 272,913.11
5 CC1
Correct interest expense
45.200.810000 Interest on Debt 75,688.38 0.00
45.250.810000 Interest on Debt 0.00 75,688.38
45.200.810100 Lease Interest Expense 7,239.00 0.00
45.250.810100 Lease Interest Expense 0.00 7,239.00
40.000.101000 Cash in Bank 1,552.50 0.00
40.200.815000 Principal Payments 0.00 1,552.50
10.700.810000 Interest on Debt 580.97 0.00
10.700.810100 Lease Interest Expense 293.51 0.00
10.000.101000 Cash in Bank 0.00 874.48
45.200.810000 Interest on Debt 678.02 0.00
45.000.101000 Cash in Bank 0.00 678.02
Total 86,032.38 86,032.38 0.00
6 CC1
Adjust current potion LTD
40.000.265000 Lease Payable - Long Term 550.00 0.00
40.000.242500 Notes Payable - Current Year 0.00 550.00
45.000.265000 Lease Payable - Long Term 1,200.00 0.00
45.000.242500 Notes Payable - Current Year 0.00 1,200.00
98.000.265000 Lease Payable - Long Term 22,750.00 0.00
98.000.265500 Lease Liability 0.00 19,500.00
98.000.242500 Notes Payable - Current Year 0.00 3,250.00
47.000.265500 State Revolving Loan - Long Term 115,732.23 0.00
47.000.242500 Notes Payable - Current Year 0.00 115,732.23 Total 140,232.23 140,232.23 0.00
7 CC1
Correct MSPFA interest and investments
14.000.810000 Interest on Debt 26,687.88 0.00
14.000.451000 Installment Note Interest Income 0.00 26,687.88
96.000.201300 Interest Payable 5,388.49 0.00
96.000.810000 Interest on Debt 0.00 5,388.49
96.000.451000 Installment Note Interest Income 201.00 0.00
96.000.450300 Lease Interest Income 475.00 0.00
ATTACHMENT #1
61 Client: CITY OF MT. SHASTA
Report: 23-24 Audit Adjustments
Account Description
Workpaper
Reference Debit Credit
Net Income
Effect
96.000.120200 Interest Receivable 0.00 176.00
96.000.242500 Notes Payable - Current Year 0.00 500.00
96.000.201100 Revenue Bond Payable 5,000.00 0.00
96.000.242500 Notes Payable - Current Year 0.00 5,000.00 Total 37,752.37 37,752.37 4,712.49
8 CC3
Record interest exp on cap lease
50.000.810000 Lease Interest Expense 2,162.97 0.00
50.000.817500 Capital Lease Payments 0.00 2,162.97
Total 2,162.97 2,162.97 0.00
9 L5
Correct client's Axon entries for #1-2, 4-5
99.000.245000 Leases Payable - Current Year 27,326.00 0.00
99.000.130700 Right to Use Asset - AXON 0.00 9,796.69
99.000.395000 Prior Period Adjustment 0.00 17,529.31
98.000.395000 Prior Period Adjustments 27,326.36 0.00
98.000.245000 Leases Payable - Current Year 0.00 27,326.36
99.000.160200 Accumulated Amortization 10,174.60 0.00
99.000.395000 Prior Period Adjustment 0.00 10,174.60
99.600.819500 Amortization 377.91 0.00
99.000.160200 Accumulated Amortization 0.00 377.91
99.000.245000 Leases Payable - Current Year 21,962.48 0.00
99.000.130700 Right to Use Asset - AXON 0.00 3,067.76
99.000.395000 Prior Period Adjustment 0.00 18,894.72
98.000.395000 Prior Period Adjustments 21,962.48 0.00
98.000.245000 Leases Payable - Current Year 0.00 16,797.30
98.000.265500 Lease Liability 0.00 5,165.18
99.000.160200 Accumulated Amortization 3,730.13 0.00
99.000.395000 Prior Period Adjustment 0.00 3,730.13
99.600.819500 Amortization 331.18 0.00
99.000.160200 Accumulated Amortization 0.00 331.18
99.000.245000 Leases Payable - Current Year 8,812.74 0.00
99.000.395000 Prior Period Adjustment 0.00 8,812.74
98.000.395000 Prior Period Adjustments 8,812.74 0.00
98.000.245000 Leases Payable - Current Year 0.00 8,812.74
98.000.245000 Leases Payable - Current Year 63,412.45 0.00
98.000.265500 Lease Liability 0.00 63,412.45
98.000.265500 Lease Liability 14,579.83 0.00
98.000.245000 Leases Payable - Current Year 0.00 14,579.83
98.000.815200 Principal Payment Offset 14,579.83 0.00
98.600.815000 Principal Payments Offset 0.00 14,579.83
10.000.579000 Unclassified Revenues 63,412.45 0.00
10.000.590200 Proceeds from Debt 0.00 63,412.45
98.000.590200 Proceeds from Debt Offset 63,412.45 0.00
ATTACHMENT #1
62 Client: CITY OF MT. SHASTA
Report: 23-24 Audit Adjustments
Account Description
Workpaper
Reference Debit Credit
Net Income
Effect
98.000.450600 Other Financing Sources 0.00 63,412.45
Total 350,213.63 350,213.63 (709.09)
10 L2
Correct P&I
10.600.815000 Principal Payments 231.26 0.00
10.600.810000 Interest on Debt 0.00 231.26
98.000.265500 Lease Liability 231.26 0.00
98.600.815000 Principal Payments Offset 0.00 231.26
Total 462.52 462.52 231.26
11 L5
Reverse client AD292976, doubled
99.000.160200 Accumulated Amortization 26,946.56 0.00
99.000.160200 Accumulated Amortization 39,444.67 0.00
99.000.390000 Investment in Capital Assets 0.00 39,444.67
99.600.819500 Amortization 0.00 26,946.56
99.000.390000 Investment in Capital Assets 121,513.67 0.00
99.000.152000 Right to Use Asset - Equipment 0.00 121,513.67 Total 187,904.90 187,904.90 26,946.56
12 F1
Error in removing scrapped asset
99.000.819000 Depreciation 26,529.00 0.00
99.000.150200 Equipment, Vehicles and Furnishings 0.00 26,529.00 Total 26,529.00 26,529.00 (26,529.00)
13 15
Correct recording of LTF income
20.000.101000 Cash in Bank 22,828.50 0.00
20.000.461000 Local Transportation Fund 0.00 22,828.50
10.000.439000 Other Fines and Forfeitures 22,828.50 0.00
10.000.101000 Cash in Bank 0.00 22,828.50
Total 45,657.00 45,657.00 0.00
14 C1
Record misc corrections to AR
10.000.439000 Other Fines and Forfeitures 2,600.04 0.00
10.000.120000 Accounts Receivable 0.00 2,600.04
10.000.120000 Accounts Receivable 2,345.07 0.00
10.000.579000 Unclassified Revenues 0.00 1,662.07
10.000.426700 Prop 64 Grant 0.00 683.00
Total 4,945.11 4,945.11 (254.97)
15 15.1
ATTACHMENT #1
63 Client: CITY OF MT. SHASTA
Report: 23-24 Audit Adjustments
Account Description
Workpaper
Reference Debit Credit
Net Income
Effect
Correct recording of doc fees
10.000.429200 State Grant - LEAP 906.39 0.00
10.000.407000 Real Property Transfer Tax 0.00 906.39
Total 906.39 906.39 0.00
16 BB2
Correct over accrual
10.000.210000 Salaries Payable 2,000.00 0.00
10.650.600100 Salaries - Regular Time 0.00 2,000.00
Total 2,000.00 2,000.00 2,000.00
17 21
Corrections to EF grant accruals
41.910.429000 Other State Grants 18,824.12 0.00
41.000.120000 Accounts Receivable 0.00 18,824.12
Total 18,824.12 18,824.12 (18,824.12)
18 16
Correct State grant accruals
10.000.120000 Accounts Receivable 955.00 0.00
10.000.429000 Other State Grants 0.00 80.00
10.000.429200 State Grant - LEAP 0.00 875.00
Total 955.00 955.00 955.00
19 16
Correct Parks grant accrual
10.000.429000 Other State Grants 30,567.08 0.00
10.000.120000 Accounts Receivable 0.00 30,567.08
67.000.120000 Accounts Receivable 30,567.08 0.00
67.000.429000 Other State Grants 0.00 30,567.08
Total 61,134.16 61,134.16 0.00
20 16
Record PPA for Cohort 3 22-23 exps
10.000.395000 Prior Period Adjustments 16,343.00 0.00
10.625.711000 Contract Services 0.00 16,343.00
Total 16,343.00 16,343.00 16,343.00
21 C1
Record PPA for def rev unavailable Prop172
10.000.395000 Prior Period Adjustments 29,673.98 0.00
10.000.240000 Deferred Revenue Unavailable 0.00 29,673.98 Total 29,673.98 29,673.98 0.00
22 16
ATTACHMENT #1
64 Client: CITY OF MT. SHASTA
Report: 23-24 Audit Adjustments
Account Description
Workpaper
Reference Debit Credit
Net Income
Effect
Move excess STIP costs to LTF
21.000.101000 Cash in Bank 4,764.13 0.00
21.921.711500 Engineering Consultant Svcs 0.00 4,764.13
20.000.711500 Engineering Consultant Svcs 4,764.13 0.00
20.000.101000 Cash in Bank 0.00 4,764.13
Total 9,528.26 9,528.26 0.00
23 F1
Correct 23-24 EF depreciation
45.250.819000 Depreciation 16,734.50 0.00
45.000.160100 Accumulated Depreciation 0.00 16,734.50
Total 16,734.50 16,734.50 (16,734.50)
GW1 50
Record/correct G-W LTD activity
98.000.265500 Lease Liability 23,629.14 0.00
98.000.245000 Leases Payable - Current Year 0.00 23,629.14
98.000.815000 Principal Payments Offset 6,919.30 0.00
98.600.815000 Principal Payments Offset 0.00 2,623.69
98.000.815100 Lease Principal Payments Offset 0.00 4,295.61
98.000.242501 Capital Lease Payable Current 0.00 766.50
98.000.265001 LT Lease Payable CB 26,263.11 0.00
98.000.815100 Lease Principal Payments Offset 0.00 25,496.61 Total 56,811.55 56,811.55 25,496.61
GW2 41
Correct capital outlay
45.250.781000 Expensed Equip. <$1000 1,953.85 0.00
45.250.880100 Capital Outlay 0.00 1,953.85
99.000.150200 Equipment, Vehicles and Furnishings 33,340.45 0.00
99.000.150700 Construction in Progress 24,031.55 0.00
99.000.880100 Capital Outlay Offset 0.00 297,719.47
99.000.395000 Prior Period Adjustment 240,347.47 0.00
Total 299,673.32 299,673.32 297,719.47
GW3 F1
Correct 23-24 depreciation
99.770.819000 Depreciation 31,561.64 0.00
99.600.819000 Depreciation 235,927.73 0.00
99.820.819000 Depreciation 539,791.22 0.00
99.000.819000 Depreciation 0.00 781,212.66
99.000.160100 Accumulated Depreciation 0.00 26,067.93
Total 807,280.59 807,280.59 (26,067.93)
GRAND TOTAL 3,215,701.98 3,215,701.98 268,687.83
ATTACHMENT #1
65 1
Charles W. Pillon, C.P.A.
CERTIFIED PUBLIC ACCOUNTANT
4685 Pleasant Hills Dr
Anderson, CA 96007
Telephone (530) 949-4177
Email: [email protected]
Communication with Those Charged with Governance at the Conclusion of the Audit January 8, 2025
Board of Directors and Audit Committee
Mount Shasta Public Financing Authority
A Component Unit of the City of Mt. Shasta, California
305 N. Mt. Shasta Blvd.
Mt. Shasta, California 96067
I have audited the financial statements of the governmental activities and major fund of the Mount Shasta Public Financing Authority (the Authority), a component unit of the City of Mt. Shasta, California (the City) for the year ended June 30, 2024. Professional standards require that I provide you with information about my responsibilities under generally accepted auditing standards and Government Auditing Standards, as well as certain information related to the planned scope and timing of my audit. I have communicated such information in my engagement letter to you dated March 6, 2023, as well as an update to this information in the communication to you during planning dated September 25, 2024. Professional standards also require that I communicate to you the following information related to my audit.
Significant Audit Matters
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the Authority are described in Note 1 to the financial statements. There were no new accounting policies adopted during the fiscal year ended June 30, 2024. The application of existing policies was not changed during FY 23-24. I noted no transactions entered into by the Authority during the year for which there is a lack of authoritative guidance or consensus. I have evaluated all identified related parties, accounting for related party transactions, if any, and accounting for significant unusual transactions, if any, and required disclosures, and found no further disclosures to you are required.
Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events.
Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. For FY 23- 24, there were no sensitive estimates affecting the governmental activities and major fund.
Certain significant accounting transactions and related financial statement disclosures are particularly important because of their significance to financial statement users. For FY 23-24, there were no new significant accounting transactions affecting the governmental activities and major fund.
The financial statement disclosures are neutral, consistent, and clear.
Difficulties Encountered in Performing the Audit
I encountered no significant difficulties in dealing with management in performing and completing my audit.
Corrected and Uncorrected Misstatements
Professional standards require me to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management.
Management has corrected all such misstatements. Please see the City’s communication letter for the list of these adjustments.
66 (Continued)
2 Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to my satisfaction, that could be significant to the financial statements or the auditor’s report.
I am pleased to report that no such disagreements arose during the course of my audit.
Management Representations
I have requested certain representations from management that are included in the management representation letter dated January 8, 2025.
Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the Authority’s financial statements or a determination of the type of auditor’s opinion that may be expressed on those statements, my professional standards require the consulting accountant to check with me to determine that the consultant has all the relevant facts. To my knowledge, there were no such consultations with other accountants.
Other Audit Findings or Issues
In my separate report dated January 8, 2025, on my consideration of the Authority’s internal control over financial reporting and on my tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters, I noted no material weaknesses or significant deficiencies in internal control that are required to be communicated to governance.
I generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the Authority’s auditor. However, these discussions occurred in the normal course of my professional relationship and my responses were not a condition to my retention.
Restriction on Use
This information is intended solely for the information and use of Board of Directors, Audit Committee and management of the Mount Shasta Public Financing Authority and is not intended to be, and should not be, used by anyone other than these specified parties.
Very truly yours,
Charles W. Pillon, CPA
67 CITY OF MT. SHASTA
Mt. Shasta, California
BASIC FINANCIAL STATEMENTS
and
SINGLE AUDIT REPORTS
June 30, 2024
68 CITY OF MT. SHASTA
TABLE OF CONTENTS
June 30, 2024
Page
Number
CITY OFFICIALS .......................................................................................................................................... 1 INDEPENDENT AUDITOR’S REPORT ....................................................................................................... 2 BASIC FINANCIAL STATEMENTS:
Government-wide Financial Statements
Statement of Net Position ....................................................................................................................... 5 Statement of Activities ............................................................................................................................ 6 Fund Financial Statements
Governmental Funds:
Balance Sheet – Governmental Funds and Reconciliation of Governmental Fund Balance to the Statement of Net Position – Governmental Activities ............................................................... 7 Statement of Revenues, Expenditures and Changes in
Fund Balance – Governmental Funds ................................................................................................ 8 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance – Governmental Funds to the Statement of Activities – Governmental Activities ................. 9 Proprietary Funds:
Statement of Net Position – Proprietary Funds .................................................................................... 10 Statement of Revenues, Expenses and Changes in Net Position – Proprietary Funds ...................... 11 Statement of Cash Flows – Proprietary Funds ..................................................................................... 12 Notes to the Financial Statements ...................................................................................................... .13 REQUIRED SUPPLEMENTARY INFORMATION (Unaudited):
Budgetary Comparison Schedule
General Fund ........................................................................................................................................ 41 Community Development Block Grant Fund ......................................................................................... 42 Cost-Sharing Multiple-Employer Defined Benefit Pension Plans Schedule of the Local Government’s Proportionate Share of the Net Pension Liability ..................... 43 Schedule of the Plan Contributions – Combined Plans ........................................................................ 44 SUPPLEMENTARY INFORMATION:
Combining Statements
Combining Balance Sheet – Non-Major Governmental Funds ............................................................ 45 Combining Statement of Revenues, Expenditures and Changes in Fund Balance – Non-Major Governmental Funds .............................................................................. 47 69 CITY OF MT. SHASTA
TABLE OF CONTENTS
June 30, 2024
Page
Number
SINGLE AUDIT SCHEDULES AND REPORTS
Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ………………………..... 49 Independent Auditor’s Report on Compliance for Each Major Program and on Internal Control over Compliance Required by the Uniform Guidance ……………………….... 51 Schedule of Expenditures of Federal Awards ……………………………………………………………….... 53 Notes to the Schedule of Expenditures of Federal Awards ………………………………………………….. 54 Schedule of Findings and Questioned Costs ………………………………….………………………………. 55 Corrective Action Plan ………………………………….…………………………………………..……………. 57 70 CITY OF MT. SHASTA CITY OFFICIALS
June 30, 2024
CITY COUNCIL
Mayor ………………………………………………………………………………………… John Stackfleth Council Member ………………………………………………………………………………John Redmond Council Member …………………………………………………………………………………Tessa Clure Council Member ………………………………………………………………………………Jeffrey Collings Council Member …………………………………………………………………………………...Tim Sterns
ADMINISTRATIVE
City Manager ……………………………………………………………………………………..Todd Juhasz Finance Director …………………………………………………………………Muriel Howarth Terrell City Clerk ........................................................................................................................John Kennedy City Treasurer ………………………………………………………………………Rhonda Boss-Monaghan Chief of Police ………………………………………………………………………………….Robert Gibson Fire Chief ……………………………………………………………………………………...Cory Burns Public Works Director …………………………………………………………………………….Ken Kellogg City Attorney …………………………………………………………………………………..John Kenny 1 71
INDEPENDENT AUDITOR’S REPORT
To the City Council and Audit Committee
City of Mt. Shasta, California
Report on the Audit of the Financial Statements
Opinions
I have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Mt. Shasta, California as of and for the year ended June 30, 2024, and the related notes to the financial statements, which collectively comprise the City of Mt. Shasta, California’s basic financial statements as listed in the table of contents.
In my opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of City of Mt. Shasta, California as of June 30, 2024, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinions
I conducted my audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. My responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of my report. I am required to be independent of the City of Mt. Shasta, California and to meet my other ethical responsibilities, in accordance with the relevant ethical requirements relating to my audit. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinions.
Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City of Mt. Shasta, California’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
Auditor’s Responsibilities for the Audit of the Financial Statements My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
2 72
INDEPENDENT AUDITOR’S REPORT
(Continued)
In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, I:
Exercise professional judgment and maintain professional skepticism throughout the audit. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City of Mt. Shasta, California’s internal control. Accordingly, no such opinion is expressed.
Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
Conclude whether, in my judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City of Mt. Shasta, California’s ability to continue as a going concern for a reasonable period of time.
I am required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that I identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis (not presented), the budgetary comparison information on pages 41-42 and the pension disclosure schedules on pages 43-44 be presented to supplement the basic financial statements.
Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. I have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to my inquiries, the basic financial statements, and other knowledge I obtained during my audit of the basic financial statements. I do not express an opinion or provide any assurance on the information because the limited procedures do not provide me with sufficient evidence to express an opinion or provide any assurance.
Supplementary Information
My audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Mt. Shasta, California’s basic financial statements. The accompanying combining and individual nonmajor fund financial statements on pages 45-48 and schedule of expenditures of federal awards on page 53, as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, are presented for the purpose of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In my opinion, the combining and individual nonmajor fund financial statements and the schedule of expenditures of federal awards are fairly stated, in all material respects, in relation to the basic financial statements as a whole. 3 73
INDEPENDENT AUDITOR’S REPORT
(Continued)
Other Information
Management has omitted Management’s Discussion and Analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board. My opinion on the basic financial statements is not affected by this missing information.
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, I have also issued my report dated January 8, 2025, on my consideration of the City of Mt. Shasta, California's internal control over financial reporting and on my tests of its compliance with certain provision of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of my testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City of Mt. Shasta, California’s internal control over financial reporting or on compliance.
That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering City of Mt. Shasta, California's internal control over financial reporting and compliance.
Charles W. Pillon, CPA
Anderson, California
January 8, 2025
4 74
BASIC FINANCIAL STATEMENTS
75 Governmental Business-Type
Activities Activities Total
ASSETS
Cash and investments, current unrestricted $ 3,550,997 $ 3,289,284 $ 6,840,281 Cash and investments, current restricted - 1,007,876 1,007,876 Receivables (net of allowances for bad
debts, where applicable):
Trade accounts - 442,850 442,850
Loans 648,737 - 648,737
Intergovernmental 1,307,416 1,257,963 2,565,379
Leases 20,369 - 20,369
Interest 1,469 85 1,554
Assessments and other 322,117 - 322,117
Internal balances 58,091 (58,091) -
Prepaid expenses 24,800 - 24,800
Cash investments, non-current unrestricted 216,697 351,234 567,931 Contributed capital invested 39,918 - 39,918
Capital assets:
Non-depreciable 822,027 1,283,690 2,105,717
Depreciable, net 6,777,371 54,318,158 61,095,529
Total Assets 13,790,009 61,893,049 75,683,058
DEFERRED OUTFLOWS OF RESOURCES
Deferred outflows - pensions 2,068,653 250,561 2,319,214
LIABILITIES
Accounts payable 352,625 278,289 630,914
Accrued liabilities 174,849 8,963 183,812
Overdraft payable 138,565 - 138,565
Due to other governments 4,803 - 4,803
Unearned revenue 82,541 - 82,541
Deposits - 166,685 166,685
Long-term liabilities:
Due within one year 254,330 583,325 837,655
Due in more than one year 1,254,365 16,342,142 17,596,507 Net pension liability 4,859,082 641,558 5,500,640
Total Liabilities 7,121,160 18,020,962 25,142,122
DEFERRED INFLOWS OF RESOURCES
Deferred inflows - pensions 168,600 20,945 189,545
Deferred inflows - leases 19,819 - 19,819
Total Deferred Inflows of Recources 188,419 20,945 209,364
NET POSITION
Net investment in capital assets 6,283,762 39,104,234 45,387,996 Restricted 2,870,696 920,150 3,790,846
Unrestricted (605,375) 4,077,319 3,471,944
Total Net Position $ 8,549,083 $ 44,101,703 $ 52,650,786 CITY OF MT. SHASTA
Statement of Net Position
June 30, 2024
The accompanying notes are an integral
part of these financial statements.
5 76
Operating Capital BusinessCharges for Grants and Grants and Governmental Type Expense Services Contributions Contributions Activities Activities Total Governmental Activities:
General government $ 1,789,110 $ 109,679 $ 752,122 $ - $ (927,309) $ (927,309) - $ Public safety 3,779,016 298,473 118,154 268,678 (3,093,711) - (3,093,711) Public works - administration 69,113 21,019 - - (48,094) - (48,094) Public works - streets & roads 1,136,879 - 222,873 23,483 (890,523) - (890,523) Public works - buildings and grounds 377,506 - - - (377,506) - (377,506) Community development 1,165,269 27,540 834,127 26,591 (277,011) - (277,011) Library 156,344 - - - (156,344) - (156,344)
Interest on long-term debt 25,567 - - - (25,567) - (25,567) Total Governmental Activities 8,498,804 456,711 1,927,276 318,752 (5,796,065) - (5,796,065) Business-Type Activities:
Water 1,128,216 768,136 - 1,260,323 - 900,243 900,243
Sewer 4,025,437 2,478,155 - 1,838,779 - 291,497 291,497 Garbage 1,297,060 1,298,024 - - - 964 964
Drainage 95,214 25,595 - - - (69,619) (69,619)
Total Business-Type Activities 6,545,927 4,569,910 - 3,099,102 - 1,123,085 1,123,085 Total Primary Government $ 15,044,731 $ 5,026,621 $ 1,927,276 $ 3,417,854 (5,796,065) 1,123,085 (4,672,980) General Revenues:
Taxes:
Property 748,914 - 748,914
Sales 2,903,023 - 2,903,023
Transient occupancy 1,290,177 - 1,290,177
Other 85,397 52,996 138,393
Investment earnings 25,412 3,117 28,529
Net change in fair value of investments 20,223 37,861 58,084 Lease revenues 9,910 - 9,910
Other 105,843 - 105,843
Gain on sale of capital assets 9,000 - 9,000
5,197,899 93,974 5,291,873
Changes in Net Position (598,166) 1,217,059 618,893
Net position, beginning, as reported 9,447,359 42,884,644 52,332,003 Prior period adjustment (300,110) - (300,110)
Net Position, Beginning, as Restated 9,147,249 42,884,644 52,031,893 Net Position, Ending $ 8,549,083 $ 44,101,703 $ 52,650,786 Total General Revenues
CITY OF MT. SHASTA
Statement of Activities
For The Year Ended June 30, 2024
Program Revenues
Net (Expense) Revenues and
Changes in Net Position
The accompanying notes are an integral
part of these financial statements.
6 77
Community
Development Other Total
General Block Grant Debt Service Governmental Governmental Fund Fund Fund Funds Funds
ASSETS
Cash and investments, unrestricted $ 719,559 $ - $ 3,048,135 - $ $ 3,767,694 Receivables, net of allowance
Loans - 648,737 - - 648,737
Intergovernmental 1,010,383 36,146 - 260,887 1,307,416
Leases 20,369 - - - 20,369
Interest 100 - - 1,369 1,469
Special assessments and other 322,117 - - - 322,117
Due from other funds 138,793 - - - 138,793
Prepaid expenses 24,800 - - - 24,800
Total Assets $ 2,236,121 $ 684,883 $ 3,310,391 - $ $ 6,231,395 Liabilities
Accounts payable $ 281,517 $ 10,753 $ - $ 60,355 $ 352,625 Accrued liabilities 174,849 - - - 174,849
Overdraft payable - 30,121 - 108,444 138,565
Due to other funds - - - 80,702 80,702
Due to other governments - - - 4,803 4,803
Deferred reveneue - unavailable 29,674 - - - 29,674
Unearned revenue 60,052 - - 22,489 82,541
Total Liabilities 546,092 40,874 - 276,793 863,759
Deferred Inflows of Resources
Deferred iniflows - leases 19,819 - - - 19,819
Fund Balances
Nonspendable 24,800 648,737 - - 673,537
Restricted - - - 2,952,413 2,952,413
Committed 177,724 - - 162,387 340,111
Unassigned 1,467,686 (4,728) - (81,202) 1,381,756
Total Fund Balances 1,670,210 644,009 - 3,033,598 5,347,817 $ 2,236,121 $ 684,883 $ 3,310,391 - $ $ 6,231,395
Total governmental fund balance, as above $ 5,347,817
Amounts reported for governmental activities in the Statement of Net Position are different because:
Capital assets used in governmental activities are not financial resources and therefore not reported in the funds 7,599,398
Contributed capital investment used in governmental activities is not a financial resource and therefore not reported in the funds 39,918 Long-term liabilities, including bonds and bond premium payable, are not due and payable in the current period and therefore are not reported in the funds (1,328,490) Pension liabilities are not due and payable in the current period and therefore are not reported on the balance sheet (4,859,082)
Compensated absenses in governmental activities are not due and payable in the current period and therefore are not reported in the balance sheet (180,205) Deferred outflows and inflows are not receivable or due and payable in the current period and therefore are not reported on the balance sheet 1,900,053 Net Position of Governmental Activities $ 8,549,083
LIABILITIES, DEFERRED INFLOWS OF
RESOURCES AND FUND BALANCES
Total Liabilities, Deferred Inflows of
Resources and Fund Balances
CITY OF MT. SHASTA
Balance Sheet - Governmental Funds and
June 30, 2024
Statement of Net Position - Governmental Activities
Reconciliation of Governmental Fund Balance to the
The accompanying notes are an integral
part of these financial statements.
7 78
Community
Development Other Total
General Block Grant Debt Service Governmental Governmental Fund Fund Fund Funds Funds
REVENUES
Property taxes $ 748,914 $ - $ - $ - $ 748,914
Sales and use taxes 2,278,883 - - 624,140 2,903,023
Transient occupancy taxes 1,290,177 - - - 1,290,177
Franchises 85,397 - - - 85,397
Assessments - - - 58,549 58,549
Licenses and permits 109,679 - - - 109,679
Intergovernmental revenues 942,507 77,533 - 836,268 1,856,308 CARES Act Covid-19 revenues - 389,720 - - 389,720
Charges for services 270,469 - - 1,056 271,525
Fines, forfeitures and penalties 16,958 - - - 16,958
Use of money and property 14,064 4,675 314,500 6,673 339,912 Net change in fair value of investments 13,723 - - 6,500 20,223 Lease revenues 9,910 - - - 9,910
Other and administrative 95,988 - - 9,855 105,843
Total Revenues 5,876,669 471,928 314,500 1,543,041 8,206,138
EXPENDITURES
Current:
City council 51,439 - - - 51,439
City administration 253,040 - - - 253,040
City clerk 33,999 - - - 33,999
Finance and personnel 403,751 - - - 403,751
City attorney 60,663 - - - 60,663
Police protection 1,488,227 - - 48,708 1,536,935
Fire protection 1,015,639 - - 19,270 1,034,909
Public safety dispatching 461,565 - - - 461,565
Animal regulation - code enforcement 306,879 - - - 306,879 Planning 203,165 - - - 203,165
Public works - administration 69,113 - - - 69,113
Public works - streets & roads 460,895 - - 53,572 514,467 Public works - buildings & grounds 345,944 - - - 345,944 Public transit assistance - - - 82,621 82,621
Insurance 331,313 - - - 331,313
Community and economic development 176,409 177,452 - 403,818 757,679 CARES Act Covid-19 assistance - 407,590 - - 407,590
Library - - - 156,344 156,344
Other 328,463 - - - 328,463
Capital outlay 550,429 - - 283,773 834,202
Debt service:
Principal payments 70,482 - 167,700 25,497 263,679
Interest 33,770 - 146,800 2,163 182,733
Total Expenditures 6,645,185 585,042 314,500 1,075,766 8,620,493 (768,516) (113,114) - 467,275 (414,355)
OTHER FINANCING SOURCES (USES)
Operating transfers in (out) 221,444 (22,455) - (198,989) - Proceeds from sale of assets 9,000 - - - 9,000
Proceeds from debt 73,242 - - - 73,242
Re-measurement of lease liability (370) - - - (370)
Total Other Financing Sources (Uses) 303,316 (22,455) - (198,989) 81,872 Changes in Fund Balance (465,200) (135,569) - 268,286 (332,483) Beginning of Year, as reported 2,224,859 779,578 - 2,765,312 5,769,749 Prior period adjustment (89,449) - - - (89,449)
Beginning of the year, restated 2,135,410 779,578 - 2,765,312 5,680,300 Fund Balance - End of Year $ 1,670,210 $ 644,009 $ 3,033,598 - $ $ 5,437,817 CITY OF MT. SHASTA
Statement of Revenues, Expenditures and Changes in Fund Balance - Governmental Funds For The Year Ended June 30, 2024
Excess (Deficiency) of Revenues Over (Under)
Expenditures
The accompanying notes are an integral
part of these financial statements. 8
79 Changes in Fund Balance - Governmental Funds $ (332,483) Amounts reported for governmental activities in the statement of activities is different because:
Governmental funds report capital outlays as expenditures. However, in the Statement of Activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation/amortization expense:
Capital outlay 834,202
Depreciation expense (848,418)
Amortization expense (31,623)
Governmental funds report repayments of principal on long-term obligations as expenditures, but it is reported as a reduction of long-term liabilities in the Statement of Net Position. 95,979 Governmental funds report issuance of long-term debt, including bond premium, as a revenue, but the issuance is reported as long-term liabilities in the Statement of Net Position and does not affect the Statement of Activities. (72,872) Governmental funds do not report the amortization of bond premium as a reduction of interest expenditure, but it is reported in the Statement of Activities 9,938 Governmental funds do not report the change in accrual of interest on long-term obligations, but it is reported in the Statement of Activities 428
Governmental funds do not report the change in compensated absences as revenue or (expenditure), but it is reported in the Statement of Activities 16,903 Governmental funds do not report the decrease of unfunded pension oblications revenue or (expenditure), but it is reported in the Statement of Activities (270,220) Changes in Net Position - Governmental Activities $ (598,166) Reconciliation of the Statement of Revenues, Expenditures and CITY OF MT. SHASTA
For The Year Ended June 30, 2024
Changes in Fund Balance - Governmental Funds
to the Statement of Activities - Governmental Activities The accompanying notes are an integral
part of these financial statements.
9 80
Total
Enterprise
Water Sewer Garbage Drainage Funds
ASSETS
Cash and investments, current unrestricted $ 116,254 $ 2,903,523 $ 269,507 $ 3,289,284 - $ Cash and investments, current restricted - 1,007,876 - - 1,007,876 Receivables (net of allowances for bad
debts, where applicable):
Trade accounts 93,682 228,154 118,870 2,144 442,850
Intergovernmental 1,257,963 - - - 1,257,963
Interest - - 85 - 85
Cash investments, non-current unrestricted 351,234 - - - 351,234 Capital assets:
Non-depreciable 1,075,629 208,061 - - 1,283,690
Depreciable, net 15,019,475 38,651,518 - 647,165 54,318,158 Total Assets 17,914,237 42,999,132 388,462 649,309 61,951,140
DEFERRED OUTFLOWS OF RESOURCES
Deferred outflows - pensions 122,915 124,266 - 3,380 250,561
LIABILITIES
Accounts payable 91,927 70,590 112,292 3,480 278,289
Accrued liabilities 2,669 6,230 - 64 8,963
Deposits 80,562 86,123 - - 166,685
Due to other funds - - - 58,091 58,091
Long-term liabilities:
Due within one year 17,423 565,902 - - 583,325
Due in more than one year 131,949 16,210,193 - - 16,342,142 Net pension liability 314,721 318,183 - 8,654 641,558
Total Liabilities 639,251 17,257,221 112,292 70,289 18,079,053
DEFERRED INFLOWS OF RESOURCES
Deferred inflows - pensions 10,274 10,387 - 284 20,945
NET POSITION
Net investment in capital assets 15,960,885 22,496,184 - 647,165 39,104,234 Restricted:
Restricted for debt service reserve - 140,440 - - 140,440 Restricted for short-lived asset reserve - 779,710 - - 779,710 Unrestricted 1,426,742 2,439,456 276,170 (65,049) 4,077,319 Total Net Position $ 17,387,627 $ 25,855,790 $ 276,170 $ 582,116 $ 44,101,703 CITY OF MT. SHASTA
Statement of Net Position - Proprietary Funds
June 30, 2024
The accompanying notes are an integral
part of these financial statements.
10 81
Total
Enterprise
Water Sewer Garbage Drainage Funds
REVENUES
User fees and charges $ 768,136 $ 2,478,155 $ 1,298,024 $ 25,595 $ 4,569,910
OPERATING EXPENSES
Cost of power and water 10,350 147,028 - - 157,378
Maintenance, operations, and administration 547,629 1,058,136 1,297,060 72,603 2,975,428 Depreciation and amortization 566,132 662,665 - 22,611 1,251,408 Total Operating Expenses 1,124,111 1,867,829 1,297,060 95,214 4,384,214 Operating Income (Loss) (355,975) 610,326 964 (69,619) 185,696
NONOPERATING REVENUES (EXPENSES)
Interest earned 203 2,499 415 - 3,117
Net change in fair value of investments 37,861 - - - 37,861 Franchise fees - - 52,996 - 52,996
Interest expense (4,105) (722,420) - - (726,525)
Total Nonoperating Revenues (Expenses) 33,959 (719,921) 53,411 - (632,551) Capital grants and contributions 1,260,323 1,838,779 - - 3,099,102 Impairment loss - (1,435,188) - - (1,435,188)
Changes in Net Position 938,307 293,996 54,375 (69,619) 1,217,059
NET POSITION
Beginning of Year 16,449,320 25,561,794 221,795 651,735 42,884,644 End of Year $ 17,387,627 $ 25,855,790 276,170$ 582,116$ $ 44,101,703 CITY OF MT. SHASTA
Statement of Revenues, Expenses and Changes in Net Position Proprietary Funds
For The Year Ended June 30, 2024
The accompanying notes are an integral
part of these financial statements.
11 82
Total
Enterprise
Water Sewer Garbage Drainage Funds
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 738,255 $ 2,472,658 $ 1,296,367 $ 25,550 $ 4,532,830 Payments to suppliers (285,729) (735,083) (1,296,342) (16,509) (2,333,663) Payments to employees (265,171) (488,325) (9,044) - (762,540) Net cash provided (used) by operating activities 187,355 1,249,250 25 1,436,627 (3)
CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES
Receipt of franchise fees - 52,996 - 52,996 -
Net cash provided (used) by non-capital financing activities - 52,996 - 52,996 -
CASH FLOWS FROM CAPITAL AND RELATED FINANCING
Capital grants received 600,978 6,158,420 - 6,759,398 - Purchase of capital assets (1,184,922) (3,533,087) - (4,718,009) - Proceeds from debt issuance 609,902 - - 609,902 -
Principal paid on capital debt (4,404) (230,039) - (234,443) - Interest payments on debt (4,160) (705,030) - (709,190) - Net cash provided (used) by capital and related financing (592,508) 2,300,166 - 1,707,658 -
CASH FLOWS FROM INVESTING ACTIVITIES
Interest income received 447 2,497 461 3 3,408
Net change in fair value of investments 37,861 - - 37,861 - Net cash provided (used) by investing activities 38,308 2,497 461 41,269 3 Net Increase (Decrease) in Cash (366,845) 3,551,913 53,482 3,238,550 - CASH
Beginning of Year 834,333 359,486 216,025 1,409,844 -
End of Year $ 467,488 $ 3,911,399 269,507$ -$ 4,648,394 $ Comprised of:
Cash and investments, current unrestricted $ 116,254 $ 2,903,523 269,507$ -$ 3,289,284 $ Cash investments, non-current unrestricted 351,234 - - - 351,234 Cash and investments, restricted 1,007,876 - - - 1,007,876 Cash and Investments $ 467,488 $ 3,911,399 269,507$ -$ 4,648,394 $ Reconciliation of operating income (loss) to cash
provided (used) by operating activities:
Operating income (loss) $ (355,975) $ 610,326 964$ $ (69,619) $ 185,696 Adjustments to reconcile operating income (loss) to
cash provided (used) by operating activities:
Depreciation and amortization 566,132 662,665 22,611 - 1,251,408 (Increase) decrease in:
accounts receivable (23,854) (5,497) (1,657) (45) (31,053) deferred outflows - pensions 3,605 3,645 - 99 7,349
Increase (decrease) in:
accounts payable 2,117 (28,924) 718 3,480 (22,609)
compensated absences (4,012) 51 - (3,961) -
deposits and other liabilities (10,360) (2,825) - (260) (13,445) due to other funds - - - 58,092 58,092
overdraft payable - - - (14,628) (14,628)
net pension liability 19,579 19,795 - 538 39,912
deferred inflows - pensions (9,877) (9,986) - (271) (20,134) Net Cash Provided (Used) by Operating Activities $ 187,355 $ 1,249,250 $ 25 $ 1,436,627 (3) $ Note regarding operating activities:
The respective change in accounts payable does
not reflect the payable related to capital assets $ 86,377 $ 18,898 $ - $ 105,275 - Proprietary Funds
For The Year Ended June 30, 2024
CITY OF MT. SHASTA
Statement of Cash Flows
The accompanying notes are an integral
part of these financial statements.
12 83
CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
13 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The City of Mt. Shasta, California’s (hereafter “the City”) financial statements are prepared in accordance with generally accepted accounting principles (GAAP). The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (Statements and Interpretations). The accounting policies of the City conform to accounting principles generally accepted in the United States of America as applicable to governmental entities. The more significant accounting policies established in GAAP and used by the City are discussed below.
A. Reporting Entity
The City operates under a City Manager - City Council form of government and provides the following services:
public safety, streets and roads, library, water, sewer, sanitation and drainage, public improvements, planning and zoning, and general administrative services.
The City has defined its reporting entity in accordance with U.S. generally accepted accounting principles, which provides guidance for determining which governmental activities, organization, and functions should be included in the reporting entity. In evaluating how to define the City for financial reporting purposes, management has considered all potential component units. The primary criterion for including a potential component unit within the reporting entity is the governing body's financial accountability. A primary government is financially accountable if it appoints a voting majority of a component unit's governing body and it imposes its will on the component unit, or if there is a potential for the component unit to provide specific financial benefits to, or impose specific financial burdens on, the primary government unit. A primary government may also be financially accountable if a component unit is fiscally dependent on the primary governmental entity regardless of whether the component unit has a separately elected governing board, a governing board appointed by a higher level of government, or a jointly appointed board.
In accordance with GASB Statement No. 61, the City's financial reporting entity comprises the following:
Primary Government:
City of Mt. Shasta
Blended Component Unit:
The Mount Shasta Public Financing Authority
Blended component units are separate legal entities that meet the component unit criteria described above and whose governing body is the same or substantially the same as the City's governing board or the component unit provides services entirely to the City. This component units' fund is blended into those of the City by appropriate activity type to compose the primary government presentation.
The component unit that is blended in the reporting activity of the City's report is as follows:
The Mount Shasta Public Financing Authority (Authority) was created on May 13, 2019, as a result of a Joint Exercise of Powers Agreement between the City and the Mount Shasta Industrial Development Authority. The fund is reported as a debt service fund. The Authority’s purpose is to finance public capital improvements for the benefit of the City, including refinance of the City’s 2008 Revenue Bond debt. Separate financial statements for Authority may be obtained by contacting the City.
B. Basis of Presentation
The financial statement presentation required by GASB provides a comprehensive, entity-wide perspective of the City’s overall financial position and results of operations while maintaining the presentation of the financial position, results of operations and cash flows, as applicable, of the City’s major funds.
Government-wide Financial Statements:
The statement of net position and statement of activities include the financial activities of the overall government.
Eliminations have been made to minimize the double counting of internal activities. These statements distinguish between the governmental and business-type activities of the City. Governmental activities are reported separately from business-type activities (such as water, sewer, garbage, and drainage). 84 CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
14 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The statement of activities presents a comparison between direct expenses and program revenues for each different identifiable activity of the City’s business-type activities and for each function of the City’s governmental activities. Direct expenses are those that are specifically associated with a program or function and therefore are clearly identifiable to a particular function. Program revenues include charges paid by recipients of goods and services offered by the program, and grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues are presented instead as general revenues.
When both restricted and unrestricted net position are available, restricted resources are depleted first before the unrestricted resources are used.
Fund Financial Statements:
Fund financial statements of the City are organized into funds, each of which is considered to be a separate accounting entity. Each fund is accounted for by providing a separate set of self-balancing accounts that constitute its assets, liabilities, fund equity, revenues, and expenditures/expenses. Funds are organized into two major categories: governmental and proprietary. An emphasis is placed on major funds within the governmental and proprietary categories. A fund is considered major if it is the primary operating fund of the City or meets the following criteria:
Total assets, liabilities, revenues, or expenditure/expenses of that individual governmental or enterprise fund are at least 10 percent of the corresponding total for all funds of that category type; and Total assets, liabilities, revenues, or expenditures/expenses for the individual governmental or enterprise fund are at least 5 percent of the corresponding total for all governmental and enterprise funds combined.
The funds of the City are described below:
Major Governmental Funds:
The General Fund: is the general operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund.
Community Development Block Grant Fund: Accounts for the financing of home rehabilitation, job creation and retention, community public works and planning activities to support community and economic development as financed by monies passed through the State by the federal government.
The Debt Service Fund: Established to account for the financing and refinancing of public capital improvements for the benefit of the City.
Major Proprietary Funds:
The Enterprise Funds (Water, Sewer, Garbage and Drainage) are used to account for operations that are financed and operated in a manner similar to a private business enterprise where the intent of the governing body is that the costs (expenses) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges, or where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes.
The Water Fund: Established to account for the operations of the City’s water utility, a self-supporting activity which renders a service on a user charge basis to residents and businesses within the City.
The Sewer Fund: Established to account for the operations of the City’s sewer utility, a self-supporting activity which renders a service on a user charge basis to residents and businesses within the City.
The Garbage Fund: Established to account for the operations of the City’s garbage utility, a self-supporting activity which renders a service on a user charge basis to residents and businesses within the City.
The Drainage Fund: Established to account for the operations of the City’s drainage utility, a self-supporting activity which renders service on a user charge basis to residents and businesses within the City. 85 CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
15 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Additionally, the City reports the following non-major funds:
Business Improvement Fund: Accounts for proceeds from special business improvement area tax funded through downtown City businesses that primarily provides parking.
Fire Assessment Fund: Established to account for fire suppression equipment acquisition, as financed by fire suppression assessments levied on property owners.
Development Impact Fund: Established to account for the collection of impact fees that are to ensure that new development projects contribute their share to the orderly development of infrastructure necessary to accommodate the anticipated growth of the community.
Local Transportation Fund: Established to account for the construction and maintenance of the streets and roads of the City, as well as to provide mass transit, as financed from “Transportation Development Act” monies passed through the County of Siskiyou by the State.
Transportation Project Fund: Established to account for transportation projects funded through various funding sources. In the current year, this fund is recognizing the Safe Routes to School and Bicycling Transportation projects.
COPS Fund: Accounts for State public safety grant funded through the State of California.
Community Public Safety Enhancement Fund: Accounts for the community enhancement program which contributes to public safety which is run through the police department and funded from public donations.
Gas Tax Fund: Established to account for the construction and maintenance of the streets and roads of the City as financed by gas taxes received from the State.
Springhill Assessment Fund: Accounts for sewer main line trunk extension funded by property owners.
The Capital Projects Fund: Established to account for the acquisition and installation of a new corporate yard garage and solar facilities and related improvements within the City.
Economic Enhancement Fund: Established to account from excess CDBG program income that would not be used for CDBG regulated expenditures. The de-federalized dollars are intended to be used to provide economic development within the City.
Special Projects Grant Fund: Established to account for the environmental assessments of Brownfield Sites funded through the U.S. Environmental Protection Agency.
Library Fund: Established to account for the operation of the City’s Library which is funded through an additional .25% sales tax on sales within the city limits of Mt. Shasta.
Other Special Revenue Funds: Includes activity in the Beautification Projects, Fire Training and Public Works Reimbursable funds.
C. Measurement Focus and Basis of Accounting:
Measurement focus is a term used to describe “which” transactions are recorded within the various financial statements. Basis of accounting refers to “when” transactions are recorded regardless of the measurement focus applied.
Measurement Focus:
In the government-wide statements, both governmental and business-type activities are presented using the economic resources measurement focus as defined below. In the fund financial statements, the current financial resources measurement focus or the economic resources measurement focus is used as appropriate. 86 CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
16 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) All governmental funds utilize a current financial resources measurement focus. Only current financial assets and liabilities are generally included on their balance sheets. Their operating statements present resources and uses of available spendable financial resources during a given period. These funds use fund balance as their measure of available spendable financial resources at the end of the year.
All proprietary (enterprise) funds utilize an economic resources measurement focus. The accounting objectives of this measurement focus are the determination of operating income, changes in net position (or cost recovery), financial position, and cash flows. All assets and liabilities (whether current or noncurrent) associated with their activities are reported. Proprietary fund equity is classified as net position.
Basis of Accounting:
In the government-wide statements, both governmental and business-type activities are presented using the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred, or economic asset used. Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place.
In the fund financial statements, governmental funds are presented on the modified accrual basis of accounting.
Under the modified accrual basis of accounting, revenues are recognized when measurable and available.
Measurable means knowing or being able to reasonably estimate the amount. For this purpose, the City considers property taxes as available if they are collected within 60 days after year end. A one-year availability period is used for revenue recognition for all other governmental fund revenues. Expenditures (including capital outlays) are recorded when the related fund liability is incurred. All proprietary funds utilize the accrual basis of accounting, as described above.
Amounts reported as program revenues include: (1) charges to customers or applicants for goods, services, or privileges provided, including fees, fines, and forfeitures, (2) operating grants and contributions, and (3) capital grants and contributions. Internally dedicated resources are reported as general revenues rather than as program revenue. Likewise, general revenues include all taxes.
D. Assets, Liabilities, Net Position or Fund Equity
Cash and Cash Equivalents:
For purposes of the statement of cash flows, the City considers, as cash equivalents, all highly liquid investments with a maturity at the date of purchase of three months or less.
Investments:
The City is a voluntary participant in the California Local Agency Investment Fund (“LAIF”). LAIF is an external investment pool through which local governments may pool investments. Investments in LAIF are highly liquid, as deposits can be converted to cash within 24 hours without the loss of interest. The regulatory oversight of LAIF rests with the Local Agency Investment Board. GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, provides that amounts held in external investment pools be reported at fair value.
The City also has investments in a brokerage firm, Time Value Investments (“TVI”), for the purpose of obtaining higher rates of return. Investments in TVI are money market and fixed income investments in U.S. Government Bonds and Certificates of Deposit with maturities ranging from 7 months to 2 years. The fair value, when materially different then the value of the investments, has been adjusted pursuant to GASB 31. The types of investments are within the scope of the City’s investment policy.
87 CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
17 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Receivables:
In the fund financial statements, material receivables in governmental funds are the same as those in the government-wide statements since they are both measurable and available. Interest earnings are recorded when earned only if paid within 60 days since they would be considered both measurable and available. Proprietary fund material receivables consist of all revenues earned at year-end but not yet received. Allowances for uncollectible accounts receivable are based on historical trends, periodic aging of accounts receivable, and management’s detailed analysis of the composition of accounts receivable. Management has determined all receivables are fully collectable.
Property Taxes:
The County of Siskiyou assesses, bills, and collects property taxes for the City. The County remits the property taxes to the City when the taxes are collected, and the allocation has been determined. Property taxes attach as an enforceable lien as of January 1st and are due November 1 and February 1 (secured), and July 1 (unsecured).
The City participates in an alternative method of distribution of property tax levies and assessments knows as the “Teeter Plan.” The California Revenue and Taxation Code allows counties to distribute secured real property, assessment, and supplemental property taxes on an accrual basis resulting in full payment to cities each fiscal year.
Any subsequent delinquent payments and related penalties and interest during a fiscal year will revert to Siskiyou County. The Teeter Plan payment is included in property tax revenue.
Interfund Receivables and Payables:
During the course of operations, numerous transactions occur between individual funds that may result in amounts owed between funds. These may include amounts relating to goods and services type transactions, and interfund loans. Short-term activities are reported as due to/due from other funds. Long-term interfund loans are shown as advances to or advances from other funds in the government-wide financial statements.
Capital Assets:
The accounting treatment over property, plant, equipment, and infrastructure assets (capital assets) depends on whether the assets are used in governmental fund operations or proprietary fund operations and whether they are reported in the government-wide or fund financial statements.
In the government-wide financial statements, property, plant, equipment, and infrastructure assets are accounted for as capital assets. All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available, except donated capital assets are recorded at their estimated fair market value at the date of donation. Items with a cost of $5,000 or more are accounted for as capital assets. The costs of normal maintenance and repairs that do not add to the value of the assets or materially extend asset lives are not capitalized. Costs of assets sold or retired (and related amounts of accumulated depreciation) are eliminated from the accounts in the year of sale or retirement and the resulting gain or loss is included in the operating statement of the related fund.
Major outlays for capital assets and improvements are capitalized as projects are constructed. Due to the early implementation of GASB Statement No. 89, interest incurred during the construction phase of capital assets of business-type activities is no longer included as part of the capitalized value of the assets constructed, but rather reported as an expense in the current period.
Depreciation of all exhaustible capital assets is recorded as an allocated expense in the Statement of Activities, with accumulated depreciation reflected in the Statement of Net Position. Depreciation is provided over the assets’ estimated useful lives using the straight-line method of depreciation.
The range of estimated useful lives by type of asset is as follows:
Utility plants 7 to 50 years
Buildings and improvements 5 to 35 years
Equipment, furnishings, and vehicles 3 to 35 years
Infrastructure 10 to 40 years
88 CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
18 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) In the fund financial statements, capital assets used in governmental fund operations are accounted for as capital outlay expenditures of the governmental fund upon acquisition. Capital assets used in proprietary fund operations are accounted for the same as in the government-wide statements.
Compensated Absences:
Vacation and accrued compensatory time off pay is vested to the employees as it accrues and is payable upon separation of service. Sick leave does not vest to the employees and is paid only when sick leave is taken.
Therefore, only vacation and accrued compensatory time off pay has been accrued in the accompanying financial statements for proprietary and government-wide statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements.
However, if material, a liability is recognized for that portion of accumulated sick leave benefits that is estimated will be taken as “terminal leave” prior to retirement.
Deferred Outflows/Inflows of Resources:
In addition to assets, the statement of net position includes a separate section for deferred outflows of resources.
This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) which will only be recognized as an outflow of resources (expense/expenditures) in the future. In addition to liabilities, the statement of net position includes a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and would only be recognized as an inflow of resources (revenue) at that time.
For the City’s pension plans, City contributions subsequent to the measurement date, differences between expected and actual experience, differences due to changes in assumptions, differences due to differences in proportions, differences between projected and actual earnings on plan investments and differences between projected and actual contributions are reported as deferred outflows/inflows of resources in the government-wide statement of net position. City contributions subsequent to the measurement date will be amortized during the next fiscal year.
Differences between expected and actual experience, changes in assumptions, differences in proportion, and differences between projection and actual contributions are amortized over the estimated service lives of the plan participants. Difference between projected and actual earnings on pension plan investments will be amortized over a five-year period.
Long-Term Liabilities:
In the government-wide financial statements and proprietary fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the statements of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bond issuance costs are expensed in the period the debt is issued. Current portions of debt obligations are reported as long-term liabilities:
due within one year.
In the governmental funds’ financial statements, bond premiums and discounts, as well as bond issuance costs, are recognized during the current period. The face amount of debt issued is reported as other financing sources.
Premiums received on debt issuances are reported as other financing sources, while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.
Net Pension Liability:
For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to this liability, information about the fiduciary net position of the City’s California Public Employees’ Retirement System (CalPERS) plan (the Plan) and additions to/deductions from the Plan’s fiduciary net position have been determined on the same basis as they are reported by CalPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.
89 CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
19 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Unearned Revenue:
Unearned revenue consists of public works reimbursables, parking fees and business licenses paid in advance by the City’s customers.
Equity Classifications:
In the government-wide financial statements, equity is classified as net position and displayed as follows:
Net investment in capital assets: Consists of capital assets net of accumulated depreciation and reduced by any outstanding balances of bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvements of those assets.
Restricted net position: Consists of net position with constraints placed on the use either by external groups such as creditors, grantors, contributors, or laws or regulations or other governments, or by law through constitutional provisions or enabling legislation.
Unrestricted net position: Consists of all other net position that do not meet the definition of restricted or invested in capital assets, net of related debt.
The government-wide statement of net position reports $3,790,846 of restricted net position, all of which is restricted by enabling legislation or constraints placed on use by creditors.
Fund Balance Classifications:
Applying the requirements of GASB issued Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions; the governmental fund financial statements present fund balances based on classifications that comprise a hierarchy that is based primarily on the extent to which the City is bound to honor constraints on the specific purpose for which amounts in the respective governmental funds can be spent. The classifications used in the governmental fund financial statements are as follows:
Nonspendable: This classification includes amounts that cannot be spent because they are either (a) legally or contractually required to be maintained intact or (b) not in spendable form.
Restricted: This classification includes amounts for which constraints have been placed on the use of the resources either (a) externally imposed by creditors (such as a debt covenant), grantors, contributors, or laws or regulation of other governments, or (b) imposed by law through constitutional provisions or enabling legislation.
Committed: This classification includes amounts that can be used only for specific purposes pursuant to constraints imposed by formal action of the City Council. These amounts cannot be used for any other purpose unless the City Council removes or changes the specified use by taking the same type of action (ordinance or resolution) that was employed when the funds were initially committed. This classification also includes contractual obligations.
Assigned: This classification includes amounts that are constrained by the City’s intent to be used for a specific purpose but are neither restricted nor committed. This intent can be expressed by the City Council or through the City Council delegation of this responsibility to the City Manager through the budgetary process.
Unassigned: This classification includes residual fund balance for the General Fund. The unassigned classification also includes negative residual fund balance of any other governmental fund that cannot be eliminated by offsetting of assigned fund balance amounts.
When an expenditure is incurred for purposes for which both restricted and unrestricted resources are available, the City considers restricted funds to have been spent first. When an expenditure is incurred for which committed, assigned, or unassigned fund balances are available, the City considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds, as needed, unless the City Council has provided otherwise in its commitment or assignment actions. 90 CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
20 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Revenues, Expenditures and Expenses
Operating Revenues and Expenses:
Operating revenues and expenses for proprietary funds are those that result from providing services and producing and delivering goods and/or services. It also includes all revenues and expenses not related to capital and related financing, noncapital financing, or investing activities.
Expenditures/Expenses:
In the government-wide financial statements, expenses are classified by function for both governmental and business-type activities.
In the fund financial statements, expenditures are classified by character (current, debt service or capital outlay) for governmental funds, and by operating or nonoperating classifications for proprietary funds. Governmental funds report expenditures of financial resources and Proprietary funds report expenses relating to use of economic resources.
F. Estimates
The preparation of basic financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
G. Budgets
The City adopts an annual budget for the fiscal year commencing the following July 1. Budgets are adopted on a basis consistent with generally accepted accounting principles. The level of control (the level at which expenditures may not exceed budget) is the fund level. Unused appropriations lapse at the end of the fiscal year. The City does not use encumbrance accounting.
H. Budgetary Comparison
Under GASB Statement No. 34, budgetary comparison information is required to be presented for the general fund and each major special revenue fund with a legally adopted budget. The Authority is not legally required to adopt a budget for the debt service fund.
I. Blended Component Unit
As stated in Note 1, Section A, Financial Reporting Entity, the Authority, a blended component unit of the City, was created to finance public capital improvements for the benefit of the City, including refinance of the City’s 2008 Revenue Bond debt. During the fiscal year ended June 30, 2020, the Authority issued two Series 2019 Revenue Bonds in order to finance City capital projects and refinance the debt. See Note 7 for a full description. The Bonds are special obligations of the Authority payable from the Net Revenues pledged under the Indenture, consisting primarily of (1) base rental payments to be made by the City to the Authority as rental for certain City-owned property under a site lease agreement dated October 1, 2019, by and between the Authority and the City; and (2) installment payments to be made by the City under two installment sale agreements, (i) dated August 1, 2019, to repay the Series 2019 Wastewater Enterprise Revenue Bond owned by the United States Department of Agriculture issued to acquire and construct the project known as the Downtown Collection Wastewater System Improvement Project; and (ii) dated October 1, 2019, to repay Series 2019 Revenue Bonds owned and issued by the Authority for two purposes, (1) to acquire and install certain new solar and energy efficient equipment and improvements located at the City’s Corporate Yard Garage, City Hall, Police Station, Fire Station and the Wastewater Treatment Plant; and (2) to prepay and discharge the 2008 Installment Sale Agreement (i.e. Series 2008 Revenue Bonds) by and between the City and IBank.
91 CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
21 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) I. Blended Component Unit (Continued)
In the fund financial statements, when the Authority is blended into the City’s financial statements as a component unit, the Authority is presented as a debt service fund. Interest earned from the lease and installment sale agreements with the City are shown as revenues, while principal repayments and interest on the revenue bond debt are shown as debt service expenditures. Significant items related to the long-term debt issuance and debt premium are shown as other financing sources, while proceeds from the debt issuance invested in the City capital projects and refinancing are shown as other financing uses.
In the government-wide financial statements, when the Authority is blended into the City’s financial statements, the long-term assets and liabilities of the Authority are eliminated, and the long-term debt related to the repayment of the revenue bonds and accrued interest is shown in the governmental activities or the business-type activities based on the Governmental Fund affected by the capital project paid for by the issuance of the bond debt. The Capital Projects Fund, a Governmental Fund of the City’s General Fund, accounts for the capital improvements and related long-term debt in the governmental activities used for the acquisition and construction of a portion of the new corporate yard garage and the solar energy equipment installed at the corporate yard, the City Hall, Police Station and Fire Station. The Water and Sewer Funds, Proprietary Funds of the City, account for the capital improvements and related long-term debt in the business-type activities used for the acquisition and construction of a portion of the new corporate yard garage and the solar energy equipment installed at the corporate yard and the wastewater treatment plant, as well as the refinance of the 2008 Wastewater Revenue Bond debt.
NOTE 2 IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
Effective in Future Fiscal Years
Effective for fiscal years beginning July 1, 2024, the GASB issued Statement No. 101, Compensated Absences.
This Statement requires that liabilities for compensated absences be recognized for (1) leave that has not been used and (2) leave that has been used but not yet paid in cash or settled through noncash means. A liability should be recognized for leave that has not been used if (a) the leave is attributable to services already rendered, (b) the leave accumulates, and (c) the leave is more likely than not to be used for time off or otherwise paid in cash or settled through noncash means.
This Statement will result in a liability for compensated absences that more appropriately reflects when a government incurs an obligation. In addition, the model can be applied consistently to any type of compensated absence and will eliminate potential comparability issues between governments that offer different types of leave.
The model also will result in a more robust estimate of the amount of compensated absences that a government will pay or settle, which will enhance the relevance and reliability of information about the liability for compensated absences.
Effective for fiscal years beginning July 1, 2024, the GASB issued Statement No. 102, Certain Risk Disclosures.
This Statement requires a government to assess whether a concentration or constraint makes the primary government reporting unit or other reporting units that report a liability for revenue debt vulnerable to the risk of a substantial impact. Additionally, this Statement requires a government to assess whether an event or events associated with a concentration or constraint that could cause the substantial impact have occurred, have begun to occur, or are more likely to begin to occur within 12 months of the date the financial statements are issued.
NOTE 3 CASH AND INVESTMENTS
The City follows the practice of pooling cash of all funds, unless the funds are required by law, debt covenant or other instrument to be held in a separate account. Interest income on pooled cash invested is allocated quarterly to the various funds based on the same proportion that such funds bear to the total monies invested. 92 CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
22 NOTE 3 CASH AND INVESTMENTS (Continued)
Cash and investments as of June 30, 2024, are classified according to liquidity and separated between unrestricted and restricted in the accompanying financial statements as follows:
Statement of Net Position
Cash and investments, current unrestricted 6,840,281 $
Cash and investments, current restricted 1,007,876
Cash investments, non-current unrestricted 567,931 Cash and Investments $ 8,416,088 Consisted of the following
Cash on hand $ 300
Deposits with banks 7,085,594
Time Value Investments brokerage 1,077,064
LAIF 253,130
Cash and Investments $ 8,416,088
Investments Authorized:
The City manages its pooled idle cash investments under the guidelines of the State of California Government Code Section 53601 which specifically authorizes investments in the following instruments: treasury bills, treasury notes, federal agency securities, bankers’ acceptances, nonnegotiable certificates of deposit, commercial paper, negotiable certificates of deposit, and repurchase agreements. All investment activities are conducted with financial institutions approved by the City Council.
Interest Rate Risk:
While the City’s investment policy does not address interest rate risk, the City manages its exposure to interest rate risks through reliance on the managers of the Local Agency Investment Fund (LAIF) for its investment in those funds and the Finance Director and City Treasurer for the City’s investment in money market accounts, US Government bonds and certificates of deposit.
Credit Risk:
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization.
LAIF does not have such a rating.
Concentration of Credit Risk:
The investment policy of the City contains no limitation on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. There are no investments in any one issuer that represent 5 percent or more of total City investments or reporting unit.
Custodial Credit Risk:
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The California Government Code has provisions for financial institutions that limit custodial credit risk for deposits. Financial institutions are required to secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law. The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies.
93 CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
23 NOTE 3 CASH AND INVESTMENTS (Continued)
California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. The City’s financial institutions also have insurance through the Federal Depository Insurance Corporation (FDIC). The City’s investment policy has no additional provisions for limiting custodial credit risk for deposits.
The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the City’s investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for investments; however, it is the practice of the City Treasurer that all investments are insured, registered, or held by the Treasurer’s custodial agent in the City’s name.
The City’s balance in banks was $7,064,424, all of which was covered by federal depository insurance, or the collateral requirements discussed in the preceding paragraph. The bank balance differs from the book balance of $7,085,594 because of outstanding deposits net of outstanding checks.
Equity in Pooled Cash and Investment
The City invests funds in the State Treasurer’s Pooled Money Investment Account (PMIA) through LAIF, a voluntary program created by statue in 1977. The PMIA has regulatory oversight from the Pooled Money Investment Board and an in-house Investment Committee. The Local Agency Investment Advisory Board has oversight of LAIF. LAIF is an unrated external investment pool.
Carrying value of investments must be at fair value if the difference between carrying value and fair value becomes material. During the year ended June 30, 2024, the City did not record an adjustment to the fair value of the investments in the City’s external investment pool held by LAIF. The City recognized an adjustment to the fair value of the investments held with the City’s brokerage firm, TVI, by increasing cash and cash investments in various Funds by $56,644.
In accordance with authorized investment laws, the State Treasurer’s Investment Pool (LAIF) invests in various structured notes and mortgage-backed securities, such as collateralized mortgage obligations. As of June 30, 2024, PIMA’s weighted average maturities were .73 years. (Copies of a report of LAIF’s investments may be obtained from the State Treasurer’s Office; Local Agency Investment Fund; P.O. Box 942809; Sacramento, CA 94209-0001) NOTE 4 RECEIVABLES
Loans Receivable
The following is the composition of loans receivable, net of zero allowance for doubtful loans, at June 30, 2024:
Community
Development Block
Grant Fund
Mortgage and business loans $ 648,737
Lease Receivable
In October 2023, the City entered into an agreement with Walsh Meyers (“Lessee”) for the use of The Landing at Mt Shasta. The terms of this agreement include a fixed minimum monthly payment (“base rent”) of $1,200 per month. The lease commenced on October 4, 2023 with a term of twenty seven (27) months, with no option to renew.
The City implemented GASBS No. 87 for the year ended June 30, 2024 and used the base rent payment schedule at the October 4, 2023 commencement date to measure the present value of the lease receivable using a 7.50% interest rate. The initial measurement of the lease receivable was $29,729 and the remaining balance at June 30, 2024, was $20,369. For the year ended June 30, 2024, the City’s General Fund received $9,910 in lease revenue and $1,441 in lease interest revenues.
94 CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
24 NOTE 5 OPERATING TRANSFERS AND INTERFUND BALANCES
The following is a summary of operating transfers in/out for the year ended June 30, 2024:
Transfer In To
General
Fund
Community
Development
Block Grant
Fund
Non-major
Governmental
Funds
Total
Transfers In
General Fund $ - $ - $ 221,444 $ 221,444
Non-major Governmental Funds - 22,455 - 22,455
Total Transfers Out $ - $ 22,455 $ 221,444 $ 243,899
Transfer Out From
All of the transfers were to pay for a fund’s share of a project or activity that occurred in another fund.
The following is a summary of the interfund balance at June 30, 2024:
Due To
Drainage
Fund
Non-major
Governmental
Funds
Total
Transfers In
General Fund $ 58,091 $ 80,702 $ 138,793
Total Due To $ 58,091 $ 80,702 $ 138,793
Due From
The interfund balances are a result of lending to the Drainage, COSP and Community Public Safety Enhancement Funds for operating deficits incurred during the fiscal year. These are temporary loans and will be paid from future revenues of the respective funds.
NOTE 6 CAPITAL ASSETS
Depreciation expense was charged to functions/programs for the year ended June 30, 2024 as follows:
Governmental Activities
General government $ 45,332
Public safety 263,356
Public works – streets, roads, buildings & garage 571,353 Depreciation Expense – Governmental Activities $ 880,041 Business-Type Activities
Water $ 566,132
Sewer 662,665
Drainage 22,611
Depreciation Expense – Business-Type Activities $ 1,251,408 95 CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
25 NOTE 6 CAPITAL ASSETS (Continued)
Capital asset activity for the year ended June 30, 2024 was as follows:
Balance
July 1, 2023 Additions
Retirements
and Transfers
Balance
June 30, 2024
Governmental Activities As Restated
Capital Assets not being Depreciated:
Land $ 747,310 $ - $ - $ 747,310
Construction in progress 248,194 66,870 (240,347) 74,717 Total Capital Assets not being Depreciated 995,504 66,870 (240,347) 822,027 Capital Assets being Depreciated:
Buildings and improvements 1,708,222 98,863 - 1,807,085 Right to use asset - building 13,273 - (13,273) - Equipment, furnishings and vehicles 4,584,928 595,597 (26,529) 5,153,996 Right to use asset - equipment 68,289 72,872 (4,858) 136,303 Infrastructure 23,969,204 - - 23,969,204
Total Capital Assets being Depreciated 30,343,916 767,332 (44,660) 31,066,588 Less Accumulated Depreciation and Amortization:
Buildings and improvements 674,195 33,171 - 707,366
Right to use asset - building 13,273 - (13,273) - Equipment, furnishings and vehicles 3,390,874 275,456 (26,529) 3,639,801 Right to use asset - equipment 38,110 31,623 (4,858) 64,875 Infrastructure 19,337,384 539,791 - 19,877,175
Total Accumulated Depreciation and Amortization 23,453,836 880,041 (44,660) 24,289,217 Total Capital Assets being Depreciated, Net 6,890,080 (112,709) - 6,777,371 Governmental Activities Capital Assets, Net 7,885,584 (45,839) (240,347) 7,599,398 Business-Type Activities
Capital Assets not being Depreciated:
Land 264,788 - - 264,788
Construction in progress 32,892,583 3,477,534 (35,351,215) 1,018,902 Total Capital Assets not being Depreciated 33,157,371 3,477,534 (35,351,215) 1,283,690 Capital Assets being Depreciated:
Buildings and improvements 1,207,868 - - 1,207,868
Equipment, furnishings and vehicles 2,359,052 - (43,418) 2,315,634 Infrastructure 31,092,492 35,351,215 (3,574,402) 62,869,305 Total Capital Assets being Depreciated 34,659,412 35,351,215 (3,617,820) 66,392,807 Less Accumulated Depreciation:
Buildings and improvements 314,599 24,908 - 339,507
Equipment, furnishings and vehicles 840,399 70,172 (43,418) 867,153 Infrastructure 11,850,876 1,156,328 (2,139,215) 10,867,989 Total Accumulated Depreciation 13,005,874 1,251,408 (2,182,633) 12,074,649 Total Capital Assets being Depreciated, Net 21,653,538 34,099,807 (1,435,187) 54,318,158 Business-Type Activities Capital Assets, Net 54,810,909 37,577,341 (36,786,402) 55,601,848 Government-Wide Capital Assets, Net $ 62,696,493 $37,531,502 $ (37,026,749) $ 63,201,246 96 CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
26 NOTE 7 LONG-TERM DEBT
Long-term liabilities at June 30, 2024 consisted of the following:
Interest Annual Principal Original Issue
Types of indebtedness (purpose) Maturity Rates Installments Amount Governmental Activities
Revenue Bonds
2019 Issue (financed the acquisition and installation of a new corporate yard garage and solar equipment)
Term Current Interest Bond 8/1/2044 2.65% - 4% $120,000 - $220,000 1,121,646 $ Capital Lease Obligation
Master Equipment Lease Purchase Agreement - Type II Wildland Fire Engine Community First National Bank 5/1/2026 2.966% Approx. $25,000 127,489 Lease Liabilities
Equipment Lease Agreement - Lanier IMC 2500, 6000 Copiers De Lage Landen 8/19/2025 7.50% $ 4,936.72 17,824
Equipment Lease Agreement - Lanier IMC 3010 Copier
U.S. Bank 12/4/2026 7.50% $ 3,400.32 9,830
Equipment Lease Agreement - Taser 7 Certifications
Axon Enterprises 7/1/2024 7.50% $ 5,552.57 18,895
Equipment Lease Agreement - Body Cameras
Axon Enterprises 10/1/2027 7.50% $ 14,580.00 63,412
Total Lease Liabilities 109,961
Governmental Activities $ 1,359,096
Business-Type Activities
Revenue Bonds
2019 Issue (financed the acquisition and installation of a new corporate yard garage and solar equipment)
Term Current Interest Bond 8/1/2044 2.65% - 4% $120,000 - $220,000 2,263,355 $ 2019 Issue (refinanced 2008 revenue bonds)
Term Current Interest Bond 8/1/2044 2.65% - 4% $120,000 - $220,000 930,000 2019 Issue (financed the downtown sewer collection system improvements) Term Current Interest Bond 8/1/2059 2.125% $9,100 - $48,300 1,309,000 Total Revenue Bonds 4,502,355
Anticipation Note
Series 2024 WasteWater Revenue Bond Anticipation Notes
(USDA Grant and Loan Anticipation Financing)
CoBank, ACB Revolving Credit 5/1/2024 1.2% - 4% Not Applicable 9,209,000 Total Anticipation Notes 9,209,000
Installment Note
Series 2021 Promissory Note
State Revolviong Loan Fund 3/31/2053 0% $115,932.23 3,457,209 Total Note Payable 3,457,209
Line of Credit
CoBank, ACB Term Revolver Credit Line 5/1/2024 1.2% - 4% Not Applicable 3,000,000 Business-Type Activities $ 20,168,564
97 CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
27 NOTE 7 LONG-TERM DEBT (Continued)
The following is a summary of long-term liabilities activity for the fiscal year ended June 30, 2024:
Balance Balance Due in
July 1, 2023 Additions Reductions June 30, 2024 One Year Governmental Activities As Restated
Revenue bonds $ 1,027,325 -$ 34,232 $ $ 993,093 37,482$ Revenue bond premium 211,599 - 9,938 201,661 9,938
Interest payable 13,282 - 428 12,854 12,854
Capital lease obligation 78,812 - 25,496 53,316 26,263
Lease liabilities 30,944 73,242 36,620 67,566 23,629
Compensated absences 197,108 - 16,903 180,205 144,164
Governmental Activities $ 1,559,070 73,242$ $ 123,617 $ 1,508,695 254,330$ Business-Type activities
Revenue bonds $ 4,153,574 -$ 133,469 $ $ 4,020,105 135,719$ Note payable - 3,457,209 100,974 3,356,235 115,732
Anticipation notes 12,056,307 609,902 3,457,209 9,209,000 - Interest payable 281,529 17,336 - 298,865 298,865
Compensated absences 45,223 - 3,961 41,262 33,009
Business-Type Activities $ 16,536,633 4,084,447$ $ 3,695,613 $ 16,925,467 583,325$ REVENUE BONDS:
As stated in Note 1, Sections A and I, the Mount Shasta Public Financing Authority (Authority), a component unit of the City, was created on May 13, 2019, as a result of a Joint Exercise of Powers Agreement between the City and the Mount Shasta Industrial Development Authority. The Authority’s purpose is to finance public capital improvements for the benefit of the City and refinance the City’s 2008 Revenue Bond debt. The Series 2019 Revenue Bonds shown in the first table of Note 7, is split between Governmental and Business-type Activities based on the capital improvements made for the specific fund. The revenue bond was issued for $4,315,000 to finance the acquisition and construction of a new corporate yard garage which serves the City’s public works department, as well as the water and sewer operations, thus the share of the financing related to the corporate garage, $1,090,000, is allocated between the governmental activity (i.e. public works) and the business-type activities. The revenue bond was also issued to finance the acquisition and installation of solar energy efficient equipment in the new corporate garage, City Hall, police station, fire station and the wastewater treatment plant, thus the share of the financing related to the solar equipment installation, $2,295,000, is allocated between the governmental activity (i.e. public works and general government) and the business-type activities of the water and sewer funds. Lastly, the revenue bond was issued to prepay and discharge the 2008 revenue bond debt of the sewer operations, thus, $930,000 of the revenue bonds have been allocated to the sewer fund. These bonds have varying interest rates based on when the bonds mature according to rates established in the bond maturity schedule. These rates are not subject to change based on market conditions.
Governmental and Business-Type Activities Combined:
Term Current Interest Bond, maturity 8/1/2044
Payment: pursuant to the Indenture of Trust dated October 1, 2019, and as described in the preceding paragraph, the Authority issued limited obligations in the amount of $4,315,000. The amount allocated to governmental activities for the corporate garage and solar equipment, $1,121,646, will accrue interest from the date of delivery of the bonds, and interest thereon will be payable semiannually on February 1 and August 1 of each year, commencing February 1, 2020.
Similarly, the amounts allocated to business-type activities, $3,193,354 for the corporate garage and solar equipment ($2,263,354) and refinance ($930,000), will accrue and pay interest in similar fashion.
Redemption: The Bonds are subject to optional, extraordinary, and mandatory sinking account redemption prior to their stated maturity dates, as provided in the Indenture Agreement. 98 CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
28 NOTE 7 LONG-TERM DEBT (Continued)
Reserve Fund: A Reserve Fund is established with the Bond Trustee pursuant to the Indenture in an amount equal to the Reserve Requirement, $267,937.50. The Reserve Fund is satisfied by the City purchasing a Municipal Bond Debt Service Reserve Insurance Policy (Reserve Policy) from the Municipal Assurance Corp. and deposit the Reserve Policy with the Trustee. The City purchased this policy as part of the bond debt issuance costs in October 2019.
Security: The Bonds are limited obligations of the Authority and, as such, only the Revenues of the Authority are pledged as security for the Bonds. Revenues are defined as 1) all installment payments, including interest, payable by the City to the Authority using the Net Revenues of the Wastewater (Sewer) Enterprise 2) all base rental payments, including interest, payable by the City to the Authority and 3) amounts deposited in the Reserve Fund.
There are no significant default provisions.
Governmental Activities:
Capital Lease Obligation
Through a master equipment lease purchase agreement with Community First National Bank dated as of April 21, 2021, the City’s Governmental Activities purchased a 2021 Type II Wildland Fire Engine for $377,489 that included a down payment of $250,000 and lease financing of $127,489. The effective date is May 1, 2021 and is financed over five years with semi-annual equal payments of principal, and accrued interest thereon, of $13,829.79, starting November 1, 2021 and maturing May 1, 2026.
Security and Default: Consistent with lease purchase agreements, security lies solely in the right to repossess the equipment in the event of default. In addition, failure to pay any lease payment at the time specified in the lease will constitute default, and under these circumstances, the Lessor has the option to demand payment of the outstanding principal and accrued interest thereon immediately due and payable.
Lease Liabilities
Equipment Lease – Lanier IMC 3010: Also pursuant to Statement No. 87, on October 4, 2023, the City recorded a lease liability in Governmental Activities in the amount of $9,830. An incremental borrowing rate of 7.5% was used to calculate the present value of the future minimum lease payments to record the liability. The remaining lease term ends December 4, 2026, with no options to renew, except to roll over month-to-month. Monthly payments of $283.26 are due to U.S. Bank for the City’s right to use the copier equipment. Consistent with equipment lease agreements, security lies solely in the right to repossess the equipment in the event of default.
Equipment Lease – Lanier IMC 2500 & 6000: In the prior year, pursuant to Statement No. 87, the City recorded a lease liability in Governmental Activities in the amount of $17,824. An incremental borrowing rate of 7.5% was used to calculate the present value of the future minimum lease payments to record the liability. The remaining lease term ends August 19, 2025, with no options to renew, except to roll over month-to-month. Quarterly payments of $1,234.18 are due to De Lage Landen for the City’s right to use the copier equipment. Consistent with equipment lease agreements, security lies solely in the right to repossess the equipment in the event of default.
Equipment Lease – Axon Tasers and Body Cameras: During the year, it was found that the City has several multi-year payment arrangements for tasers and body cameras from Axon Enterprises. Three of those arrangements started in prior years before the start of the fiscal year ended June 30, 2024 and have been recorded as a prior period adjustment to the right-to-use assets and lease liabilities. The fourth arrangement started on October 1, 2023 and Statement No. 87 was applied correctly. Details of these arrangements are as follows:
1. Tasers and body cameras: This arrangement started July 1, 2019 but the implementation date was July 1, 2021. Pursuant to Statement No. 87, the City recorded a lease liability and right-to-use asset in Governmental Activities in the amount of $17,529, respectively. A prior period adjustment was recorded to reflect the payment and amortization activity in the years ended June 30, 2022 and 2023. An incremental borrowing rate of 7.5% was used to calculate the present value of the future minimum lease payments to record the liability. The lease term ended June 30, 2024, with no options to renew, and the equipment was returned to the vendor.
99 CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
29 NOTE 7 LONG-TERM DEBT (Continued)
2. Taser 7 Certifications: This arrangement started July 1, 2020 but the implementation date was July 1, 2021.
Pursuant to Statement No. 87, the City recorded a lease liability and right-to-use asset in Governmental Activities in the amount of $18,895, respectively. A prior period adjustment was recorded to reflect the payment and amortization activity in the years ended June 30, 2022 and 2023. An incremental borrowing rate of 7.5% was used to calculate the present value of the future minimum lease payments to record the liability. The remaining lease term ends June 30, 2025, with no options to renew. Annual payments of $5,160 are due to Axon Enterprises for the City’s right to use the taser equipment. Consistent with equipment lease agreements, security lies solely in the right to repossess the equipment in the event of default.
3. Body cameras: This arrangement started July 1, 2022, which is used as the implementation date. Pursuant to Statement No. 87, the City recorded a lease liability and right-to-use asset in Governmental Activities in the amount of $8,813, respectively. A prior period adjustment was recorded to reflect the payment and amortization activity in the year ended June 30, 2023. An incremental borrowing rate of 7.5% was used to calculate the present value of the future minimum lease payments to record the liability. The lease term ended June 30, 2024, with no options to renew, and the equipment was returned to the vendor.
4. Body cameras: This arrangement started and was implemented on October 1, 2023. Pursuant to Statement No. 87, the City recorded a lease liability and right-to-use asset in Governmental Activities in the amount of $63,412, respectively. An incremental borrowing rate of 7.5% was used to calculate the present value of the future minimum lease payments to record the liability. The remaining lease term ends October 31, 2028, with no options to renew. Annual payments of $15,579.83 are due to Axon Enterprises for the City’s right to use the taser equipment. Consistent with equipment lease agreements, security lies solely in the right to repossess the equipment in the event of default.
Business-type Activities:
Term Current Interest Bond, maturity 8/1/2059
On May 9, 2019, an obligation of funds between the United States Department of Agriculture (USDA) Rural Development and the City of Mt. Shasta was authorized to fund a sewer project called the Downtown Sewer Collection Project. The funding from USDA Rural Development includes a loan of $1,309,000 in the form of Series 2019 Wastewater Enterprise Revenue Bond (Bond), and a grant of $2,151,880. The debt was issued on August 28, 2019 and will mature on August 1, 2059. The name of the owner of the bond is the USDA and the issuer is the Authority for the benefit of the City. The repayment of the bond by the Authority is made pursuant to an Installment Sale Agreement dated August 1, 2019, by and between the Authority and the City, whereby the City repays the annual debt service under the Installment Sale Agreement in amount exactly equal to the debt service required to repay the Bond.
Pledged Assets, Debt Reserves and Default: The City is obligated to pay the installment payments from Net Revenues as defined in the Trust Agreement dated August 1, 2019, by and between the Authority and the City.
There is a required debt service reserve equal to at least one annual loan installment that accumulates at the rate of 10% of one annual payment per year for 10 years or until a total of $51,065 has accumulated. Ten percent of the proposed loan payment would equal $426 per month. This would equate to $24,708 at June 30, 2024 and has been deposited by the City. Additionally, there is a required short-lived asset reserve to be deposited based on an annual assessment of the facility’s short-lived asset needs to pay for repairs and/or replacement of major system assets.
The assessed needs at June 30, 2024, of $779,710, has been deposited by the City. In the event of default, the Bond includes a provision that if the City is more than 30 days late on an installment payment, the full amount of the unpaid principal balance, together with accrued interest, becomes due immediately. 100
CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
30 NOTE 7 LONG-TERM DEBT (Continued)
Revenue Bond and Promissory Note Anticipation Notes
On May 1, 2021, the City entered into an interim financing agreement with CoBank, ACB (CoBank), for the Federal loan anticipation financing for the State Mandated Wastewater Treatment Plant and Disposal Improvement Project. In anticipation of the Series 2024 Wastewater Revenue Bonds to be issued by the USDA in the amount of $9,209,000, Series 2021 Wastewater Revenue Bond Anticipation Notes (USDA Grant and Loan Anticipation Financing), on a drawdown basis, were approved by the City and are being financed by CoBank in the aforementioned interim financing agreement. The amount drawn down from this financing as of June 30, 2024 was $9,209,000. The total principal outstanding at the end of construction will be repaid from the proceeds of the Series 2024 Wastewater Revenue Bonds to be issued when the conditions of completion have been met. During the interim financing arrangement, interest is charged on the outstanding balance of the loan at the 1-month LIBOR Rate plus 1.4%. The project was finished and the USDA Rural Development RUS financing issued on October 1, 2024. See Note 13 Subsequent Events for further information.
In anticipation of the Promissory Note with the State of California Water Resources Control Board (SWRCB) in the amount of $4,926,942, Series 2021 Revolving Credit Promissory Notes (SWRCB Loan Anticipation Financing), on a draw-down basis, were approved by the City and are being financed by SWRCB. The amount drawn down from this financing as of June 30, 2024 was $3,457,209. The total principal outstanding at the end of construction was repaid from the proceeds of the Promissory Note, see below.
Security and Default: Pursuant to Government Code, the proceeds of the RD/RUS financing are pledged for the payment of the interim financing obligation and the interest thereon. Default is defined as the City failing to make any payment to the lender or a termination or material modification of the RD/RUS letter of conditions. In the event of default, the lender may suspend construction financing and declare all outstanding principal and accrued interest thereon immediately due and payable.
The City also has an open Term Revolver Credit Line with CoBank for the purpose of meeting construction related cash flow needs in the interim before funds are received from interim financing or grant funds. The amount approved on a draw-down basis is $3,000,000. There is zero outstanding on this credit line at June 30, 2024.
Installment Note, maturity 3/31/2053
On March 31, 2024, the State’s Revolving Loan Fund repaid the loan anticipation financing Series 2021 Revolving Credit Promissory Notes were converted to a long-term installment note payable to the State of California. The note will be repaid in thirty annual principal only payments; one payment of $100,974.30, followed by twenty-nine payments of $115,732.23. This loan is a zero-percent loan.
Pledged Assets, Debt Reserves and Default: The City is obligated to pay the installment payments from Net Revenues as defined in the Installment Sale Amended Agreement dated April 12, 2021, by and between the State of California and the City. There is a required debt service reserve equal to one annual loan payment in the amount of $115,732.23, and this amount has been deposited by the City as of June 30, 2024. In the event of default, the Agreement includes a provision that if the City is more than 30 days late on an installment payment, the full amount of the unpaid principal balance becomes due immediately. 101
CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
31 NOTE 7 LONG-TERM DEBT (Continued)
The debt service requirements for the revenue bonds are as follows:
Year Ended June 30, Principal Interest Principal Interest 2025 $ 37,482 $ 30,287 $ 135,719 $ 111,606
2026 37,482 29,163 136,119 107,738
2027 38,122 28,029 140,978 103,795
2028 38,763 26,876 145,938 99,711
2029 39,403 25,506 150,797 94,855
2030-2034 228,092 102,416 831,009 388,788
2035-2039 257,247 64,284 901,854 258,043
2040-2044 260,829 28,275 779,771 148,353
2045-2049 55,673 835 318,220 64,871
2050-2054 - 204,400 - 42,464
2055-2059 - 227,000 - 19,809
2060-2064 - - 48,300 1,026
Totals $ 993,093 $ 335,671 $ 4,020,105 $ 1,441,059
Governmental Activities Business-Type Activities
Revenue Bonds
The debt service requirements for the anticipation note and Installment Note is as follows:
Year Ended June 30, Principal Interest Principal Interest 2025 $ 214,270 - $ $ 115,732 $ - 2026 180,000 193,779 115,732 - 2027 151,000 190,262 115,732 - 2028 154,000 187,022 115,732 - 2029 158,000 183,707 115,732 - 2030-2034 839,000 866,311 578,661 - 2035-2039 932,000 772,268 578,661 - 2040-2044 1,035,000 667,919 578,661 - 2045-2049 1,150,000 551,969 578,661 - 2050-2054 1,277,000 423,098 462,931 - 2055-2059 1,420,000 279,969 - - 2060-2064 1,577,000 120,904 - - 2065-2069 336,000 3,570 - - Totals $ 9,209,000 $ 4,655,048 $ 3,356,235 -$ Anticipation Note
Business-Type Activities
Installment Note
Business-Type Activities
The debt service requirements for the capital lease obligations are as follows:
Year Ended June 30, Principal Interest
2025 $ 26,263 $ 1,396
2026 27,053 607
Totals $ 53,316 $ 2,003
Capital Lease
Governmental Activities
102
CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
32 NOTE 7 LONG-TERM DEBT (Continued)
The debt service requirements for the lease liabilities are as follows:
Year Ended June 30, Principal Interest
2025 $ 23,629 $ 4,840
2026 16,094 3,120
2027 14,280 2,000
2028 13,563 1,017
2029 - - Totals $ 67,566 $ 10,978
Lease Liabilities
Governmental Activities
NOTE 8 PENSION PLANS
General Information about the Pension Plans
Plan Description, Benefits Provided, and Employees Covered The Plan is a cost-sharing multiple employer defined benefit pension plans administered by the California Public Employees’ Retirement System (CalPERS). The June 30, 2023 GASB 68 actuarial valuation report for the combined Miscellaneous (employees other than Safety) and Safety (police and fire) Risk Pools list a full description of the assumptions for funding purposes, but not accounting purposes, and membership information. The benefit provided from Appendix B of the June 30, 2023 actuarial valuation reports for the CalPERS Miscellaneous and Safety Risk Pools are available on the CalPERS’ website (www.calpers.ca.gov) under “Forms and “Publications”.
Contribution Description
Section 20814(c) of the California Public Employees’ Retirement Law (PERL) requires that an actuary determine the employer contribution rates for all public employers on an annual basis, and that the rates shall be effective on the July 1 following notice of a change in the rate. The CalPERS’ annual actuarial valuation process determines the total plan contributions. For public-agency cost-sharing plans covered by either the Plan, the basis of the Plan’s actuarially determined rate is the estimated amount necessary to pay the Plan’s allocated share of the risk pool’s costs of benefits earned by employees during the year, and any unfunded accrued liability. PERL requires the employer to contribute the difference between the actuarially determined rate and the contribution rate of employees. For the measurement period ended June 30, 2023 (the measurement date), the basis for the contribution rates is actual contributions made, and not the actuarially determined contribution. The employees and the employer had the following contribution rates, shown as a percentage of the annual payroll.
Miscellaneous Risk Pool
Contribution Type Classic PEPRA
Employee (Charged) 7.00% 6.75%
Employee (Effective) 6.92% 6.75%
Employer 10.32% 7.47%
Safety Risk Pool
Contribution Type Classic - Fire Classic - Police PEPRA - Fire PEPRA - Police Employee (Charged) 9.00% 9.00% 13.00% 13.00%
Employee (Effective) 8.95% 8.95% 13.00% 13.00%
Employer 18.17% 18.17% 12.78% 12.78%
The charged employee contribution rate is the percentage that the plan charges the employees after the first $400 in earnings for Classic plans. The Classic plan charges the first $400 in earnings at two-thirds of the charged rate.
The effective employee contribution rate takes this into consideration. 103
CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
33 NOTE 8 PENSION PLANS (continued)
Employer contribution rates may change if the Plan amends its contracts. It is the responsibility of the employer to make necessary accounting adjustments to reflect the impact due to any employer-paid member contributions, or situations where members pay a portion of the employer contribution.
Actuarial Methods and Assumptions Used to Determine Plan Contributions CalPERS derived the actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2022–2023 from the June 30, 2022 funding valuation report.
Actuarial Cost Method
Actuarial Assumptions:
Investment rate of return 6.90%
Inflation 2.30%
Salary increases Varies by Entry Age and Service
Mortality rate table1
Post Retirement Benefit Increase
1 The mortality table used was developed based on CalPERS-specific data. The rates incorporate Generational Mortality to capture ongoing mortality improvement using 80% of scale MP 2020 published by the Society of Actuaries. For more details, please refer to the 2021 experience study report that can be found on the CalPERS website.
Derived using CalPERS' Membership Data for all Funds
Contract COLA up to 2.3% until Purchasing Power
Protection Allowance Floor on Purchasing Power
applies
Entry-Age Normal
All other actuarial assumptions used in the June 30, 2023 valuation use the results of the 2021 CalPERS Experience Study and Review of Actuarial Assumptions, including updates to salary increases, mortality, and retirement rates, as a basis. Employers should refer to CalPERS’ Annual Comprehensive Financial Report for the fiscal year ended June 30, 2023, to obtain the required supplementary information for proper financial reporting.
Amortization of Deferred Outflows and Deferred Inflows of Resources Description of the Amortization Methodology
Under GASB 68, agencies recognize actuarial gains and losses related to changes in total pension liability and fiduciary net position in the pension expense systematically over time.
Agencies recognize the first amortized amount of a gain or loss in the pension expense for the year the gain or loss occurs. Agencies categorize the remaining amounts as deferred outflows and deferred inflows of resources related to pensions that are to be recognized in future pension expense.
The amortization period differs depending on the source of the gain or loss:
Difference between projected and actual
earnings
Five-year straight-line amortization
All other amounts Straight-line amortization over the expected average remaining service lifetime (EARSL) of all members
provided with benefits (active, inactive and retired), as of the beginning of the measurement period.
The report amortizes the Net Difference between the Projected and Actual Investment Earnings on Pension Plan Investments over a five-year period on a straight-line basis. The report recognizes one-fifth of the total in the Pension Expense during the measurement period and amortizes the remaining Net Difference between Projected and Actual Investment Earning on Pension Plan Investments at the measurement date over the remaining four-year period.
The Net Difference between Projected and Actual Investment Earnings on Pension Plan Investments in the 104
CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
34 NOTE 8 PENSION PLANS (continued)
Schedule of Collective Pension Amounts represents the unamortized balance relating to the current measurement period and the prior measurement period on a net basis.
The employer should amortize deferred outflows and deferred inflows of resources relating to Differences between Expected and Actual Experience, Changes of Assumptions, and employer-specific amounts over the EARSL of members provided with pensions through the Plan. The EARSL for PERF C for the June 30, 2023 measurement date is 3.8 years.
CalPERS derived the EARSL by dividing the total service years of 600,538 (the sum of remaining service lifetimes of all active employees) by 160,073 (the total number of participants: active, inactive, and retired) in PERF C.
Inactive employees and retirees have remaining service lifetimes equal to zero. The basis of total future service is the members’ probability of decrementing due to an event other than receiving a cash refund.
The Schedule of Collective Pension Amounts does not reflect employer-specific amounts such as changes in the employer proportion, differences between actual employer contributions and employers’ proportionate shares of contributions, and employer contributions to PERF C subsequent to the measurement date, as defined in GASB 68 paragraphs 54, 55, and 57. Appropriate treatment of such amounts is the responsibility of the employers.
CalPERS’ website provides CalPERS’ Comprehensive Annual Financial Report for the fiscal year ended June 30, 2023, and the CalPERS’ GASB 68 Accounting Valuation Reports for the public agency Miscellaneous and Safety Risk Pools, which together provide additional financial and actuarial information required for GASB 68 disclosures.
Allocation of Net Pension Liability and Pension Expense to Individual Plans A key aspect of GASB 68 pertaining to cost-sharing employers is the establishment of an approach to allocate the net pension liability and pension expense to the individual employers within the risk pool. Paragraph 49 of GASB 68 indicates that for pools with contribution rates within the pool based on separate relationships, the proportional allocation should reflect those relationships. The allocation method utilized by CalPERS determines the employer’s share by reflecting these relationships through the plans they sponsor within the risk pool. The valuation uses plan liability and asset-related information where available, and proportional allocations of individual plan amounts as of the valuation date where not available.
1. In determining a cost-sharing plan’s proportionate share, CalPERS’ staff calculated the total amounts of liabilities and assets for the risk pool on the valuation date (June 30, 2021). The risk pool’s fiduciary net position (FNP) subtracted from its total pension liability (TPL) determines the net pension liability (NPL) at the valuation date.
2. Using standard actuarial roll-forward methods, the staff then calculated the risk-pool TPL at the measurement date (June 30, 2023). The staff then subtracted the risk-pool FNP at the measurement date from this number to determine the NPL for the risk pool at the measurement date.
3. We calculated the individual plan’s TPL, FNP, and NPL at the valuation date. We calculated this and the subsequent steps each risk pool separately.
4. We calculated two ratios by dividing the plan’s individual TPL and FNP as of the valuation date from (3) by the amounts in step (1), the risk pool’s total TPL and FNP, respectively.
5. The plan’s TPL as of the Measurement Date is equal to the risk-pool TPL generated in (2), multiplied by the TPL ratio generated in (4).
6. The plan’s FNP as of the Measurement Date is equal to the FNP generated in (2) multiplied by the FNP ratio generated in (4), plus any additional side fund (or unfunded liability) contributions made by the employer on behalf of the plan during the measurement period.
7. The plan’s NPL at the Measurement Date is the difference between the TPL and FNP calculated in (5).
8. We combined the results from each risk pool for the results in this report.
Please refer to the CalPERS “Public Agency Cost-Sharing Multiple-Employer Defined Benefit Pension Plan Schedules of Employer Allocations and Collective Pension Amounts” report for the Miscellaneous and Safety Risk Pools, available from CalPERS’ website under the GASB 68 section. 105
CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
35 NOTE 8 PENSION PLANS (continued)
Each plan’s proportion of aggregate employer contributions is equal to the plan’s proportion of FNP calculated in (4). Each plan’s proportionate share of risk-pool pension expense is the sum of the related proportionate shares of the components of the aggregate pension expense.
Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions For the year ended June 30, 2024, the contributions recognized as part of pension expense for each Plan were as follows:
Measurement Year Ended June 30, 2023 Miscellaneous Safety Contributions - employer $ 345,519 $ 311,315
Contributions - employee $ 21,463 $ 20,275
As of June 30, 2024, the City reported net pension liabilities for its proportionate shares of the net pension liability of each Plan as follows:
Miscellaneous $ 2,884,709
Safety 2,615,931
Total $ 5,500,640
Net Pension
Liability
The City’s net pension liability for each Plan is measured as the proportionate share of the net pension liability. The net pension liability of each of the Plans is measured as of June 30, 2023, and the total pension liability for each Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2022 rolled forward to June 30, 2023 using standard update procedures. The City’s proportion of the net pension liability was based on a projection of the City’s long-term share of contributions to the pension plans relative to the projected contributions of all participating employers, actuarially determined. The City’s proportionate share of the net pension liability for each Plan as of June 30, 2022 and 2023 was as follows:
Miscellaneous Safety Total
Proportion - June 30, 2022 0.05781% 0.03462% 0.04402%
Proportion - June 30, 2023 0.05769% 0.03500% 0.04409%
Change - Increase (Decrease) -0.00012% 0.00038% 0.00007% For the year ended June 30, 2024, the City recognized net pension expense of $943,008. 106
CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
36 NOTE 8 PENSION PLANS (continued)
At June 30, 2024, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:
Measurement Year Ended June 30, 2023
Deferred
Inflows of
Resources
Changes in assumptions $ 326,832 $ -
Differences between actual and expected
experience 339,424 39,302
Net difference between projected and
actual earnings on pension plan
investments 825,050 - Difference between actual contributions vs. proportionate share of contributions 49,662 148,365
Change in employer's proportion 132,585 1,878
Pension contributions made subsequent to
the measurement date 645,661 - Total $ 2,319,214 $ 189,545 Deferred
Outflows of
Resources
The amount of $645,661 reported as deferred outflows of resources related to contributions subsequent to the measurement date for the miscellaneous and safety plans, will be recognized as reduction of the net pension liability in the measurement year ended June 30, 2024.
Other amounts reported as deferred outflows of resources and deferred inflows of resources related to the pension plans will be recognized as pension expense as follows:
Measurement Year Ended June 30,
2024 $ 468,094
2025 330,486
2026 662,035
2027 23,393
2028 - Thereafter - Total $ 1,484,008
Discount Rate
The discount rate used to measure the total pension liability for PERF C was 6.90%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability.
107
CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
37 NOTE 8 PENSION PLANS (continued)
Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate The following presents the City’s proportionate share of the net pension liability for each Plan, calculated using the discount rate for each Plan, as well as what the City’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower or 1-percentage point higher than the current rate:
Plan's Net Pension Liability/(Asset)
Discount Rate
-1%
5.90%
Current
Discount Rate
6.90%
Discount
Rate
+1%
7.90%
Miscellaneous $ 4,274,124 $ 2,884,709 $ 1,741,102
Safety 3,839,820 2,615,931 1,615,315
Total $ 8,113,944 $ 5,500,640 $ 3,356,417
Pension Plan Fiduciary Net Position
Detailed information about each pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports.
Long-Term Expected Rate of Return
In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Projected returns for all asset classes are estimated and, combined with risk estimates, are used to project compound (geometric) returns over the long term. The discount rate used to discount liabilities was informed by the long-term projected portfolio return.
The expected real rates of return by asset class are as follows:
Asset Class
Assumed Asset
Allocation
Real Return
Years 1 - 101,2
Global equity - cap-weighted 30.0% 4.54%
Global equity non-cap-weighted 12.0 3.84
Private Equity 13.0 7.28
Treasury 5.0 0.27
Mortgage-backed Securities 5.0 0.50
Investment Grade Corporates 10.0 1.56
High Yield 5.0 2.27
Emerging Market Debt 5.0 2.48
Private Debt 5.0 3.57
Real assets 15.0 3.21
Leverage (5.0) (0.59)
1 An expected inflation of 2.30% used for this period.
2 Figures are based on the 2021-22 Asset Liability Management study. 108
CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
38 NOTE 9 FUND BALANCE
The following table provides details of the Fund Balance classifications used in the Balance Sheet of the governmental funds:
June 30, 2024 General Fund
Special
Revenue Funds Total
Nonspendable for:
Loans receivable $ - $ 648,737 $ 648,737
Prepaid expenses 24,800 24,800 - Nonspendable Fund Balance $ 24,800 $ 648,737 $ 673,537 Restricted for:
Fire $ - $ 124,597 $ 124,597
Sewer assessement - 141,252 141,252
Community development - 219,527 219,527
Capital projects fund - 4,233 4,233
Streets & roads 1,280,489 - 1,280,489
Library 1,182,315 - 1,182,315
Restricted Fund Balance $ 2,952,413 - $ $ 2,952,413
Committed for:
Capital assets $ 177,724 $ 177,724 - $
Library capital projects - 162,387 162,387
Committed Fund Balance $ 177,724 $ 162,387 $ 340,111
NOTE 10 RISK MANAGEMENT
The City belongs to a joint power authority called Small Cities Organized Risk Effort (SCORE). The cities in SCORE are involved in a program whereby they share risk for general liability, workers compensation, and employment practices to limits of $25,000,000 for general liability, $100,000,000 for workers compensation, and $1,000,000 for employment practices. Each City has a self-insured retention (SIR) of $25,000 in a banking plan. Losses above the SIR are covered under the program risk sharing provisions up to $500,000 for liability, or $150,000 for workers compensation. Beyond these limits, coverage is provided by larger joint powers authorities: California Joint Powers Risk Management Authority (CJPRMA), Local Agencies Excess Workers Compensation Excess Joint Powers Authority (LAWCX), and Employment Risk Management Authority (ERMA) through a combination of self-insurance and/or reinsurance to the maximum limits. There has been no significant reduction in any of the insurance coverages from the prior year.
NOTE 11 CONTINGENCIES
The City is involved in certain claims and lawsuits. In the opinion of the City's management, of the remaining unsettled lawsuits, it is unlikely that these claims and lawsuits will have a material adverse effect on the accompanying financial statements.
The City has received federal and state grants for specific purposes that are subject to reviews by the grantor agencies. Such reviews could lead to requests for reimbursement to the grantor agency for expenditures disallowed under the terms of the grant. The amount, if any, of expenditures that may be disallowed by the granting agencies cannot be determined at this time, although City management expects such amounts, if any to be immaterial.
The Sewer Fund has deposits collected in prior years for prepaid sewer connections. The landowners who purchased connections before March 25, 1991 do not have to pay the difference between the prepaid connection cost and the current cost of construction. Therefore, the City will be liable for any costs over the amount that was prepaid. As of June 30, 2024, there are 105 connections that were purchased before March 25, 1991. The dollar amount of the potential excess costs to be incurred by the City is undeterminable. 109
CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
39 NOTE 12 PRIOR PERIOD ADJUSTMENTS
All prior period adjustments relate to the City’s General Fund, as well as those affecting the Governmental Activities.
During the fiscal year ended June 30, 2024, the City discovered the following errors to the prior period financial statements: 1) unrecorded FY22-23 expenses of $59,775 relating to the Prop 64 Cohort 2 grant, which had the effect of decreasing beginning fund balance, as well as beginning net position in Governmental Activities; 2) error in recognizing Prop 172 public safety funds for revenue considered unavailable, which had the effect of decreasing beginning fund balance; 3) error in not implementing GASB Statement No. 87 for equipment leases with Axon Enterprises for tasers and body cameras, which had the effect of decreasing beginning net position in Governmental Activities for activity relating to lease liabilities and increasing beginning net position in Governmental Activities for activity relating to the right-to-use assets; and 4) adjustment of previously recorded capital outlay for construction in progress for the projected library improvements that will not be used and should be expensed. This had the effect of decreasing beginning net position in Governmental Activities to remove the capitalized asset. All prior period adjustments related to the General Fund are found on page 8 and those related to the Governmental Activities are found on page 6. The effect on the change in fund balance for the General Fund and effect on beginning fund balance, as well as the change in net position and the overall effect on beginning net position for the Governmental Activities, are presented in tabular form as follows:
General Fund
Beginning fund balance, as previously reported $ 2,224,859 (59,775)
(29,674)
Net impact on Change in Fund Balance: (Decrease) (89,449) Beginning fund balance, as restated $ 2,135,410
Governmental Activities
Beginning net position, as previously reported $ 9,447,359 (59,775)
(19,685)
19,697
(240,347)
Net impact on Change in Net Position: (Decrease) (300,110) Beginning net position, as restated $ 9,147,249
4. Adjustment to correct Library construction in progress
1. Adjustment to correct Prop 64 Cohort 2 grant expenses
2. Adjustment to correct Prop 172 revenues
1. Adjustment to correct Prop 64 Cohort 2 grant expenses
2. Adjustment to correct lease liabilities and interest expense
3. Adjustment to correct the right-to-use lease assets and amortization expense
NOTE 13 SUBSEQUENT EVENTS
As of January 8, 2025, the date in which the financial statements were available to be issued and the issuance date, the City Council and management have reviewed the financial statements and they are aware of the one event that has occurred subsequent to the balance sheet date and through the date of the independent auditor’s report that would require adjustments to or disclosure in the financial statements. At June 30, 2024, the City had a loan balance of $9,209,000 for interim construction financing that was due to the lender, CoBank. As stated in Note 7 beginning on page 26, Series 2024 Wastewater Revenue Bonds were issued on October 1, 2024, by the USDA Rural Development RUS financing and the proceeds were used to repay the balance of the interim construction financing. Effective February 1, 2025, semi-annual interest payments at 2.125% of the outstanding loan balance will begin and annual principal payments will begin on August 1, 2025. The future debt service requirements for the revenue bonds are reflected in the anticipation note schedule on page 31. 110
CITY OF MT. SHASTA
Notes to the Financial Statements
June 30, 2024
40 NOTE 14 DEFERRED COMPENSATION PLAN
The City offers its employees a deferred compensation plan (the "Plan") created in accordance with IRS Code Section 457. Amounts deferred by employees and the related income are held in trust by the plan provider for the exclusive benefit of the participants and their beneficiaries. The amounts are not owned by the City, nor are they available to the City's creditors. The Plan is funded solely by the employees' voluntary contributions to the Plan up to the limits prescribed by the IRS. The City does not match employee contributions; therefore, no expense is reported with respect to this plan.
Under the provisions of GASB Statement No. 84, Fiduciary Activities, which has superseded GASB Statement No. 32, Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans, the City is not required to report the value of the plan assets since the assets are held in trust for the exclusive benefit of the participants and their beneficiaries. Consequently, the values of the plan assets and any related liability to plan participants have been excluded from the City's financial statements.
NOTE 15 AGREEMENTS
The City has an agreement with the Mt. Shasta Fire Protection District to provide fire personnel services to the District. The City received $190,000 for the year ended June 30, 2024.
NOTE 16 COMMITMENTS
The City had several contractual commitments at June 30, 2024, however, all of those commitments are based on future services performed and thus, no expense has been recorded in the current financial statements related to these future services.
NOTE 17 LOAN RECEIVABLE
During the year ended June 30, 2023, the City provided a $105,000 loan to a local business under the 18-CDBG12914 Economic Development Grant Program. According to the terms of this loan and the grant program, principal and interest shall be deferred to provide the necessary timeframe to meet, document and verify eligibility for forgiveness of the loan. The deferral period for forgiveness will be one year from the closing date. The deferral period may be extended with approval from Lender. Loans awarded under this program will become eligible for complete forgiveness once the CDBG “National Objective Standards” as stated in Section 3.4 of the Guidelines for Business Assistance Loan/Grant Program operated by City of Mt. Shasta with CDBG Funding adopted January 23, 2023. During the year ended June 30, 2024, the eligibility requirements were met and the loan was eligible for loan forgiveness.
NOTE 18 STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
Budgetary information – the annual budget is adopted on a basis consistent with generally accepted accounting principles for all major Governmental funds of the City and significant non-major Governmental funds. The budget is adjusted throughout the year as necessary.
Excess of expenditures over appropriations – for the year ended June 30, 2024, the Community Development Block Grant Fund’s expenditures exceeded appropriations by $23,240 due to excess CARES Act assistance expenditures as well as community development expenditures. This has created a deficit in unassigned fund balance in the amount of $4,728. This will be paid for by future revenues. 111
REQUIRED SUPPLEMENTARY INFORMATION SECTION
(UNAUDITED)
112
Favorable
(Unfavorable)
Original Final Actual Variance With
Budget Budget Amounts Final Budget
REVENUES
Property taxes $ 671,000 $ 671,000 $ 748,914 $ 77,914
Sales and use taxes 2,386,800 2,409,844 2,278,883 (130,961) Transient occupancy taxes 1,224,000 1,224,000 1,290,177 66,177 Franchise and other licenses 88,000 88,000 85,397 (2,603) Licenses and permits 87,300 87,300 109,679 22,379
Intergovernmental revenues 803,682 803,682 942,507 138,825 Charges for services 236,350 275,850 270,469 (5,381)
Fines, forfeitures and penalties 9,500 9,500 16,958 7,458 Use of money and property 20,850 31,350 14,064 (17,286) Net change in fair value of investments - - 13,723 13,723 Lease revenues - - 9,910 9,910
Other 316,164 295,964 95,988 (199,976)
Total Revenues 5,843,646 5,896,490 5,876,669 (19,821)
EXPENDITURES
Current:
City council 43,662 45,662 51,439 (5,777)
City administrator 284,999 284,999 253,040 31,959
City clerk 26,049 40,249 33,999 6,250
Finance and administration 1,359,520 1,418,924 1,132,640 286,284 City attorney 65,000 65,000 60,663 4,337
Police protection 2,066,752 2,133,152 2,256,671 (123,519) Fire protection 981,404 1,027,912 1,015,639 12,273
Planning 284,580 235,280 203,165 32,115
Streets and roads 494,794 498,044 460,895 37,149
Buildings and grounds 279,954 350,954 345,944 5,010
Community and economic development 130,625 147,475 176,409 (28,934) Capital outlay 306,667 418,318 550,429 (132,111)
Debt service:
Principal payments 52,706 52,706 70,482 (17,776)
Interest 37,960 37,960 33,770 4,190
Total Expenditures 6,414,672 6,756,635 6,645,185 111,450 Excess (Deficiency) of Revenues Over (Under) Expenditures (571,026) (860,145) (768,516) 91,629
OTHER FINANCING SOURCES (USES)
Operating transfers in (out) 170,000 283,410 221,444 (61,966) Proceeds from sale of assets - - 9,000 9,000
Proceeds from debt - - 73,242 73,242
Re-measurement of lease liability - - (370) (370)
Total Other Financing Sources (Uses) 170,000 283,410 303,316 19,906 Change in Fund Balance $ (401,026) $ (576,735) $ (465,200) $ 111,535 CITY OF MT. SHASTA
Budgetary Comparison Schedule
For The Year Ended June 30, 2024
General Fund
The accompanying notes are an integral
part of these financial statements.
41 113
Favorable
(Unfavorable)
Original Final Actual Variance With
Budget Budget Amounts Final Budget
REVENUES
Intergovernmental revenues 170,200 161,802 77,533 (84,269) CARES Act Covid-19 revenues 850,000 400,000 389,720 (10,280) Use of money and property 12,000 24,000 4,675 (19,325)
Total Revenues 1,032,200 585,802 471,928 (113,874)
EXPENDITURES
Current:
Community and economic development 169,600 161,802 177,452 (15,650) CARES Act Covid-19 assistance 850,000 400,000 407,590 (7,590) Total Expenditures 1,019,600 561,802 585,042 (23,240)
Excess (Deficiency) of Revenues Over (Under) Expenditures 12,600 24,000 (113,114) (137,114)
OTHER FINANCING SOURCES (USES)
Operating transfers in (out) (12,000) (24,000) (22,455) 1,545 Total Other Financing Sources (Uses) (12,000) (24,000) (22,455) 1,545 Change in Fund Balance $ 600 $ (135,569) - $ $ (135,569) Budgetary Comparison Schedule
Community Development Black Grant Fund
For The Year Ended June 30, 2024
CITY OF MT. SHASTA
The accompanying notes are an integral
part of these financial statements.
42 114
Measurement Year Ending June 30: 1
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Plan's proportion of the net pension liability 0.03677% 0.03478% 0.03669% 0.03691% 0.03753% 0.03836% 0.03933% 0.04661% 0.04402% 0.04409% Plan's proportionate share of the net pension liability $2,288,034 $2,387,208 $3,174,391 $3,660,325 $3,616,147 $3,930,972 $4,279,666 $2,521,006 $5,084,475 $5,500,641 Plan's covered-employee payroll $1,395,764 $1,504,449 $1,711,974 $1,749,876 $1,770,620 $2,015,466 $1,934,681 $1,931,680 $1,975,448 $2,560,209 Plan's proportionate share of the net pension liability as percentage of its covered-employee payroll 163.93% 158.68% 185.42% 209.18% 204.23% 195.04% 221.21% 130.51% 257.38% 214.85% Plan's proportionate share of the fiduciary net position as a percentage of the plan's total pension liability 18.97% 18.99% 23.69% 25.01% 23.69% 24.58% 25.48% 14.55% 72.14% 71.34% Plan's proportionate share of aggregate employer
contributions 2
$269,809 $349,779 $368,746 $399,015 $465,252 $512,667 $598,343 $675,255 $770,427 $558,436 1 GASB 68 requires historical information only for measurement periods for which GASB 68 is applicable. 2 The Plan’s proportionate share of aggregate contributions may not match the actual contributions made by the employer during the measurement period. The Plan’s proportionate share of aggregate contributions uses the Plan’s proportion of fiduciary net position multiplied by the total employer contribution amount as its basis, as well as any additional side fund (or unfunded liability) contributions made by the employer during the measurement period. GASB 68 does not require that we display this data for employers participating in cost-sharing plans, but it we show it here because we use it in the calculation of the Plan’s pension expense.
CITY OF MT. SHASTA
Cost-Sharing Multiple-Employer Defined Benefit Pension Plan June 30, 2024
Last 10 Years
SCHEDULE OF THE LOCAL GOVERNMENT'S
PROPORTIONATE SHARE OF THE NET PENSION LIABILITY
COMBINED PLANS
The accompanying notes are an integral
part of these financial statements. 43
115
Measurement Year Ending June 30: 1
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Actuarially determined contribution 2 $ 205,584 $ 215,802 $ 274,569 $ 326,891 $ 353,005 $ 436,230 $ 441,494 $ 485,179 $ 525,780 $ 625,834 Contributions in relation to the actuarially
determined contribution 205,584 215,802 274,569 326,891 353,005 436,230 441,494 485,179 525,780 625,834 Contribution deficiency (excess) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Covered employee payroll 1,395,764$ 1,504,449$ 1,711,974$ 1,749,876$ 1,770,620$ 2,015,466$ 1,934,681$ 1,931,680$ 1,975,448$ 2,560,209$ Contributions as a percentage of coveredemployee payroll 14.73% 14.34% 16.04% 18.68% 19.94% 21.64% 22.82% 25.12% 26.62% 24.44% 1 GASB 68 requires historical information only for measurement periods for which GASB 68 is applicable.
Notes to Schedule:
Change in Assumptions: None
COMBINED PLANS
2 GASB 68 assumes that employers contribute an amount equal to the actuarially determined contribution. However, some employers may choose to make additional contributions towards their side fund or their unfunded liability. Employer contributions for such plans exceed the actuarially determined contribution. CalPERS determined that employer obligations referred to as "side funds" do not conform to the circumstances described in the paragraph 120 of GASB 68, therefore CalPERS does not consider them separately financed specific liabilities.
Change in Benefit Terms: There were no changes to benefit terms that applied to all members of the Public Agency Pool. However, individual employers in the Plan may have provided a benefit improvement to their employees by granting Two Years Additional Service Credit to members retiring during a specified period (also known as "Golden Handshakes"). Employers that have done so may need to report this information as a separate liability in their financial statement as CalPERS considers such amounts to be separately financed employer-specific liabilities. These employers should consult with their auditors.
CITY OF MT. SHASTA
Cost-Sharing Multiple-Employer Defined Benefit Pension Plan June 30, 2024
Last 10 Years
SCHEDULE OF PLANS CONTRIBUTIONS
The accompanying notes are an integral
part of these financial statements. 44
116
SUPPLEMENTARY INFORMATION
117
Community
Business Fire Development Local Transportation Public Safety Improvement Assessment Impact Transportation Project COPS Enhancement Gas Tax Balance Fund Fund Fund Fund Fund Fund Fund Fund Forward
ASSETS
Cash and investments $ 52,706 $ 113,150 $ 41,781 $ 540,898 $ 4,764 -$ $ 712,974$ - $ 1,466,273 Receivables (net of allowances for doubtful
Accounts, where applicable):
Intergovernmental - 11,392 - 7,155 26,666 - - 22,943 68,156 Interest 31 55 21 253 - - - 300 660
Total Assets $ 52,737 $ 124,597 $ 41,802 $ 548,306 $ 31,430 -$ $ 736,217$ - $ 1,535,089
LIABILITIES AND FUND BALANCES
Liabilities
Accounts payable $ 4,500 $ - $ - $ - $ 5,341 -$ $ 1,015 -$ 10,856 $ Overdraft payable - - - - 25,320 - - - 25,320
Due to other funds - - - - - 54,414 26,288 - 80,702
Due to other governments - - - 4,803 - - - - 4,803
Total Liabilities 4,500 - - 4,803 30,661 54,414 27,303 - 121,681 Fund Balances
Restricted 48,237 124,597 41,802 543,503 769 - - 736,217 1,495,125 Unassigned - - - - - (54,414) (27,303) - (81,717)
Total Fund Balances 48,237 124,597 41,802 543,503 769 (54,414) (27,303) 736,217 1,413,408 Total Liabilities and Fund Balances $ 52,737 $ 124,597 $ 41,802 $ 548,306 $ 31,430 -$ $ 736,217$ - $ 1,535,089 Special Revenue Funds
CITY OF MT. SHASTA
Combining Balance Sheet - Nonmajor Governmental Funds
June 30, 2024
The accompanying notes are an integral
part of these financial statements.
45 118
Special Other
Balance Springhill Capital Economic Projects Special
Brought Assessment Projects Enhancement Grant Library Revenue Forward Fund Fund Fund Fund Fund Funds Total
ASSETS
Cash and investments $ 1,466,273 $ 141,182 4,233$ $ 111,725 -$ 1,299,193 $ 25,529$ $ 3,048,135 Receivables (net of allowances for doubtful
Accounts, where applicable):
Intergovernmental 68,156 - - - 122,158 70,573 - 260,887 Interest 660 70 - - - 638 1 1,369
Total Assets $ 1,535,089 $ 141,252 4,233$ $ 111,725 122,158$ $ 1,370,404 25,530$ $ 3,310,391
LIABILITIES AND FUND BALANCES
Liabilities
Accounts payable $ 10,856 $ - -$ $ - 23,797$ $ 25,702 -$ 60,355 $ Overdraft payable 25,320 - - - 83,124 - - 108,444
Due to other governments 4,803 - - - - - - 4,803
Unearned revenue - - - - 4,388 - 18,101 22,489
Total Liabilities 121,681 - - - 111,309 25,702 18,101 276,793 Fund Balances
Restricted 1,495,125 141,252 4,233 111,725 10,849 1,182,315 6,914 2,952,413 Committed - - - - - 162,387 - 162,387
Unassigned (81,717) - - - - - 515 (81,202)
Total Fund Balances 1,413,408 141,252 4,233 111,725 10,849 1,344,702 7,429 3,033,598 Total Liabilities and Fund Balances $ 1,535,089 $ 141,252 4,233$ $ 111,725 122,158$ $ 1,370,404 25,530$ $ 3,310,391 CITY OF MT. SHASTA
Combining Balance Sheet - Nonmajor Governmental Funds (Continued) June 30, 2024
Special Revenue Funds
The accompanying notes are an integral
part of these financial statements.
46 119
Community
Business Fire Development Local Transportation Public Safety Improvement Assessment Impact Transportation Project COPS Enhancement Gas Tax Balance Fund Fund Fund Fund Fund Fund Fund Fund Forward
REVENUES
Sales and use taxes $ - $ - $ - $ - $ - -$ $ 248,793$ - $ 248,793 Assessments 9,526 49,023 - - - - - - 58,549
Intergovernmental revenues - 10,288 - 143,922 18,719 186,159 - 83,715 442,803 Charges for services - - 1,056 - - - - - 1,056
Use of money and property 121 283 68 851 - - - 1,595 2,918 Net change in fair value of investments - - - - - 2,494 - - 2,494 Other revenue 1,073 - - - - 8,500 282 - 9,855
Total Revenues 10,720 59,594 1,124 144,773 18,719 197,153 282 334,103 766,468
EXPENDITURES
Current:
Police protection - - - - - 31,786 16,922 - 48,708
Fire protection - 19,270 - - - - - - 19,270
Public works - streets & roads - - - 53,572 - - - - 53,572 Public transit assistance - - - 82,621 - - - - 82,621
Community development 32,491 - - - - - - - 32,491
Library - - - - - - - - -
Capital outlay - - - 4,764 18,719 202,137 21,912 - 247,532 Debt service:
Principal - 25,497 - - - - - - 25,497
Interest - 2,163 - - - - - - 2,163
Total Expenditures 32,491 46,930 - 140,957 18,719 233,923 38,834 - 511,854 (21,771) 12,664 1,124 3,816 - (36,770) (38,552) 334,103 254,614
OTHER FINANCING SOURCES (USES)
Operating transfers in (out) - - - - - (70,000) - (151,444) (221,444) Total Other Financing Sources (Uses) - - - - - (70,000) - (151,444) (221,444) Changes in Fund Balances (21,771) 12,664 1,124 3,816 - (106,770) (38,552) 182,659 33,170
FUND BALANCES
Beginning of year 70,008 111,933 40,678 539,687 769 52,356 11,249 553,558 1,380,238 End of year $ 48,237 $ 124,597 $ 41,802 $ 543,503 $ (54,414)$ 769 $ (27,303) 736,217$ $ 1,413,408 Special Revenue Funds
CITY OF MT. SHASTA
Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds For The Year Ended June 30, 2024
Excess of Revenues Over (Under)
Expenditures
The accompanying notes are an integral
part of these financial statements.
47 120
Special Other
Balance Springhill Capital Economic Projects Special
Brought Assessment Projects Enhancement Grant Library Revenue Forward Fund Fund Fund Fund Fund Funds Total
REVENUES
Sales and use taxes $ 248,793 $ - -$ $ - -$ 375,347 $ -$ 624,140 $ Assessments 58,549 - - - - - - 58,549
Intergovernmental revenues 442,803 - - - 393,465 - - 836,268 Charges for services 1,056 - - - - - - 1,056
Use of money and property 2,918 368 - - - 3,125 262 6,673 Net change in fair value of investments 2,494 - - 4,006 - - - 6,500 Other revenue 9,855 - - - - - - 9,855
Total Revenues 766,468 368 - 4,006 393,465 378,472 262 1,543,041
EXPENDITURES
Current:
Police protection 48,708 - - - - - - 48,708
Fire protection 19,270 - - - - - - 19,270
Public works - streets & roads 53,572 - - - - - - 53,572 Public transit assistance 82,621 - - - - - - 82,621
Community development 32,491 - - 966 357,780 - 12,581 403,818 Library - - - - - 156,344 - 156,344
Capital outlay 247,532 - - - 26,591 9,650 - 283,773
Debt service:
Principal 25,497 - - - - - - 25,497
Interest 2,163 - - - - - - 2,163
Total Expenditures 511,854 - - 966 384,371 165,994 12,581 1,075,766 254,614 368 - 3,040 9,094 212,478 (12,319) 467,275
OTHER FINANCING SOURCES (USES)
Operating transfers in (out) (221,444) - - 17,455 - - 5,000 (198,989) Total Other Financing Sources (Uses) (221,444) - - 17,455 - - 5,000 (198,989) Changes in Fund Balances 33,170 368 - 20,495 9,094 212,478 (7,319) 268,286
FUND BALANCES
Beginning of year 1,380,238 140,884 4,233 91,230 1,755 1,132,224 14,748 2,765,312 End of year $ 1,413,408 $ 141,252 4,233$ $ 111,725 10,849$ $ 1,344,702 7,429$ $ 3,033,598 CITY OF MT. SHASTA
Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds (Continued) For The Year Ended June 30, 2024
Special Revenue Funds
Excess of Revenues Over (Under)
Expenditures
The accompanying notes are an integral
part of these financial statements.
48 121
SINGLE AUDIT SCHEDULES AND REPORTS
122
INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND
ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS
PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the City Council and Audit Committee
City of Mt. Shasta, California
I have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Mt. Shasta, California as of and for the year ended June 30, 2024, and the related notes to the financial statements, which collectively comprise the City of Mt. Shasta, California's basic financial statements, and have issued my report thereon dated January 8, 2025.
Report on Internal Control Over Financial Reporting
In planning and performing my audit of the financial statements, I considered the City of Mt. Shasta, California's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing my opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City of Mt.
Shasta, California's internal control. Accordingly, I do not express an opinion on the effectiveness of the City of Mt. Shasta, California's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented or detected and corrected on a timely basis. A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
My consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. I identified certain deficiencies in internal control, described in the accompanying schedule of findings and questioned costs as item 2024-001 that I consider to be material weaknesses.
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City of Mt. Shasta, California's financial statements are free of material misstatement, I performed tests of its compliance with certain provisions of laws, regulations, contracts, and grants agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of my audit and, accordingly, I do not express such an opinion. The results of my tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. 49 123
INDEPENDENT AUDITOR’S REPORT
(Continued)
City of Mt. Shasta, California’s Response to Findings
Government Auditing Standards requires the auditor to perform limited procedures on the City of Mt.
Shasta, California’s response to the findings identified in my audit and described in the accompanying schedule of findings and questioned costs. City of Mt. Shasta, California’s response was not subjected to the other auditing procedures applied in the audit of the financial statements and, accordingly, I express no opinion on the response.
Purpose of This Report
The purpose of this report is solely to describe the scope of my testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Charles W. Pillon, CPA
Anderson, California
January 8, 2025
50 124
INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM
AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE To the City Council and Audit Committee
City of Mt. Shasta, California
Report on Compliance for Each Major Federal Program
Opinion on Each Major Federal Program
I have audited City of Mt. Shasta, California’s compliance with the types of compliance requirements identified as subject to audit in the OMB Compliance Supplement that could have a direct and material effect on each of City of Mt. Shasta, California’s major federal programs for the year ended June 30, 2024.
City of Mt. Shasta, California’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs.
In my opinion, City of Mt. Shasta, California complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2024.
Basis for Opinion on Each Major Federal Program
I conducted my audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). My responsibilities under those standards and the Uniform Guidance are further described in the Auditor’s Responsibilities for the Audit of Compliance section of my report.
Responsibilities of Management for Compliance
Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to City of Mt.
Shasta, California’s federal programs.
Auditor’s Responsibilities for the Audit of Compliance
My objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on City of Mt. Shasta, California’s compliance based on my audit. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance will always detect material noncompliance when it exists. The risk of not detecting material noncompliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Noncompliance with the compliance requirements referred to above is considered material if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about City of Mt. Shasta, California’s compliance with the requirements of each major federal program as a whole.
In performing an audit in accordance with generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance, I:
51 125
INDEPENDENT AUDITOR’S REPORT
(Continued)
Exercise professional judgment and maintain professional skepticism throughout the audit. Identify and assess the risks of material noncompliance, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding City of Mt. Shasta, California’s compliance with the compliance requirements referred to above and performing such other procedures as I considered necessary in the circumstances.
Obtain an understanding of City of Mt. Shasta, California’s internal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of City of Mt. Shasta, California’s internal control over compliance. Accordingly, no such opinion is expressed.
I am required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that I identified during the audit.
Report on Internal Control over Compliance
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
My consideration of internal control over compliance was for the limited purpose described in the Auditor’s Responsibilities for the Audit of Compliance section above and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies in internal control over compliance. Given these limitations, during my audit I did not identify any deficiencies in internal control over compliance that I consider to be material weaknesses, as defined above. However, material weaknesses or significant deficiencies in internal control over compliance may exist that were not identified.
My audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed.
The purpose of this report on internal control over compliance is solely to describe the scope of my testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.
Charles W. Pillon, CPA
Anderson, California
January 8, 2025
52 126
Passed-through
Pass-Through Other Award Federal to
Federal Agency/Program or Cluster Title ALN Agency Number Expenditures Subrecipients United States Department of Agriculture
Cooperative Forestry Assistance 10.664 $ 36,840
Water and Waste Disposal Systems for Rural
Communities: State Mandated Wastewater
Treatment and Disposal Improvement Project 10.760 10,437,540 Loan balance - beginning of period = $ 9,209,000
Loans current period = $ 0.00
Loan balance - end of period = $ 9,209,000
Total United States Department of Agriculture 10,474,380 Department of Housing and Urban Development
Community Development Block Grants/State's
Program and Non-Entitlement Grants in Hawaii
COVID-19 CV-02 Supplemental Food 14.228 State of California 20-CDBG-CV2-3-
00094 111,056 111,056
COVID-19 CV-02 Subsistence 14.228 State of California
20-CDBG-CV2-3-
00106 257,972 49,036
2018 Business Assistance 14.228 State of California 18-CDBG-12914 857 857 2018 Micro Enterprise Program - Technical
Assistance 14.228 State of California 18-CDBG-12916 669 669 2018 Microenterprise Financial Assistance 14.228 State of California 18-CDBG-12915 276 276 Non Housing OTC (2019) Pine Street Water
Project 14.228 State of California 20-CDBG-12093 12,053 - Senior Snow Removal 14.228 State of California
22-CDBG-NH00017 70,648 29,373
Total ALN 14.228: Department of Housing and Urban Development 453,531 191,267 United States Environmental Protection Agency
Capitalization Grants for Clean Water State
Revolving Funds: State Mandated Wastewater
Treatment and Disposal Improvement Project 66.458
California State
Water Board D1701041 370,935
Brownfields Multipurpose, Assessment, Revolving
Loan Fund, and Cleanup Cooperative Agreements:
New Mill Southern Dump Area 66.818 GRANT13759636 335,906 41,975 Brownfields Multipurpose, Assessment, Revolving
Loan Fund, and Cleanup Cooperative Agreements 66.818 BF-98T07101-0 17,897 Total ALN 66.818 353,803 41,975
Total United States Environmental Protection Agency 724,738 Department of Homeland Security
Disaster Grants - Public Assistance (Presidentially
Declared Disasters) 97.036 CalOES
DR4790 - Project
745461 40,791
Total Department of Homeland Security 40,791
11,693,440
Total Expenditures of Federal Awards $ 11,693,440 $ 233,242 Total Other Programs (Treated individually for major program determination) Other Programs (Treated individually for major program determination) CITY OF MT. SHASTA
Schedule of Expenditures of Federal Awards
For the Fiscal Year Ended June 30, 2024
The accompanying notes are an
intergral part of this schedule 53
127
CITY OF MT. SHASTA
Notes to the Schedule of Expenditures of Federal Awards For the Year Ended June 30, 2024
NOTE A—BASIS OF PRESENTATION
The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal grant activity of the City of Mt. Shasta (the City) under programs of the federal government for the fiscal year ended June 30, 2024.
The information in this Schedule is presented in accordance with the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the City, it is not intended to and does not present the financial net position or changes in net position of the City.
NOTE B—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments, when applicable, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Also, when applicable, recognition is following the Uniform Guidance for federal awards granted after December 26, 2014.
2. Pass-through entity identifying numbers are presented where available.
NOTE C—SUBRECIPIENTS
Of the federal expenditures presented in the schedule, the City provided $233,242 of the federal awards to subrecipients.
NOTE D—INDIRECT COST RATE
The City did not elect to use the 10% de Minimis indirect cost rate on the federal awards presented in this schedule.
NOTE E—FEDERAL LOANS
a) The City was approved by the United States Department of Agriculture (USDA) Rural Development to receive a loan totaling $9,209,000 for the State Mandated Wastewater Treatment Plant and Disposal Improvement Project. Interim loan financing was received for the construction period. Due to this loan having “continuing compliance requirements” pursuant to the 2024 Compliance Supplement, the amount listed for this loan includes the beginning of the period loan balance plus proceeds used during the year. The balance owing at the end of the period is $9,209,000.
b) The City was approved by the pass-through entity, California State Water Resources Control Board, to receive a pass-through loan (i.e. sub-award) from the Environmental Protection Agency Clean Water State Revolving Fund totaling $6,926,942 for the State Mandated Wastewater Treatment Plant and Disposal Improvement Project. $2,000,000 of this loan is funded using Principal Forgiveness subsidy funding and has reduced the loan balance at the end of the period. Due to this loan not having “continuing compliance requirements” pursuant to the 2023 Compliance Supplement, the amount listed for ALN 66.458 is the fiscal year expenditures funded by this loan during the fiscal year under audit without the beginning loan balance.
The balance owing at the end of the period is $3,457,209. 54 128
CITY OF MT. SHASTA
Schedule of Findings and Questioned Costs
For the Year Ended June 30, 2024
SUMMARY OF AUDITOR’S RESULTS
1. The independent auditor’s report expresses an unmodified opinion on whether the financial statements of the City of Mt. Shasta, California were prepared in accordance with GAAP.
2. Material weaknesses were identified relating to the audit of the financial statements as reported in the Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards.
3. No instances of noncompliance material to the financial statements of the City of Mt. Shasta were identified which would be required to be reported in accordance with Government Auditing Standards.
4. No material weakness was identified in internal control over compliance for the major federal award program reported in the Independent Auditor’s Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance.
5. The independent auditor’s report on compliance over major federal award programs expressed an unmodified opinion on all major federal award programs.
6. There are no audit findings that are required to be reported in accordance with 2 CFR Section 200.516(a) reported in this Schedule.
7. The programs tested as major programs were:
United States Department of Agriculture, Water and Waste Disposal Systems for Rural Communities, ALN 10.760
8. The threshold used for distinguishing between Type A and B programs was $750,000.
9. The City of Mt. Shasta did qualify as a low-risk auditee. 55 129
CITY OF MT. SHASTA
Schedule of Findings and Questioned Costs
For the Year Ended June 30, 2024
FINDINGS – FINANCIAL STATEMENT AUDIT
Finding 2024-001 Lack of Effective Internal Control over Financial Close and Reporting Condition: I identified and posted numerous material audit adjustments as part of my audit in order to agree the financial statements with the underlying support. These were required in order for the financial statements to be prepared in accordance and/or conformity with generally accepted accounting principles (GAAP). In addition, there were material misstatements in the preparation of the schedule of expenditures of federal awards.
Criteria: The City must present its financial statements in accordance with generally accepted accounting principles and the schedule of expenditures of federal awards must be in accordance with Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. In accordance with Statement on Auditing Standards No. 122c, external auditors cannot be part of an entity’s internal controls over the preparation of the financial statements, or the schedule of expenditures of federal awards, and are prohibited from auditing their own work, which could impair independence.
Cause: The Finance Director did not identify and correct material misstatements in the financial statements before the start of the audit. The schedule of expenditures of federal awards was prepared without including the grant portion of a major federal award and the some subrecipient pass-through balances were incorrect.
Effect: This is a material weakness in the internal controls over financial close and reporting, which includes the preparation of the schedule of expenditures of federal awards. Year-end financial statements contained material misstatements which could lead to inaccurate decisions that impact the City, as well as impacting the external users of the financial statements. There are no questioned costs related to this finding.
Context: This is a repeat finding from the year ended June 30, 2023. The items consisted of adjustments to properly record grant revenues and expenditures, correct year-end balances for grant related receivables, interest payable, long-term debt, capital assets and depreciation, and ensure the schedule of expenditures of federal awards was fairly stated.
Recommendation: I recommend that the City takes steps to ensure that all adjustments necessary to prepare the financial statements, and related notes, in accordance with GAAP be identified and posted prior to the start of the audit. The City should also ensure that the schedule of expenditures of federal awards is fairly stated by including all federal awards and amounts passed through to subrecipients are correct.
Views of Responsible Officials: The City agrees with this finding.
FINDINGS – MAJOR FEDERAL AWARD PROGRAMS AUDIT
NONE
SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS – FINANCIAL STATEMENT AUDIT 2023-001 Lack of Effective Internal Control over Financial Close and Reporting Condition: I identified and posted numerous material audit adjustments as part of my audit in order to agree the financial statements with the underlying support. These were required in order for the financial statements to be prepared in accordance and/or conformity with generally accepted accounting principles (GAAP). In addition, there were material misstatements in the preparation of the schedule of expenditures of federal awards.
Status: The recommendations have not been fully implemented. 56 130
CITY OF MT. SHASTA
305 North Mt. Shasta Boulevard
Mt. Shasta, California 96067
(530) 926-751 O • Telephone
(530) 926-7521 • Fax
CORRECTIVE ACTION PLAN
Year ended 6/30/24
Finding: 2024-001
Agency: City of Mt. Shasta, California
Responsible person name/title: Malisa Dodd, Finance Director Anticipated completion date: June 30, 2025 Audit
Corrective action plan: The City's Finance Director will be responsible for ensuring that all adjustments necessary to prepare the financial statements and related notes, in accordance with GAPP will be identified and posted prior to the start of the audit. The schedule of expenditures of federal award is fairly stated by including all federal awards and amounts passed through to subrecipients are correct. 57 YEAR-ROUND RECREATIONAL CENTER
131
MOUNT SHASTA PUBLIC
FINANCING AUTHORITY
Mt. Shasta, California
BASIC FINANCIAL STATEMENTS
June 30, 2024
132
MOUNT SHASTA PUBLIC FINANCING AUTHORITY
(A Component Unit of the City of Mt. Shasta, California)
TABLE OF CONTENTS
June 30, 2024
Page
Number
INDEPENDENT AUDITOR’S REPORT 1
BASIC FINANCIAL STATEMENTS
Statement of Net Position, Governmental Funds Balance Sheet and Reconciliation of Governmental Fund Balance to the Statement of Net Position – Governmental Activities 3
Statement of Activities and Governmental Fund Revenues, Expenditures and Change in Fund Balance 4
Reconciliation of Statement of Revenues, Expenditures, and Change in Fund Balance – Governmental Funds to the Statement of Activities - Governmental Activities 5 Notes to the Financial Statements 6
OTHER SCHEDULES AND REPORTS
Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 13
Schedule of Findings and Questioned Costs 15
133
INDEPENDENT AUDITOR’S REPORT
To the Board of Directors and Audit Committee
Mount Shasta Public Financing Authority
Mt. Shasta, California
Report on the Audit of the Financial Statements
Opinions
I have audited the accompanying financial statements of the governmental activities and major fund of the Mount Shasta Public Financing Authority, a component unit of the City of Mt. Shasta, California as of and for the year ended June 30, 2024, and the related notes to the financial statements, which collectively comprise the Authority’s basic financial statements as listed in the table of contents.
In my opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of Mount Shasta Public Financing Authority as of June 30, 2024, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinions
I conducted my audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. My responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of my report. I am required to be independent of the Mount Shasta Public Financing Authority and to meet my other ethical responsibilities, in accordance with the relevant ethical requirements relating to my audit. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinions.
Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Mount Shasta Public Financing Authority’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
Auditor’s Responsibilities for the Audit of the Financial Statements My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
1 134
INDEPENDENT AUDITOR’S REPORT
(Continued)
In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, I:
Exercise professional judgment and maintain professional skepticism throughout the audit. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Mount Shasta Public Financing Authority’s internal control. Accordingly, no such opinion is expressed.
Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
Conclude whether, in my judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Mount Shasta Public Financing Authority’s ability to continue as a going concern for a reasonable period of time.
I am required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that I identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis (not presented), be presented to supplement the basic financial statements. Management has omitted Management’s Discussion and Analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. My opinion on the basic financial statements is not affected by this missing information.
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, I have also issued my report dated January 8, 2025, on my consideration of the Mount Shasta Public Financing Authority's internal control over financial reporting and on my tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of my testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance.
That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Mount Shasta Public Financing Authority's internal control over financial reporting and compliance.
Charles W. Pillon, CPA
Anderson, California
January 8, 2025
2 135
BASIC FINANCIAL STATEMENTS
136
Governmental
Activities
General Statement of
Fund Adjustments Net Position
ASSETS
Restricted cash and investments $ - $ - $ -
Interest receivable - 60,060 60,060
Investment in lease to the City of Mt. Shasta 975,000 - 975,000 Installment notes receivable with the City of Mt. Shasta 4,038,200 - 4,038,200 Contributed capital investment in the City of Mt. Shasta - 36,198 36,198 Total Assets $ 5,109,458 - $ $ 5,109,458
LIABILITIES AND FUND BALANCE
Liabilities
Interest payable $ - $ 60,060 $ 60,060
Due within one year 183,138 - 183,138
Due in more than one year 5,031,723 - 5,031,723
Total Liabilities 5,274,921 - 5,274,921
Fund Balance/Net Position
Fund balance (165,463) -
Total Liabilities and Fund Balance $ -
Total Net Position $ (165,463) $ (165,463)
Total governmental fund balance, as above $ -
Amounts reported for governmental activities in the Statement of Net Position are different because:
Interest receivable used in governmental activities is not a financial resource and therefore not reported in the funds 60,060
Contributed capital investment used in governmental activities is not a financial resource and therefore not reported in the funds 36,198 Long-term investment in the capital lease to the City of Mt. Shasta in governmental activitites is not a financial resource and therefore not reported in the funds 975,000 Long-term installment notes receivable with the City of Mt. Shasta in governmental activitites are not financial resources and therefore not reported in the funds 4,038,200 Long-term liabilities, as follows, are not due and payable in the current period and therefore are not reported in the funds:
2019 Series Revenue Bonds payable (3,780,000)
2019 Series Revenue Bonds Premium payable (201,661)
2019 Series Wastewater Enterprise Revenue Bonds payable (1,233,200) Interest on long-term debt is not accrued in governmental funds, but rather is recognized as an expenditure when legally due, however, the Statement of Activities reflects interest payable as the obligation is incurred (60,060)
Net Position of Governmental Activities $ (165,463)
MOUNT SHASTA PUBLIC FINANCING AUTHORITY
(A Component Unit of the City of Mt. Shasta, California) Statement of Net Position, Governmental Funds Balance Sheet and June 30, 2024
Reconciliation of Governmental Fund Balance to the
Statement of Net Position - Governmental Activities
The accompanying notes are an integral
part of these financial statements.
3 137
General Statement of
Fund Adjustments Activities
REVENUES
Lease interest income $ 30,612 $ (375) $ 30,237
Installment note interest income 116,188 (1,639) 114,549 Total Revenues 146,800 (2,014) 144,786
EXPENDITURES
Debt service:
Principal payments 167,700 (167,700) -
Interest charges 146,800 (11,952) 134,848
Total Expenditures 314,500 (179,652) 134,848
Excess (Deficiency) of Revenues Over (Under)
Expenditures/Expenses (167,700) 177,638 9,938
OTHER FINANCING SOURCES (USES)
Proceeds from lease investment reduction 30,000 (30,000) - Proceeds from installment note repayments 137,700 (137,700) - Total Other Financing Sources (Uses) 167,700 (167,700) - Change in Fund Balance/Net Position - 9,938 9,938
Fund Balance - Beginning of Year (175,401) - (175,401)
Fund Balance - End of Year $ (165,463) - $ $ (165,463)
For The Year Ended June 30, 2024
MOUNT SHASTA PUBLIC FINANCING AUTHORITY
(A Component Unit of the City of Mt. Shasta, California) Statement of Activities and Governmental Fund Revenues, Expenditures and Change in Fund Balance
The accompanying notes are an integral
part of these financial statements.
4 138
Change in Fund Balance - Governmental Funds $ -
Amounts reported for governmental activities in the statement of activities is different because:
Governmental funds report interest income when it is legally due, however, in the Statement of Activities it is reported when incurred
Lease interest income (375)
Installment note interest income (1,639)
Governmental funds report proceeds from repayments of long-term debt, as a revenue, but the repayment is reported as a reduction of investment in lease or installment notes receivable in the Statement of Net Position and does not affect the Statement of Activities:
Lease investment (30,000)
Installment note receivable (137,700)
Governmental funds do not report the amortization of bond premium as a reduction of interest expenditure, but it is reported in the Statement of Activities 9,938 Repayment of bond principal is reported as expenditure in governmental funds and, thus, has the effect of reducing fund balance because current resources have been used. However, the principal payments reduce liabilities in the Statement of Net Position and does not affect the Statement of Activities 167,700
Interest expense in the Statement of Activities is reported when incurred in contrast to governmental funds where it is recorded when legally due 2,014 Change in Net Position - Governmental Activities 9,938$ Reconciliation of the Statement of Revenues, Expenditures and
MOUNT SHASTA PUBLIC FINANCING AUTHORITY
(A Component Unit of the City of Mt. Shasta, California) For The Year Ended June 30, 2024
Changes in Fund Balance - Governmental Funds
to the Statement of Activities - Governmental Activities The accompanying notes are an integral
part of these financial statements.
5 139
MOUNT SHASTA PUBLIC FINANCING AUTHORITY
(A Component Unit of the City of Mt. Shasta, California) Notes to the Financial Statements
June 30, 2024
6 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Mount Shasta Public Financing Authority’s (hereafter “the Authority”), a component unit of the City of Mt.
Shasta, California, (hereafter “the City”), financial statements are prepared in accordance with generally accepted accounting principles (GAAP). The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (Statements and Interpretations).
The accounting policies of the Authority conform to accounting principles generally accepted in the United States of America as applicable to governmental entities. The more significant accounting policies established in GAAP and used by the City are discussed below.
A. Reporting Entity
The Authority was created on May 13, 2019, as a result of a Joint Exercise of Powers Agreement between the City and the Mount Shasta Industrial Development Authority (Development Authority). The Authority is empowered to exercise any powers common to the City and the Development Authority.
The Authority's purpose is to finance public capital improvements. The Authority undertakes the sale and issuance of bonds. Bond proceeds are then used to design, construct, and acquire public capital improvements and lease, lease-back, sell, or re-sell such improvements to the City.
The Agreement is effective until terminated by the members as evidenced by a resolution adopted by the governing board of each respective member. The Agreement cannot terminate while any bonds remain outstanding. Upon dissolution of the Authority, any surplus assets shall be returned to the City and the Development Authority in proportion to any contributions made.
The Authority is a component unit of the City, and accordingly, is included in the basic financial statements of the City because the City Council exercises oversight responsibility over the operation of the Authority and the Authority provides specific financial benefits to the City. Only the accounts of the Authority are included herein; therefore, these financial statements do not represent the financial position or results of operations of the City. The financial data of the Authority is included in the City's annual financial report. Administrative costs of the Authority are paid by the City and are not included in the accompanying financial statements.
B. Basis of Presentation
Government-wide and Fund Financial Statements:
The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, while the governmental fund financial statements are reported using the current financial resources measurement and the modified accrual basis of accounting.
The operations of the fund statements are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund balances, revenues, and expenditures. Authority resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The Authority only uses a governmental fund.
Governmental fund types account for the activities of the Authority. The measurement focus is based upon spending or financial flow and the determination of changes in fund balance (net current assets). The following are the Authority's governmental fund types:
General fund accounts for the accumulation of financial resources for, and the payment of, general long-term debt principal, interest, and related costs.
The statement of net position and statement of activities columns reflect consolidated results of operations using the accrual basis of accounting and eliminating all interfund activity.
Basis of Accounting:
Refers to when revenues and expenditures are recognized in the accounts and reported in the basic financial statements.
140
MOUNT SHASTA PUBLIC FINANCING AUTHORITY
(A Component Unit of the City of Mt. Shasta, California) Notes to the Financial Statements
June 30, 2024
7 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Governmental fund types are accounted for using the modified accrual basis of accounting. Revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available) as net current assets. “Measurable” means the amount of the transaction can be determined and ”available” means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. A sixty (60) day availability period is used for revenue recognition for all other governmental fund revenues. Revenues not considered available are recorded as deferred revenues, unavailable. Revenues considered susceptible to accrual include interest and lease payments. Expenditures are generally recognized when the related fund liability is incurred, except for unmatured interest on general long-term debt, which is recognized when due.
The statement of net position and statement of activities columns represent operations on the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows.
Capital Assets: are not capitalized in the accompanying financial statements as they are under capital lease or installment sale to the City.
Investment in Lease to City of Mt. Shasta: is recorded as direct financing lease to the City.
Installment Sale to the City of Mt. Shasta: is recorded as installment notes receivable with the City.
Contributed Capital: represents excess bond premium invested in the City projects.
Bond Issuance Costs: are expensed immediately, as incurred.
Bond Premium and Discount: are amortized on a straight-line basis over the life of the related debt obligations which is not materially different from the effective interest method.
Use of Estimates: in preparation of basic financial statements in conformity with accounting principles generally accepted in the United States of America are required by management as well as assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
C. Budgetary Comparison
Under GASBS No. 34, budgetary comparison information is required to be presented for the general fund. The Authority is not legally required to adopt a budget; therefore, budget comparison information is not included for the general fund.
NOTE 2 INVESTMENT IN LEASE TO THE CITY OF MT. SHASTA
New Corporate Yard Garage
On October 1, 2019, the City and the Authority entered into an agreement for the Authority to finance the design, construction and/or rehabilitation of a new corporate yard garage. In order to finance the project, the City will lease certain real property and improvements thereon commonly known as the City of Mount Shasta City Hall, Police and Fire Station (“Leased Property”), pursuant to a Site and Facilities Lease, dated October 1, 2019, for an advance rental equal to $1,090.000 of the Series 2019 Revenue Bonds. In turn, the Authority, pursuant to a Lease Agreement, will sublease the Leased Property to the City, in consideration for Base Rental Payments to be made by the City to the Authority, according to a schedule that corresponds in amount to the principal and interest coming due with respect to the Bonds issued for this project. The first principal payment made under the lease was made on August 1, 2020 and will have a final maturity of August 1, 2044. 141
MOUNT SHASTA PUBLIC FINANCING AUTHORITY
(A Component Unit of the City of Mt. Shasta, California) Notes to the Financial Statements
June 30, 2024
8 NOTE 2 INVESTMENT IN LEASE TO THE CITY OF MT. SHASTA (Continued) Future minimum lease payments to be received as of June 30, 2024, are as follows:
Year Ended June 30, Total
2025 $ 64,638
2026 63,587
2027 62,538
2028 61,487
2029 60,263
2030-2034 313,312
2035-2039 313,050
2040-2044 315,756
2045 60,900
Total Lease Payments 1,315,531
Less: unearned income (340,531)
Net Investment in Lease Receivable $ 975,000
NOTE 3 INSTALLMENT NOTES RECEIVABLES
The following is a summary of the Authority’s installment notes receivable future minimum installment payments to be received from the City as of June 30, 2024:
Year Ended June 30, Total
2025 $ 250,456
2026 246,913
2027 248,386
2028 249,799
2029 250,299
2030-2034 1,236,992
2035-2039 1,168,377
2040-2044 901,472
2045-2049 378,705
2050-2054 246,864
2055-2059 246,809
2060 49,326
Total Installment Notes Receivable 5,474,397
Less: unearned income (1,436,197)
Net Installment Notes Receivable $ 4,038,200
Solar and Energy Efficient Improvements and Refinance
On October 1, 2019, the City and the Authority entered into an agreement for the Authority to finance the acquisition and installation of solar and energy efficient equipment in the new corporate yard garage, City Hall, Police and Fire Stations, and the Wastewater treatment plant. Also, the Authority agreed to provide additional financing to prepay and discharge the Series 2008 Revenue Bond debt of the City’s Sewer Fund. These are defined as the “project”.
The Authority has agreed to provide the financing for the solar and energy efficient improvements in the amount of $2,295,000 and to discharge the revenue bond debt in the amount of $930,000, by selling the project to the City for $3,225,000, in consideration of the agreement by the City to pay the purchase price of the project in semiannual installments of principal and interest. The installment payments will be secured by an irrevocable pledge of the Net Revenues of the Wastewater operations. The first principal payment made under the installment sale was made on August 1, 2020 and will have a final maturity of August 1, 2044. 142
MOUNT SHASTA PUBLIC FINANCING AUTHORITY
(A Component Unit of the City of Mt. Shasta, California) Notes to the Financial Statements
June 30, 2024
9 NOTE 3 INSTALLMENT NOTES RECEIVABLES (Continued)
Future minimum installment payments to be received under this agreement, as of June 30, 2024, are as follows:
Year Ended June 30, Total
2025 $ 201,050
2026 197,600
2027 199,075
2028 200,400
2029 200,925
2030-2034 990,275
2035-2039 921,538
2040-2044 654,663
2045 131,950
Total Installment Notes Receivable 3,697,475
Less: unearned income (892,475)
Net Installment Notes Receivable $ 2,805,000
Downtown Collection Sewer System Improvements
On August 1, 2019, the City and the Authority entered into an agreement for the Authority to finance the acquisition and improvement of/to the Wastewater system known as the downtown collection system for $1,309,000. The Authority has agreed to provide financing for the improvement project by selling the project to the City in consideration of the agreement by the City to pay the purchase price of the project in semiannual installments of principal and interest. The installment payments will be secured by an irrevocable pledge of the Net Revenues of the Wastewater operations. The first principal payment made under the installment sale was made on August 1, 2020 and will have a final maturity of August 1, 2059.
Future minimum installment payments to be received under this agreement, as of June 30, 2024, are as follows:
Year Ended June 30, Total
2025 $ 49,406
2026 49,313
2027 49,311
2028 49,399
2029 49,374
2030-2034 246,717
2035-2039 246,839
2040-2044 246,809
2045-2049 246,755
2050-2054 246,864
2055-2059 246,809
2060 49,326
Total Installment Notes Receivable 1,776,922
Less: unearned income (543,722)
Net Installment Notes Receivable $ 1,233,200
143
MOUNT SHASTA PUBLIC FINANCING AUTHORITY
(A Component Unit of the City of Mt. Shasta, California) Notes to the Financial Statements
June 30, 2024
10 NOTE 4 LONG-TERM DEBT
The Authority’s long-term debt obligations consist of the following at June 30, 2024:
Annual Original
Interest Principal Issue
Types of indebtedness (purpose) Maturity Rates Installments Amount Governmental Activities
Revenue Bonds:
2019 Issue (financed the acquisition and installation of a new corporate yard garage and solar equipment; and refinance the 2008 revenue bonds) Term Current Interest Bond 8/1/2044 2.65% - 4% $120,000 - $220,000 4,315,000 $ 2019 Issue (financed the downtown sewer collection system improvements) Term Current Interest Bond 8/1/2059 2.125% $9,100 - $48,300 1,309,000 $ Governmental Activities $ 5,624,000
The following is a summary of long-term liabilities activity for the fiscal year ended June 30, 2024: Balance Balance Due in July 1, 2023 Additions Reductions June 30, 2024 One Year Governmental Activities
Series 2019 Revenue Bonds -
Garage, Solar, Refinance 3,925,000 $ $ 145,000 - $ $ 3,780,000 $ 150,000 Amortized bond premium 211,599 - 9,938 201,661 9,938
Series 2019 Wastewater
Enterprise Revenue Bond 1,255,900 22,700 - 1,233,200 23,200 Governmental Activities $ 5,392,499 $ 177,638 - $ $ 5,214,861 $ 183,138 REVENUE BONDS:
The Authority was created on May 13, 2019, as a result of a Joint Exercise of Powers Agreement between the City and the Mount Shasta Industrial Development Authority. The Authority’s purpose is to finance public capital improvements for the benefit of the City, which includes the refinance of the City’s Series 2008 Revenue Bond debt.
Term Current Interest Bond, maturity 8/1/2044
The Series 2019 Revenue Bonds shown in the first table of Note 4 on page 10, were issued for $4,315,000 to finance the acquisition and construction of a new corporate yard garage, the acquisition and installation of solar energy efficient equipment in the new corporate garage, City Hall, Police and Fire stations, and the Wastewater treatment plant, and to prepay and discharge the 2008 revenue bond debt of the sewer operations. The bonds will accrue interest from the date of delivery, and interest thereon will be payable semiannually on February 1 and August 1 of each year, commencing February 1, 2020. These bonds have varying interest rates based on when the bonds mature according to rates established in the bond maturity schedule. These rates are not subject to change based on market conditions.
The repayment of the bonds by the Authority is made pursuant to a Lease Agreement and an Installment Sale Agreement dated October 1, 2019, by and between the Authority and the City, whereby the City repays the annual debt service under the Lease Agreement and the Installment Sale Agreement in amount exactly equal to the debt service required to repay the Bond. The Series 2019 Revenue Bonds first principal payment was made on August 1, 2020 and will have a final maturity of August 1, 2044.
Redemption: The Bonds are subject to optional, extraordinary, and mandatory sinking account redemption prior to their stated maturity dates, as provided in the Indenture Agreement. 144
MOUNT SHASTA PUBLIC FINANCING AUTHORITY
(A Component Unit of the City of Mt. Shasta, California) Notes to the Financial Statements
June 30, 2024
11 NOTE 4 LONG-TERM DEBT (Continued)
Reserve Fund: A Reserve Fund is established with the Bond Trustee pursuant to the Indenture in an amount equal to the Reserve Requirement, $267,937.50. The Reserve Fund is satisfied by the City purchasing a Municipal Bond Debt Service Reserve Insurance Policy (Reserve Policy) from the Municipal Assurance Corp. and deposit the Reserve Policy with the Trustee. The City purchased this policy as part of the bond debt issuance costs in October 2019.
Security: The Bonds are limited obligations of the Authority and, as such, only the Revenues of the Authority are pledged as security for the Bonds. Revenues are defined as 1) all installment payments, including interest, payable by the City to the Authority using the Net Revenues of the Wastewater (Sewer) Enterprise 2) all base rental payments, including interest, payable by the City to the Authority and 3) amounts deposited in the Reserve Fund.
There are no significant default provisions.
The debt service requirements for these bonds are as follows:
Year Ended
June 30, Principal Interest
2025 $ 150,000 $ 115,688
2026 150,000 111,188
2027 155,000 106,613
2028 160,000 101,888
2029 165,000 96,188
2030-2034 925,000 378,588
2035-2039 1,010,000 224,588
2040-2044 875,000 95,419
2045 190,000 2,850
Totals $ 3,780,000 $ 1,233,010
Term Current Interest Bond, maturity 8/1/2059
On May 9, 2019, an obligation of funds between the United States Department of Agriculture (USDA) Rural Development and the City was authorized to fund a sewer project called the Downtown Sewer Collection System Project. The funding from USDA Rural Development includes a loan of $1,309,000 in the form of Series 2019 Wastewater Enterprise Revenue Bond. The debt was issued on August 28, 2019 and will mature on August 1, 2059. The name of the owner of the bond is the USDA and the issuer is the Authority for the benefit of the City.
The repayment of the bond by the Authority is made pursuant to an Installment Sale Agreement dated August 1, 2019, by and between the Authority and the City, whereby the City repays the annual debt service under the Installment Sale Agreement in amount exactly equal to the debt service required to repay the Bond. The Series 2019 Wastewater Enterprise Revenue Bond’s first principal payment was made on August 1, 2020 and will have a final maturity of August 1, 2044.
Pledged Assets, Debt Reserves and Default: The City is obligated to pay the installment payments from Net Revenues as defined in the Trust Agreement dated August 1, 2019, by and between the Authority and the City.
There is a required debt service reserve equal to at least one annual loan installment that accumulates at the rate of 10% of one annual payment per year for 10 years or until a total of $51,065 has accumulated. Ten percent of the proposed loan payment would equal $426 per month. This would equate to $24,708 at June 30, 2024 and has been deposited by, and recorded by, the City. Additionally, there is a required short-lived asset reserve to be deposited based on an annual assessment of the facility’s short-lived asset needs to pay for repairs and/or replacement of major system assets. The assessed needs at June 30, 2024 of $779,710 has been deposited and recorded by the City. In the event of default, this Bond of $1,309,000 includes a provision that if the City is more than 30 days late on an installment payment, the full amount of the unpaid principal balance, together with accrued interest, becomes due immediately.
145
MOUNT SHASTA PUBLIC FINANCING AUTHORITY
(A Component Unit of the City of Mt. Shasta, California) Notes to the Financial Statements
June 30, 2024
12 NOTE 4 LONG-TERM DEBT (Continued)
The debt service requirements for these bonds are as follows:
Year Ended
June 30, Principal Interest
2025 $ 23,200 $ 26,206
2026 23,600 25,713
2027 24,100 25,211
2028 24,700 24,699
2029 25,200 24,174
2030-2034 134,100 112,617
2035-2039 149,100 97,739
2040-2044 165,600 81,209
2045-2049 183,900 62,855
2050-2054 204,400 42,464
2055-2059 227,000 19,809
2060 48,300 1,026
Totals $ 1,233,200 $ 543,722
NOTE 5 RISK MANAGEMENT
The Authority is exposed to various risks of loss related to torts; theft of, damage to, and distribution of assets; errors and omissions; and natural disasters. Because of the close relationship between the Authority and the City, the Authority’s liability coverage is provided by the City’s insurance policies. Complete information on risk management can be found in the City’s audited financial statements.
NOTE 6 SUBSEQUENT EVENTS
As of January 8, 2025, the date in which the financial statements were available to be issued and the issuance date, the Board of Directors and management have reviewed the financial statements and they are aware of the one event that has occurred subsequent to the balance sheet date and through the date of the independent auditor’s report that would require adjustments to or disclosure in the financial statements. At June 30, 2024, the City had a loan balance of $9,209,000 for interim construction financing that was due to the lender, CoBank. On October 1, 2024, Series 2024 Wastewater Revenue Bonds were issued by the USDA Rural Development RUS financing to the Authority, which used the proceeds to make a loan of $9,209,000 to the City in the form of an Installment Note, which was used by the City to repay the balance of the interim construction financing. Effective February 1, 2025, semi-annual interest payments at
2.125% of the outstanding loan balance will begin and annual principal payments will begin on August 1, 2025. 146
OTHER SCHEDULES AND REPORTS
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INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL
STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Directors and Audit Committee
Mount Shasta Public Financing Authority
Mt. Shasta, California
I have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities and the major fund of the Mount Shasta Public Financing Authority, a component unit of the City of Mt. Shasta, California as of and for the year ended June 30, 2024, and the related notes to the financial statements, which collectively comprise the Mount Shasta Public Financing Authority's basic financial statements, and have issued my report thereon dated January 8, 2025.
Report on Internal Control Over Financial Reporting
In planning and performing my audit of the financial statements, I considered the Mount Shasta Public Financing Authority’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing my opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Mount Shasta Public Financing Authority's internal control. Accordingly, I do not express an opinion on the effectiveness of the Mount Shasta Public Financing Authority's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented or detected and corrected on a timely basis. A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
My consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during my audit I did not identify any deficiencies in internal control that I consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified.
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Mount Shasta Public Financing Authority's financial statements are free of material misstatement, I performed tests of its compliance with certain provisions of laws, regulations, contracts, and grants agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts.
However, providing an opinion on compliance with those provisions was not an objective of my audit and, accordingly, I do not express such an opinion. The results of my tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
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INDEPENDENT AUDITOR’S REPORT
(Continued)
Purpose of this Report
The purpose of this report is solely to describe the scope of my testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Charles W. Pillon, CPA
Anderson, California
January 8, 2025
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Mount Shasta Public Financing Authority
Schedule of Findings and Questioned Costs
For the Year Ended June 30, 2024
FINDINGS – FINANCIAL STATEMENT AUDIT
NONE
SUMMARY OF PRIOR AUDIT FINDINGS
Finding 2023-001 Lack of Effective Internal Control over Financial Close and Reporting Condition: I identified and posted numerous material audit adjustments as part of my audit in order to agree the financial statements with the underlying support. These were required in order for the financial statements to be prepared in accordance and/or conformity with generally accepted accounting principles (GAAP).
Status: The Authority has fully implemented the recommendations. 15 150