City Council Agenda December 19, 2023
Notes to the Basic Financial Statements:
Note 1 – Summary of Significant Accounting Policies............................................................................. 64 Note 2 – Cash and Investments .............................................................................................................. 73 Note 3 – Capital Assets............................................................................................................................ 77 Note 4 – Leases Receivable..................................................................................................................... 79 Note 5 – Loans Receivable ......................................................................................................................81 Note 6 – Interfund Transactions............................................................................................................. 82 Note 7 – Deferred Outflows and Inflows of Resources........................................................................... 83 Note 8 – Long-Term Debt........................................................................................................................ 84 Note 9 – Nacimiento Water Project........................................................................................................ 88 Note 10 – Leases Payable and Subscription-Based Information Technology Agreements .................... 88 Note 11 – Defined Benefit Pension Plans ...............................................................................................90 Note 12 – Other Post-Employment Benefits........................................................................................... 94 Note 13 – Other Employee Benefits ....................................................................................................... 99 Note 14 – Fund Balances and Deficits...................................................................................................100 Note 15 – Funds with Expenditures Exceeding Appropriations............................................................100 Note 16 – Successor Agency to the Former Redevelopment Agency...................................................100 Note 17 – Liability, Workers’ Compensation, and Purchased Insurance..............................................102 Note 18 – Litigation and Contingencies................................................................................................104 Note 19 – Subsequent Events...............................................................................................................104 Note 20 – Prior Period Adjustments.....................................................................................................104 Required Supplementary Information
Budgetary Basis of Accounting – Note to the Required Supplementary Information ................................105 Budgetary Comparison Schedule – General Fund.......................................................................................106 Budgetary Comparison Schedule – Measure J-20 Supplemental Sales Tax Fund .......................................107 Budgetary Comparison Schedule – American Rescue Plan Act Fund..........................................................108 Budgetary Comparison Schedule – Specific Plans Fund.............................................................................. 109 Schedule of Changes in the Net Other Post-Employment Benefit (OPEB) Liability and Related Ratios ..... 110 Schedule of Changes in the Net Pension Liability and Related Ratios......................................................... 112 Schedule of Pension Contributions – Agent Multiple-Employer Defined Benefit Pension Plan ................. 114 Schedule of Plan’s Proportionate Share of Net Pension Liability................................................................ 116 Schedule of Pension Contributions – Cost-Sharing Defined Benefit Pension Plan ..................................... 118 Attachment 1
City Council Agenda December 19, 2023
Combining Statements
Nonmajor Governmental Funds:
Nonmajor Governmental Funds Descriptions ....................................................................................... 120 Combining Balance Sheet – Nonmajor Governmental Funds............................................................... 122 Combining Statement of Revenues, Expenditures, and Change in Fund Balances – Nonmajor Governmental Funds............................................................................................................ 126 Individual Fund Financial Statements and Schedules
Major Governmental Funds:
Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget to Actual – Capital Projects Fund .............................................................................................................. 130 Nonmajor Governmental Funds:
Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget to Actual – Special Revenue Funds............................................................................................................ 131 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget to Actual – Capital Projects Funds............................................................................................................. 141 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget to Actual – Debt Service Funds .................................................................................................................. 147 Internal Service Funds:
Internal Service Funds Descriptions......................................................................................................149 Combining Statement of Net Position – Internal Service Funds........................................................... 150 Combining Statement of Revenues, Expenses, and Changes in Net Position – Internal Service Funds .......................................................................................................................... 151 Combining Statement of Cash Flows – Internal Service Funds............................................................. 152 Custodial Funds:
Custodial Funds Descriptions................................................................................................................ 155 Combining Statement of Fiduciary Net Position – Custodial Funds .....................................................156 Combining Changes in Fiduciary Net Position – Custodial Funds.........................................................157
STATISTICAL SECTION
Net Position by Component............................................................................................................................... 160 Changes in Net Position ..................................................................................................................................... 162 Fund Balances of Governmental Funds ............................................................................................................. 166 Changes in Fund Balances of Governmental Funds........................................................................................... 168 Attachment 1
City Council Agenda December 19, 2023
Tax Revenue by Source – General Fund............................................................................................................. 171 Assessed Value of Taxable Property .................................................................................................................. 172 Net Taxable Assessed Value History .................................................................................................................. 174 Property Tax Rates – Direct and Overlapping Governments............................................................................. 175 Principal Property Taxpayers ............................................................................................................................. 176 Property Tax Levies and Collections................................................................................................................... 179 Taxable Sales by Category – Adjusted for Economic Data ................................................................................. 180 Sales Tax Rates – Direct and Overlapping Governments................................................................................... 183 Ratios of Outstanding Debt by Type .................................................................................................................. 184 Ratios of General Bonded Debt Outstanding..................................................................................................... 186 Direct and Overlapping Governmental Activities Debt...................................................................................... 187 Legal Debt Margin Information.......................................................................................................................... 188 Pledged Revenue Coverage................................................................................................................................ 190 Principal Employers............................................................................................................................................ 192 Demographics and Economic Statistics.............................................................................................................. 195 Full-Time Equivalent Government Employees by Fund/Department................................................................ 196 Operating Indicators by Function/Program.......................................................................................................198 Capital Asset Statistics by Function/Program ....................................................................................................200 Attachment 1
City Council Agenda December 19, 2023
CITY OF EL PASO DE ROBLES
“The Pass of the Oaks”
December 7, 2023
Honorable Mayor, Members of the City Council, and the Citizens of El Paso de Robles, We are pleased to present the City of El Paso de Robles’ (City) Annual Comprehensive Financial Report (ACFR) for the fiscal year (FY) ended June 30, 2023. State law requires that every general‐purpose local government publish an annual report on its financial position and activity, and that the report be audited by an independent firm of certified public accountants. Taken together, the ACFR, the multi‐year fiscal forecast, and the budget provide the best overview of the City’s fiscal health and opportunities for future financial stability. Because the ACFR is audited by an independent expert, the report provides additional assurance to the community that the City is being a responsible steward of the community’s tax dollars.
The City's financial statements have been audited by Brown Armstrong Accountancy Corporation, Certified Public Accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City for the fiscal year ended June 30, 2023, are free of material misstatements. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation.
The independent auditor concluded, based upon the audit, that there was a reasonable basisforrendering an unmodified opinion, meaning that the City's financial statements for the fiscal year ended June 30, 2023, are fairly presented in conformity with Generally Accepted Accounting Principles (GAAP). The independent auditor’s report is presented as the first component of the financial section of this report.
Since the audit is based on management's representations concerning the finances of the City, management assumes full responsibility for the completeness and reliability of all information presented in this report. To provide a reasonable basis for making these representations, management of the City has established a comprehensive internal control framework that is designed both to protect the City's assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City's financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the City's comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financialstatements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects.
Management has provided a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City's MD&A can be found immediately following the report of the independent auditors.
The Reporting Entity
The City was incorporated in 1889 as a general law City that operates under the Council‐Manager form of government with a general population of 30,692. The governing body consists of a five‐member City Council. The City is divided into four voting districts, each district represented by one City Councilmember Attachment 1
City Council Agenda December 19, 2023
residing in that district, with the Mayor’s position elected at‐large; the voters also elect one City Treasurer at‐large. All six elected positions are non‐partisan. The City Manager, appointed by the City Council, is the Chief Executive Officer, and is empowered to appoint all non‐elected employees, except for the City Attorney.
The City is a full‐service city providing police and fire/emergency medical services; a municipal general aviation airport; library; parks and recreation services; a sanitary landfill; state‐of‐the‐art water, wastewater, and stormwater utilities; streets, sidewalks, trails, and traffic safety infrastructure; as well as private development review, approval, and inspection services.
This ACFR includes the financial activities of the primary government, the City, and its component unit, the El Paso de Robles Financing Authority (Authority). A component unit is a legally separate entity for which the primary government is financially accountable and either having substantially the same governing board as the City or providing services entirely to the City. The Authority was formed by the City as a conduit for long‐term debt financing and has the power to acquire, purchase, construct, finance, lease and/or sell public facilities and appurtenances necessary for the public purposes of the City. The ACFR also includes the operations of the Successor Agency (former Redevelopment Agency) which is reported as a Private‐Purpose Trust Fund.
Budget Information
The budget for FY 2022‐23 was formally adopted by the City Council in June 2022. Although the budget is formally adopted at a point‐in‐time, it remains an evolving planning document that is amended throughout the year. Amendments are necessary to recognize changesto revenue streams, the regulatory environment, and the broader economic outlook. These factors are balanced against policy decisions made by the City Council,shifting needs of departmentsto meet community needs, and unforeseen items that arise after the budget is adopted. Unspent appropriations may be carried forward into the next fiscal year with the City Manager’s approval; however, appropriations that are carried forward are generally related to capital projects and special one‐time appropriations, usually agreements involving third‐party consultants or other outside services. Budgetary control is maintained at the department level, meaning line‐item variances within any given department are allowed so long as the total departmental expenditures do not exceed total budgeted appropriations.
Paso Robles Economy and Outlook
Notwithstanding broader concerns of an economic slowdown, the City remains on solid fiscal footing, with major general revenue sources meeting or exceeding projections. Inflation and the rising costs of borrowing have correlated with a reduction in local auto sales tax revenues, although demand for real estate remains strong. Regardless, revenues remain stable and growth‐oriented, albeit at a much more “normal” pace than was experienced over the past two years.
Special events and tourism continued to play a key role in the vitality of the City. Hospitality, leisure, and tourism‐related industries remain relatively stable, with year‐over‐year sales growth in these areas. Over 2 million visitors spent time in our downtown core over the past 12 months. Hotel occupancy remained steady and room rates remained strong, reflective of the region’s strengthening brand awareness among travelers. The City, with sponsorship from Travel Paso, initiated the return of the 4th of July celebration at Barney Schwartz Park. The event drew several thousand attendees to watch the impressive fireworks show.
Attachment 1
City Council Agenda December 19, 2023
Development activity continues across all sectors, with new hotels, industrial and residential permitting remaining very strong. Major private development projects such as the Gateway, The Landing, and Paso Commons are hitting key milestones in the development process. New projects such as the redevelopment of the Ennis Building by Barrelhouse Brewing have been announced. Infrastructure projects to support these and future developments are reflected in the capital improvement budget.
Overall, the development outlook for Paso Robles remains bullish.
The local labor market remains very tight, with unemployment rates below the national average. The latest unemployment rate in the San Luis Obispo County was 3.6 percent in September 2023, and ranks the 8th lowest in the State. Finally, the City has maintained its rainy‐day fund above recommended levels set by the Government Finance Officers Association and is continuing to set aside funding into a Section 115 trust to buffer against future projected California Public Employees Retirement System (CalPERS) employer cost increases. The City’s general obligation bond rating was reaffirmed at “AA” in spring 2023 and FY 2022‐23 marked the first time the City received the GFOA Distinguished Budget Presentation Award.
Major Initiatives
Measure J‐20
In 2020, Paso Robles voters approved Measure J‐20, a one cent local transaction and use tax. One of the three priorities for the Measure is to adequately staff and equip the police department to augment existing services and proactively plan for future demands. In FY 2022‐23, nine additional sworn positions and three civilian positions were added to the department. By the end of the fiscal year, the department’s sworn staffing increased by 13% when compared to before Measure J‐20 was in place. Three additional police officer candidates have passed testing, background, and physical tests and are anticipated to enter the police academy in July 2023. Ifsuccessful in the academy, the sworn staffing complement will increase by 20% from 2020 levels.
Another priority of the measure was to adequately staff and equip the fire and emergency services department, similar to the police department. As such—and consistent with the department’s Five‐Year Strategic Plan—the FY 2022‐23 budget included the addition of one deputy chief, one fire inspector and funding for 100% of six firefighter costs previously funded through a federal Staffing for Adequate Fire and Emergency Response (SAFER) grant. The Measure and these new positions allow the department to build capacity, enhance succession planning and maintain necessary firefighter staffing levels to respond effectively to the growing number of calls for service. Additionally, the department completed two Firefighter Recruit Academies, which resulted in five previously vacant firefighter positions filled and sent two firefighters to paramedic school.
Measure J‐20 also has provided $6.2 million towards the construction of Fire Station 3. The station is in the final stages, with opening anticipated for late 2023. The 6,800 square‐foot building includes a four‐ bay engine house, office space, sleeping rooms, kitchen, and common areas. Other site improvements include parking lot and driveways, storm water management infrastructure, outdoor training areas, and drought tolerant landscaping. Construction of Fire Station 3 is an important step in meeting the SAFER Grant requirements while enhancing emergency services for residents and visitors of the City.
The last priority of these fundsisrelated to street maintenance and FY 2022‐23 marked anothersignificant investment in the City’s street maintenance efforts. Because of Measure J‐20 funding, the City was able to accelerate its street repair plan by one year, completing more work in less time than originally anticipated. Since Measure J‐20 has been in place, the Capital Projects Engineering Division utilized $1.8 Attachment 1
City Council Agenda December 19, 2023
million to maintain, repair and construct City streets, with an additional $10.1 million budgeted towards uncompleted projects.
Street Maintenance and Rehabilitation
To beƩer inform residents about City street maintenance work, a cross‐funcƟonal team has developed and released a public‐facing geographic informaƟon system (GIS) map that depicts each road segment in the community, the current condiƟon, maintenance history and future maintenance plan. The mapping tool will be used by City staff to develop a roads maintenance master plan that will drive repair plans in the future.
FY 2022‐23 reflectsthe second‐to‐last fiscal year of Measure E‐12 revenues, asthe measure isset to expire during the 2024‐25 fiscal year. Measure E‐12 revenue provides a criƟcal resource to improve the City’s Pavement CondiƟon Index and enhances the quality of life for residents and visitors. Should the measure not be placed on the ballot for renewal purposes in 2024, funding allocated to local road maintenance work is expected to be significantly reduced during the next budget cycle. As such, a major iniƟaƟon for the upcoming year is to seek City Council direcƟon on a future tax measure.
Capital Infrastructure
Highway 46 West: The Paso Robles Gateway project is located northwest of the intersecƟon of Highway 101 and State Route 46 West (SR‐46W) and includesthe development of two hotels with 325 rooms, three commercial centers with approximately 75,600 square feet of space, conference space, workforce residenƟal units, and up to 80 resort residenƟal units or a third hotel with 100 rooms. The City Council‐ approved Development Agreement requires the realignment of South Vine Street with Theatre Drive, which involves not only construcƟon of a new road, but also construcƟon of a bridge in order to connect to SR‐46W. The City’s CirculaƟon Element has also idenƟfied this need, as it would provide an alternate route to State Highway 101, from the north‐end of the City to the shopping and business district south of SR‐46W. This is a mulƟ‐agency effort between the developer, the City, Cal Trans, U.S. Army Corps of Engineers, California Department of Fish and Wildlife, and Regional Water Quality Control Board. The agreement requires the design to be completed by 2024 and the road and bridge open to traffic by 2028.
Plans are nearing compleƟon, and a porƟon of the road work ready for construcƟon bidding. The total esƟmated cost of the City’s porƟon of the bridge and road realignment is esƟmated to be $20 million.
Highway 46 East: The team conƟnues to advance work on the State Route 46 East (SR‐46E)/Union Road Overpass project. When constructed, this project will provide a safe and convenient mulƟmodal overpass over SR‐46E at Union Road. The project will eliminate unprotected turns at Airport Road, make this state route operate more efficiently, and will provide direct access to the new industrial and commercial development in this quadrant of the City.
The City Manager’s Office led an effort to bring together transportaƟon stakeholders at the regional and state level to discuss much needed safety improvements along SR‐46E. In early May, Senator John Laird and Assemblymember Dawn Addis, along with Caltrans Director Tony Tavares, and California TransportaƟon Commission Chair Lee Ann Eager joined county and city officialsto tour the SR‐46E corridor and discuss why these improvements are criƟcal for the state. The tour included an onsite visit to the Airport Road intersecƟon to view the various uncontrolled turning movements that are occurring at that locaƟon. There were several posiƟve takeaways from the tour, including feedback on how best to approach future opportuniƟes to fund an overcrossing/interchange at State Route 46E and Union Road.
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City Council Agenda December 19, 2023
FY 2022‐23 marked the achievement of significant milestones for the project. All technical studies were approved by Caltrans in late May 2023 and required documentaƟon was submiƩed to the California TransportaƟon Commission. Public circulaƟon of environmental documents began on August 3, 2023.
That being said, the City cannot fund this project alone and needs financial assistance from the State and other regional partners. However, more recently, the City has been noƟfied that Caltrans will sponsor the City in its Trade Corridor Enhancement Program (TCEP) grant applicaƟon and the San Luis Obispo County of Governments (SLOCOG) will provide addiƟonal funding towards the project, as well. This is a significant step in geƫng state funding towards the projects. If successful, the State and SLOCOG could fund up to 80‐90% of the $65 million project.
Spaceport DesignaƟon
FY 2022‐23 saw notable milestones reached as the City conƟnues to pursue a spaceport designaƟon for the City‐owned municipal airport. In FY 2022‐23, the City and California Polytechnic State University, San Luis Obispo (Cal Poly), entered into an agreement for Cal Poly to lead the development of an applicaƟon for a spaceport license with the Federal AviaƟon AdministraƟon (FAA). Economic development and airport staff have been working closely with the Cal Poly team in finalizing this applicaƟon. During FY 2022‐23, the City and Cal Poly team presented the concept to a broad cross secƟon of stakeholders, including a presentaƟon at the 2023 CubeSat Developers Workshop at Cal Poly. The applicaƟon is anƟcipated to be submiƩed to the Federal AviaƟon AdministraƟon (FAA) in FY 2023‐24. The vision for the spaceport heavily focuses on educaƟon in space, whereby students can gain easier access to horizontal launch payloads to bring their projects to reality.
Financial Policies
The City has established a comprehensive set of fiscal policies designed to: (1) provide for an acceptable level of services and products effectively; (2) provide for an acceptable level of services and products as the community grows; (3) ensure that the City is living within its means; and (4) provide reserves for unbudgeted needsthat might arise from time to time. Assuch, the City continuesto develop and maintain financial management programs(e.g., two‐year budgets, ten‐year financial forecasts, and five‐year capital improvement program forecast) to ensure its long‐term ability to pay for the costs necessary to provide the services required by its citizens. Similarly, the City will maintain financial records management information systems capable of tracking revenues and expenditure line‐items, by source, by fund, by department, or any other format deemed necessary or desirable. The accounting systems are in conformity with generally accepted accounting principles as specified by the Municipal Finance Officers Association’s “Governmental Accounting, Auditing, and Financial Reporting,” and pronouncementsissued by the Governmental Accounting Standards Board. Additionally, the City has established stand‐alone investment, purchasing, and debt management policies which are available on the City’s website at www.prcity.com.
Certificate of Award
For Fiscal Year 2021‐22, the City received the Certificate of Achievement for Excellence in Financial Reporting by the Government Finance Officers Association of the United States (GFOA) for its annual comprehensive financial report. To receive the award, the City published an easily readable and efficiently organized ACFR that satisfied accounting principles generally accepted in the United States of America and all applicable legal requirements. This was the fifth time the City has received the award from GFOA.
Previously, the City was awarded the California Society of Municipal Finance Officers (CSMFO) Certificate for Outstanding Financial Reporting for 19 consecutive years.
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City Council Agenda December 19, 2023
Acknowledgements
The preparation of the ACFR was made possible by the entire Administrative Services staff. Special acknowledgment goes to Catherine Piatti, Finance Manager, in the preparation of audit fieldwork and the ACFR. In addition, we would like to thank the Mayor and City Council, and each City department for their continued commitment to ensuring the City’s financial operations are conducted in a highly responsible manner.
Respectfully submitted,
Ty Lewis Ryan Cornell
City Manager Administrative Services Director
Attachment 1
City Council Agenda December 19, 2023
Voters of the City of Paso Robles
City Council
Board &
Commissions City Manager
City Manager's
Office
City Clerk
Civic
Engagement
Economic
Development
Administrative
Services
Finance
Human
Resources/Risk
Management
Information
Technology
Police
Patrol &
Operations
Investigations
Records/
Dispatch
Fire and
Emergency
Services
Emergency
Response
Prevention
Public Works
Airport
Capital Projects
Street &
Stormwater
Maintenance
Property &
Landscape
Maintenance
Community
Services
Library
Park & Trail
Maintenance
Recreation
Community
Development
Building
Engineering
Planning
Utilities
Solid Waste
Wastewater
Water
City Attorney
City Treasurer
Attachment 1
City Council Agenda December 19, 2023
ELECTED OFFICIALS
Mayor.......................................................................................................................................................Steve Martin Mayor Pro Tem........................................................................................................................................ John Hamon Councilmember........................................................................................................................................Chris Bausch Councilmember..................................................................................................................................... Steve Gregory Councilmember..........................................................................................................................................Fred Strong City Treasurer...........................................................................................................................................Ryan Cornell
EXECUTIVE MANAGEMENT
City Manager...................................................................................................................................................Ty Lewis Assistant City Manager............................................................................................................................... Chris Huot City Attorney.......................................................................................................................................... Elizabeth Hull Administrative Services Director .............................................................................................................Ryan Cornell Community Development Director ....................................................................................................... Warren Frace Community Services Director.............................................................................................................. Angelica Fortin Fire Chief....................................................................................................................................... Jonathan Stornetta Police Chief .............................................................................................................................................Damian Nord Public Works Director............................................................................................................................Freda Berman Utilities Director..............................................................................................................................Christopher Alakel Attachment 1
City Council Agenda December 19, 2023
Government Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of El Paso De Robles
California
For its Annual Comprehensive
Financial Report
For the Fiscal Year Ended
June 30, 2022
Executive Director/CEO
Attachment 1
City Council Agenda December 19, 2023
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Attachment 1
City Council Agenda December 19, 2023
Financial Section
Independent Auditor’s Report
Management’s Discussion &
Analysis
Basic Financial Statements
Required Supplementary
Information
Combining Statements
Individual Fund Financial
Statements and Schedules
Attachment 1
City Council Agenda December 19, 2023
Attachment 1
City Council Agenda December 19, 2023
INDEPENDENT AUDITOR’S REPORT
To the City Council
City of El Paso de Robles, California
Report on the Audit of the Financial Statements
Opinions
We 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 El Paso de Robles (the City) as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City, as of June 30, 2023, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Responsibilities of Management for the Financial Statements 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’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance Attachment 1
City Council Agenda December 19, 2023
and therefore is not a guarantee that an audit conducted in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards, we:
Exercise professional judgment and maintain professional skepticism throughout the audit. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, no such opinion is expressed. Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management discussion and analysis; the General Fund, Measure J-20 Supplemental Sales Tax Fund, American Rescue Plan Act Fund, and Specific Plans Fund budgetary comparisons; the schedule of changes in the net other post-employment benefit liability and related ratios; the schedule of changes in the net pension liability and related ratios; the schedule of pension contributions – agent multiple-employer defined benefit pension; the schedule of plan’s proportionate share of net pension liability; and the schedule of pension contributions – cost-sharing defined benefit pension plan be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The accompanying combining and individual fund financial statements and schedules are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial Attachment 1
City Council Agenda December 19, 2023
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 our opinion, the combining and individual fund financial statements and schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole.
Other Information
Management is responsible for the other information included in the annual report. The other information comprises the introductory and statistical sections but does not include the basic financial statements and our auditor’s report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon.
In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 7, 2023, on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters.
The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.
BROWN ARMSTRONG
ACCOUNTANCY CORPORATION
Bakersfield, California
December 7, 2023
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City Council Agenda December 19, 2023
City of El Paso de Robles
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2023
The management’s discussion and analysis (MD&A) of the City of El Paso de Robles (City) provides an overall review and analysis of the City’s financial activities for the fiscal year (FY) ended June 30, 2023. City management encourages readers to consider the information presented here, in conjunction with the accompanying transmittal letter located in the introductory section, the basic financialstatements, and the accompanying notesto those basic financial statements to enhance their understanding of the City’s financial performance.
FINANCIAL HIGHLIGHTS
Key financial highlights for FY 2022‐23, are as follows:
In 2020, the voters of the City approved Measure J‐20, a one‐cent supplemental sales tax override. The main prioritiesforspending the Measure J‐20 supplemental sales tax revenue—as approved by City Council in Resolution 20‐118—are for fire and emergency services, police services, and street repair and maintenance. For FY 2022‐23, revenues received totaled $13.3 million, a slight increase from FY 2021‐22 of $13.1 million. Approximately $9.4 million of these funds were expended during FY 2022‐23 on the following:
Expenditure Description FY 22‐23
Actual
Construction of Fire Station No. 3 $ 4,484,428
Fire and Emergency Services Personnel1 1,722,062
Street and Road Maintenance 1,075,361
Police Personnel 932,990
Police Vehicle & Equipment 507,101
Public Safety Center Camera System 190,656
Fire and Emergency Services Equipment 160,500
9‐1‐1 Communications System 131,374
Design of Police Substation/Evidence Storage 122,048
Street Maintenance Personnel 118,752
Total Measure J‐20 Expenditures $ 9,445,272
1‐ Net of grant revenues
In 2012, the voters of the City approved Measure E‐12, a one half‐centsupplemental salestax override. The main purpose of these funds is for street repair and maintenance. On February 4, 2020, City Council approved a “Street Maintenance Plan” which outlines which residential streets, arterials, and collectors will be maintained over the next six years. For FY 2022‐23, approximately $4 million of these funds were expended on the following street segments:
Road Segment FY 22‐23
Actual
Melody Drive/Patricia Lane $ 1,960,192
County Club‐Area 935,290
Appaloosa Drive 478,687
Creston Road 337,674
Sherwood/Sierra Bonita/Turtle Creek 103,246
24th Street Bridge 75,412
Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2023
Road Segment FY 22‐23
Actual
Dry Creek Road 54,925
Riverside (17th Street – 24th Street) 46,444
Rolling Hill Estates 12,195
Total Measure E‐12 Expenditures $ 4,004,065
The City’s defined pension benefit is heavily dependent on not only on member and employee contributions, but also investment earnings on those contributions. When these assumptions are not met, an Unfunded Accrued Liability (UAL) is created, which is essentially the amount needed to fund pastservice credit earned. Noncurrent liabilities realized a significant increase from FY 2021‐22 to FY 2022‐23 because the California Public Employees Retirement System (CalPERS) did not meet its expected rate of return in FY 2021‐22 (the assumed rate of return is 6.9% and the actual rate of return was ‐6.1%). This resulted in an increase in net pension liability of $19.7 million. To exacerbate the issue, the decrease comes on the heels of a year where the actual rate of return was 21.3%, which far exceeded the expected rate of return and accentuates this year’s decrease. The City has been proactive in addressing the City’s UAL and to minimize impacts to City contributions when CalPERS does not meet their assumed rate of return and/or changes their assumptions. In 2017, the City established a Section 115 Pension Trust Fund and on June 30, 2023, the Trust had a fair value balance of $8.8 million. It is likely the City will utilize the Trust fund within the upcoming years when the full impacts investment loss of 2022 are realized. In FY 2022‐23, the City entered into fee deferral agreements associated with two affordable housing development projects: River Walk Terrace, a 79‐unit low‐income senior housing development; and Sunrise Villas, a 69‐unit housing project. The fee deferral includes fees associated with building permits, development impact fees, and water and sewer connection fees. The agreements provide for repayment over a 30‐year period, with an interest rate of 3.75%. The fees will be repaid from a portion of residual receipts available from the project. The deferral of fees helps with the overall financial feasibility of the project as well as ensuring the rent associated with these units maintains its affordability for a period of at least 55 years. The total fee deferral recognized in FY 2022‐23 for River Walk Terrace and Sunrise Villas is $1.3 million and $1.7 million, respectively.
The City experienced two 100‐yearstormsthis past winter. As a result, on January 12, 2023, the City Council declared a localstate of emergency due to a severe storm event that resulted in sustained damage to public and private infrastructure. The City is working with the California Office of Emergency Services and the Federal Emergency Management Agency in order to seek reimbursement for the damage caused by the storm. It is unknown how much each of these participating agencies will be contributing towards this damage, and assuch, City Council appropriated money from general fund reservesto cover the repair costs.
In addition to immediate debris removal and Emergency Center Operation costs, the anticipated repair costs for damages incurred during the storm are listed below:
Damaged Facility General Water Wastewater
Sinkhole at Bolen Drive $ 300,000 $ ‐ $ ‐ Larry Moore Park
Playground, Fence, Grading 30,700 ‐ ‐
Riverwalk Trail Repair 31,000 ‐ ‐
Police Shooting Range 20,500 ‐ ‐
Fire Station No. 3 Sidewalk 18,200 ‐ ‐
Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2023
Damaged Facility General Water Wastewater
Dry Creek Trail 45,400 ‐ ‐
Rambouillet/Snead Trail 14,600 ‐ ‐
Water Treatment Plant and
Yard Rock Slope Protection ‐ 168,000 ‐
Ronconi Well Repairs ‐ 40,000 ‐
Wastewater Treatment
Plant Ponds ‐ ‐ 200,000
Total $ 460,400 $ 208,000 $ 200,000
The City was recently awarded a low‐interest, 2.6%, 30‐year State Revolving Fund (SRF) loan and a variety of grants pertaining to the City’s Recycled Water Distribution System. In 2019, the City completed construction of the first phase of its recycled water program, which included Tertiary Treatment Facilities at the Paso Robles Wastewater Treatment Plant. The second phase of the recycled water program is a purple pipe system that will deliver the recycled water to east Paso Robles for irrigation and recharge of groundwater. Design and environmental permitting of the Recycled Water Distribution System are nearly complete. The project is a major undertaking and includes installation of a large pumping station, over 4.5 miles of large diameter water pipeline across the northern part of the City, and a two‐million‐gallon storage tank located at east end of the City, near Barney Schwartz Park. The total project cost is currently estimated at $35.4 million (in 2024 dollars, the anticipated mid‐point of construction). The City recently received a $3.5 million grant from the State’s Department of Water Resources for completion of a portion of the Recycled Water Distribution System under the Salinas River. Additionally, SRF staff recently informed City staff the project is slated to receive a $10.2 million grant in combination with the low‐interest loan.
OVERVIEW OF THE FINANCIAL STATEMENTS
The financial statements presented herein include all the activities of the City using the integrated approach as prescribed by GASB Statement No. 34. This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements are comprised of three components: (1) Government‐wide Financial Statements; (2) Fund Financial Statements; and (3) Notes to the Basic Financial Statements. Thisreport also contains othersupplementary information in addition to the basic financialstatements.
Government‐Wide Financial Statements
The Government‐Wide Financial Statementsreportinformation about the City as a whole using accounting methods similar to those used by private sector companies or the accrual basis of accounting. They present governmental activities and business‐type activities separately. These statements include all assets of the City (including infrastructure) as well as all liabilities (including long‐term debt). Additionally, certain eliminations have occurred as prescribed by the GASB statement regarding inter‐fund activity, payables, and receivables.
The Statement of Net Position presents information on all of the City’s assets and liabilities, as well as any deferred outflows or inflows of resources. Net position is the difference between assets plus deferred outflows of resources and liabilities plus deferred inflows of resources, which is one way to measure the City’s financial health or financial position. Over time, increases or decreases in the City’s net position is one indicator of whether its financial health is improving or deteriorating. Other factors to consider are changes in the City’s property tax base, the condition of the City’s roads, and the number of calls for services the City responds to.
The Statement of Activities includes all of the City’s fiscal year revenues and expenses, regardless of when cash is received or paid, and how the City’s net position has changed in the fiscal year.
Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2023
Both government‐wide statements distinguish the City’s functions that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a portion of their coststhrough user fees and charges(business‐type activities). The activities of these two distinctions are as follows:
Governmental Activities – Most of the City’s basic services are reported in this category, including general government, public safety, public works, community services, and community development. Taxes and state and federal grants finance most of these activities. Business‐type Activities – The City charges a fee to customers to cover all or most of the cost of certain services it provides. These activities include the City’s water system, wastewater system, airport, transit operations, and parking operations.
Fund Financial Statements
A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated forspecific activities or objectives. The fund financialstatementsinclude statementsfor each of the three categories of activities ‐ governmental, proprietary, and fiduciary. The governmental activities are prepared using the current financial resources measurement focus and the modified accrual basis of accounting. The proprietary and fiduciary activities are prepared using the economic resources measurement focus and the accrual basis of accounting.
Reconciliation of the governmental fund financial statements to the government‐wide financial statements is provided to explain the differences created by the integrated approach.
The fund financialstatements provide detailed information about the mostsignificant funds, not the City as a whole.
Some funds are required to be established by State law and by bond covenants, however, management may establish other fundsto help it control and manage money for particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grants and other money.
The City has three types of fund financial statements:
Governmental Funds – Most of the City’s basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at fiscal year‐end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental funds statements provide a detailed short‐term view of the City’s general government operations, such as police, fire and public works, and the basic services it provides. Governmental funds information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the City’s programs. Because this information does not encompass the additional long‐term focus of the government‐wide statements, reconciliations that explain the relationship (or differences) between governmental funds and the governmental activities follow the governmental funds statements. Proprietary Funds – The City maintains two different types of Proprietary Funds: Enterprise Funds and Internal Service Funds. Enterprise Funds are used when the City charges customers for the services it provides, whether to outside customers or to other units of the City. Internal Service Funds are used to accumulate and allocate costs internally to various functions. The City uses Internal Service Funds to allocate fleet maintenance and replacement, information technology maintenance and replacement, and risk management functions. Both Enterprise and Internal Service Funds are generally reported as proprietary funds. Proprietary fund statements, like the government‐wide statements, provide short‐term and long‐term financial information about the activities the City operates like businesses, such as utility services.
Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2023
Fiduciary Funds – The City is the trustee, or fiduciary, for certain funds held on behalf of the War Memorial Hospital Scholarship, Business Improvement Area, Groundwater Sustainability Agency, Pension Trust and the Successor Agency for the dissolution of the Redevelopment Agency. The City’s fiduciary activities are reported in a separate statement of fiduciary net position and statement of changes in fiduciary net position. These activities are excluded from the City’s other financial statements since the City cannot use these assets to finance its operations. The City is responsible for ensuring that the assets reported in these funds are used for their intended purposes.
Notes to the Basic Financial Statements
The notes provide additional detailed information that is essential to a full understanding of the data provided in the government‐wide and fund financial statements.
Required Supplementary Information
The notes to the basic financial statements are followed by a section of required supplementary information (RSI) that further explains and supports the information in the financial statements.
Combining Statements and Other Individual Fund Financial Information In addition to the basic financial statements, accompanying notes and required supplementary information, this report also presents certain other supplementary information including combining fund statements for the City’s nonmajor special revenue, capital projects and debt service funds; individual budget and actual statements for nonmajor and major funds; and combining statement of changes in assets and liabilities for agency funds.
FINANCIAL ANALYSIS OF THE CITY AS A WHOLE
The City presents its financial statements under the reporting model required by the GASB Statement No. 34, Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments. This section provides two fiscal years of financial information and a comparative analysis of the government‐wide financial statements.
Analysis of Net Position
The net position of the City increased $24.0 million from $369.2 million on June 30, 2022, to $393.2 million on June 30, 2023. Total assets increased $23.7 million and total liabilities increased $14.5 million. The following analysis of governmental and business‐type activities provides more detailed information for these changes.
Governmental Activities Business‐Type Activities Total
2021‐22 2022‐23 2021‐22 2022‐23 2021‐22 2022‐23 ASSETS
Current assets $105,558,691 $111,588,171 $27,400,657 $36,640,220 $132,959,348 $148,228,391 Noncurrent receivables 10,942,292 11,392,228 155,483,402 14,518,295 166,425,694 25,910,523 Noncurrent capital assets 216,047,626 228,285,626 136,729,942 216,047,626 365,015,568 Total assets 332,548,609 351,266,025 182,884,059 187,888,457 515,432,668 539,154,482
DEFERRED OUTFLOWS OF
RESOURCES
Deferred outflows of resources 10,889,264 14,677,029 1,084,259 2,571,237 11,973,523 17,248,266 Total deferred outflows of
resources 10,889,264 14,677,029 1,084,259 2,571,237 11,973,523 17,248,266 Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2023
Governmental Activities Business‐Type Activities Total
2021‐22 2022‐23 2021‐22 2022‐23 2021‐22 2022‐23
LIABILITIES
Current liabilities 17,229,095 16,152,326 5,115,078 5,570,611 22,344,173 21,722,937 Noncurrent liabilities 43,552,062 59,963,275 58,448,232 57,157,413 102,000,294 117,120,688 Total liabilities 60,781,157 76,115,601 63,563,310 62,728,024 124,344,467 138,843,625
DEFERRED INFLOWS OF
RESOURCES
Deferred inflows of resources 18,947,114 10,754,810 14,519,086 13,640,749 33,466,200 24,395,559 Total deferred inflows of
resources 18,947,114 10,754,810 14,519,086 13,640,749 33,466,200 24,395,559
NET POSITION
Net investment in capital assets 200,336,981 216,455,421 87,509,379 85,746,827 287,846,360 302,202,248 Restricted 30,895,914 31,663,321 3,152,473 3,152,473 34,048,387 34,815,794 Unrestricted 32,476,707 30,953,901 14,827,689 25,191,621 47,304,396 56,145,522 Total net position $263,709,602 $279,072,643 $105,489,541 $114,090,921 $369,199,143 $393,163,564 Governmental Activities
In total, current assets increased by $6 million when comparing FY 2022‐23 to FY 2021‐22. Specifically, cash and investments, despite the adverse impacts of the fair value adjustment, increased by $5.4 million during the year for two main reasons: 1) delaysin the construction of fully funded/budgeted capital projects(there is approximately $23.1 million in budgeted, but unexpended capital projects on June 30, 2023); and 2) expending the City’s new Measure J‐20 supplemental sales tax override continues to take longer than anticipated due to the challenges in recruiting for certain public safety position. On June 30, 2023, Measure J‐20 Fund had a cash balance of approximately $12.1 million. Noncurrent receivables saw a significant increase, as well. This is mainly attributed to the fee deferral agreements associated with two affordable housing development projects, as previously mentioned. The agreements provide for repayment of City fees over a 30‐year period, with an interest rate of 3.75%. Noncurrent capital assets increased by $12.2 million when comparing FY 2022‐23 to FY 2021‐22. This is because the City continues to make investments in replacing, repairing, and rehabilitating the City’s aging infrastructure. For the current year, projects include: Fire Station #3 ($4.5 million), Union Road/Golden Hill Round‐about ($4.8 million), Melody Drive/Patricia Lane Road Repairs ($2 million), Country Club Roads Repairs ($1.3 million), Police 9‐1‐1 Communications System Upgrade ($890 thousand), Appaloosa Drive Road Repairs ($653 thousand), Huer Huero Creek Bridge/Round‐about ($560 thousand), Police Department Computer Aided Dispatch System ($487 thousand), 24th Street Bridge Rehab ($420 thousand), Various Traffic Sign/Striping Improvements ($441 thousand), Creston Road/South River/Rolling Hills Road Improvements ($338 thousand), City‐wide Fiber Optic Network ($333 thousand), and various vehicles and pieces of equipment ($2.1 million)
Current liabilities decreased by $1.1 million while noncurrent liabilities increased by $16.4 million, resulting in an overall increase of $15.3 million in total liabilities. The decrease in current liabilities is mainly attributed to the timing of when city employees are paid. In FY 2021‐22, the last pay period of the fiscal year was paid after June 30, 2022. This resulted in a larger accrued payroll liability than this year because only a portion of the payroll liability was not paid prior to June 30, 2023. Noncurrent liabilities realized a significant increase from FY 2021‐22 to FY 2022‐23. As previously mentioned, thisincrease can be attributed to net pension liability and CalPERS not meeting its expected rate of return in FY 2021‐22.
Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2023
Restricted net position, representing amounts that must be used in accordance with external restrictions, increased by less than $800,000. The majority of the increase in the restriction is due to additional developer impact fees (i.e., restricted monies) being received and not yet expended.
Business‐type Activities
The City’s business‐type activities’ net position on June 30, 2023, was $114.1 million. Business‐type activities use the same accrual basis of accounting as the Proprietary Funds. As mentioned earlier, business‐type activities and proprietary funds are used to account for those activities that are supported primarily by user charges to external users, and includes water and wastewater utilities, airport operations, transit services and parking operations. As such, information regarding the significant changes in business‐type activities are located within the Proprietary Funds section of this MD&A.
Analysis of the Statement of Activities
The changes in net position for governmental and business‐type activities are as follows:
Governmental Activities Business‐Type Activities Total 2021‐22 2022‐23 2021‐22 2022‐23 2021‐22 2022‐23
REVENUES
Program revenues:
Charges for services $8,699,062 $9,425,855 $31,206,717 $32,872,686 $39,905,779 $42,298,541 Operating grants &
c contributions
2,384,482 1,422,500 1,441,502 1,161,862 3,825,984 2,584,362 Capital grants & contributions 7,046,952 1,152,591 1,584,698 166,029 8,631,650 1,318,620
General revenues:
Property taxes 14,765,732 15,779,797 70,482 84,111 14,836,214 15,863,908 Sales & use taxes 33,540,805 33,546,372 ‐ ‐ 33,540,805 33,546,372 Transient occupancy taxes 9,803,368 9,824,200 ‐ ‐ 9,803,368 9,824,200 Other taxes 5,125,133 5,972,504 ‐ ‐ 5,125,133 5,972,504 Use of money & property (1,241,190) 1,885,763 (415,414) 452,761 (1,656,604) 2,338,524 Other revenues 408,299 19,996 24,762 56,053 433,061 76,049 Total revenues 80,532,643 79,029,578 33,912,747 34,793,502 114,445,390 113,823,080
EXPENSES
Governmental activities:
General government 4,255,252 8,296,909 ‐ ‐ 4,255,252 8,296,909 Public safety 18,873,101 32,518,993 ‐ ‐ 18,873,101 32,518,993 Highways and streets 9,437,822 10,714,433 ‐ ‐ 9,437,822 10,714,433 Sanitation 486,619 937,337 ‐ ‐ 486,619 937,337 Health and welfare 21,118 83,774 ‐ ‐ 21,118 83,774 Culture‐recreation 8,944,983 9,258,774 ‐ ‐ 8,944,983 9,258,774 Urban redevelopment and
t housing
‐ 169,869 ‐ ‐ ‐ 169,869
Economic development and
t assistance
632,370 919,319 ‐ ‐ 632,370 919,319 Interest on long‐term debt 728,305 1,133,573 ‐ ‐ 728,305 1,133,573
Business‐type activities:
Water operations ‐ ‐ 13,916,471 14,052,151 13,916,471 14,052,151 Wastewater operations ‐ ‐ 10,051,515 9,518,425 10,051,515 9,518,425 Airport operations ‐ ‐ 1,384,856 1,016,792 1,384,856 1,016,792 Transit operations ‐ ‐ 33,136 33,136 33,136 33,136 Parking operations ‐ ‐ 481,163 769,332 481,163 769,332 Total expenses 43,379,570 64,032,981 25,867,141 25,389,836 69,246,711 89,422,817
Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2023
Governmental Activities Business‐Type Activities Total 2021‐22 2022‐23 2021‐22 2022‐23 2021‐22 2022‐23 Change in net position before
t transfers 37,153,073 14,996,597 8,045,606 9,403,666 45,198,679 24,400,263
Transfers 840,375 802,286 (840,375) (802,286) ‐ ‐
Change in net position 37,993,448 15,798,883 7,205,231 8,601,380 45,198,679 24,400,263 Net position – July 1 225,716,154 263,368,614 98,284,310 105,489,541 324,000,464 368,858,155 Net position – June 30 $263,709,602 $279,167,497 $105,489,541 $114,090,921 $369,199,143 $393,258,418 The City’s overall net position, including a prior period adjustment, increased by $24 million during the current fiscal year. This is mainly because the City continues to heavily invest in infrastructure and other capital assets.
Governmental activity capital and right‐to‐use lease assets increased by $12.2 million this past year. Additionally, an approximate $11.4 million increase came from the Measure J‐20 and Capital Projects Funds. As previously mentioned, hiring public safety personnel, which is a significant portion of the Measure J‐20 revenues, has taken longer than anticipated. This resulted in an approximate $4 million surplus in the current fiscal year. Similar activity occurred last year, the first year the supplemental sales tax went into effect. As such, it is intended that this surplus will be reappropriated to additional public safety or road maintenance projects in the upcoming fiscal year. The second significant increase was realized in the Capital Projects Fund, where the City is seeing delays in the construction of fully funded/budgeted capital projects (there is approximately $23.1 million in budgeted, but unexpended capital projects on June 30, 2023). As such, the fund balance grew from $15.6 million to $23.0 million.
Funds will be expended as infrastructure project advance.
Governmental Activities
Governmental activities increased the City’s net position by $15.8 million. Total resources available during the year to finance governmental activities consisted of net position on July 1, 2022, of $263.4 million, program revenues of $12 million, and general revenues of $67 million. Total expenses for governmental activities during the fiscal year were $64 million with a majority of the expenses attributed to public safety (51%), highways and streets (17%) and culture‐recreation (14%).
Key factors are as follows:
As we continue to see a rebalancing after the effects of COVID‐19, revenues experienced a slight decrease of $1.5 million which was mainly attributed to a decrease in program revenues, specifically operating and capital grants, and not general revenues, such as taxes. General revenues continued to see a slight increase of $4.6 million, which can be attributed to an increase in property tax of $1 million; and an increase in interest revenue of $3.1 million, due to rebounding interest rates and returns on investments received throughout year.
Total expenses for governmental activities increased by $20.7 million, or 48%, when compared to the prior fiscal year. Approximately $3.1 million of this increase was one‐time due to the deferred housing loans the City entered into with the Paso Robles Housing Authority. In this instance, the General Fund “paid” funds to the development impact fee funds to cover the deferred fees. Repayments of the loan receivable will then be received by the General Fund. As a result of thistransaction, there is an “Urban redevelopment and housing” expense that did not occur in previous years. Lastly, as mentioned throughout this discussion, Measure J‐20 was intended to expand City services, so an uptick in expenses was anticipated with this measure passing.
Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2023
Business‐Type Activities
The City’s net position from business‐type activities increased by $8.6 million. As mentioned earlier, business‐type activities are used to report the same functions represented in the proprietary funds financial statements.
Additional information regarding business‐type activities is located within the Proprietary Funds section of this MD&A.
FINANCIAL ANALYSIS OF THE CITY’S FUNDS
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance‐related legal requirements.
Governmental Funds
The City’s governmental funds reported combined ending fund balance of $92.6 million, an increase of $6.7 million, compared to the prior fiscal year. This includes $24.8 million in the General Fund, $14.6 million in the Measure J‐20 Supplemental Sales Tax Fund, a deficit balance of $1.4 million in the Specific Plans Fund, $23.1 million in the Capital Projects Fund, and $31.5 million in all other (nonmajor) governmental funds.
Approximately $21 million (of the total $92.6 fund balance for governmental funds) comprises unassigned General fund balance and is available for spending at the City’s discretion. The remainder of the General fund balance is comprised of $2.7 million nonspendable and $1.1 million assigned.
The General Fund is used to account for all revenues and expenditures necessary to carry out basic government activity of the City that is not accounted for in other funds. For the fiscal year ended June 30, 2023, the City’s General Fund balance was $24.8 million, which is a $5.6 million decrease when compared to the prior fiscal year. This was because the capital improvement program (CIP) for FY 2022‐23 and FY 2023‐24 focused on a theme of moving large projects to “shovel ready” status. This included investment of one‐time general fund revenue to fund several large transportation improvements to expand economic development opportunities and traffic improvements.
The Measure J‐20 Supplemental Sales Tax Fund accounts for and reports the financial resources used by the voter‐ approved Measure J‐20, a one‐cent supplemental sales tax approved by voters in 2020. The tax went into effect April of 2021 and for the fiscal year ended June 30, 2023, the balance of the Measure J‐20 Supplemental Sales Tax Fund was $14.6 million, an increase of $4 million when compared to the prior fiscal year. Again, recruiting for certain positions funded with these funds has taken longer than anticipated and has resulted in one‐time salary savings. It is anticipated that the City Council will reappropriate these funds towards additional road maintenance projects, similar to what occurred this past year.
The American Rescue Plan Act Fund accountsfor receipts and expenditures of money appropriated by the American Rescue Plan Act, a COVID‐19 federal stimulus relief package signed by President Biden in 2021. The City received a total of $5.5 million which must be spent no later than December 31, 2026. City Council has appropriated these funds towards the Sherwood Park Master Plan, including pickleball courts and towards the South Vine Street Bridge and road realignment.
The Specific Plans Fund accounts for collection from the payment of development impact fees as identified in the Borkey, Union/46, Chandler Ranch and Olsen Beechwood specific plans for public facilities and infrastructure. The Specific Plans Fund shows a deficit fund balance at the end of the fiscal year. As soon as development begins in these specific sites, development revenue will begin to be collected and fund balance will begin to increase.
The Capital Projects Fund accounts for large capital and infrastructure projects that typically take multiple years to construct and complete and/or have several different funding sources. The Capital Projects Fund balance grew to Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2023
$23.0 million, an increase of $7.5 million. This increase is because the General Fund fully funds (i.e., transfers) the Capital Project Fund in the year the project is approved, even if the project takes several years to complete. This past year, City Council intentionally withdrew General Fund reservesto complete several unfunded capital projects, with project completion anticipated in the upcoming year.
The City’s Nonmajor Governmental Funds are funds that do not meet the specified criteria of expenditures, assets, or liabilities (excluding extraordinary items) of at least 10% of corresponding totals for all governmental and enterprise funds and at least 5% of the aggregate amount for all governmental and enterprise funds. A fund that does not meet the specified criteria can still be classified as a major fund if it is deemed important to financial statement users. The Nonmajor Governmental Funds total fund balance recognized a slight increase of just under $800,000 when compared to the prior fiscal year.
Proprietary Funds
The City’s proprietary funds statements provide the same type of information found in the government‐wide financial statements, only in more detail. The proprietary funds financial statements provide separate information for each of the enterprise funds as they are all major funds. The basic proprietary fund financial statements can be found after the Governmental Funds Financial Statements. At the end of the fiscal year, the unrestricted net positions for the Water, Wastewater, Airport, Transit, and Parking funds were $14.3 million, $2.9 million, $3.6 million, $4.7 million, and $(888,687),respectively. There was a total increase in net position for the enterprise funds of $7.7 million.
Key Factors are as follows:
The Water fund recognized an increase in net position of $3.2 million, or 7%, and is a similar to the $2.4 million increase the fund realized in FY 2021‐22. This is because over the past three years, there has been at least one staff vacancy (more recently, the City Council approved a reclassification to one of those vacant positions in effort to attract more candidates). Regardless, the lack of staffing has also caused delays in deferred maintenance items, which is also creating an optics of fund savings, when in fact, these expenditures are simply being delayed.
The Wastewater fund recognized an increase in net position of $2.9 million, or 8%. The reason for this increase was twofold: an increase in operating revenues of $1 million and a decrease in nonoperating expenses and transfer out of approximately $250 thousand $543 thousand respectively. The increase in operating revenues can be attributed to the sewer ratesthat were approved by City Council on May 4, 2021, that increase annually from July 1, 2021 through April 1, 2025. For FY 2022‐23, the annual increase included a 36% increase in residential wastewater flat rates. The decrease in nonoperating expense can be attributed to positive investment income for FY 2022‐23 of $51,377 compared to an investment loss of ($142,091) for FY 2021‐22.
The Airport fund and Transit fund also recognized slight increases of $569,916 and $1 million, respectively.
Both increases can be attributed to increases in capital or operating grants and contributions and positive investment income.
The Parking fund is a newer proprietary fund created in FY 2018‐19. The Parking Operations Fund was established to account for the activity associated with the paid downtown parking program, with the intent that the cost to operate the program be fully funded through parking revenues and fines. However, it is projected to take several years for the program to be fully operational and start receiving the maximum Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2023
revenues. As a result, an interfund loan (from the General Fund) was established to cover any initial shortfalls. As of June 30, 2023, the loan balance was $545,773. Repayments and drawdowns of the loan are made quarterly, depending on the net revenues generated from this program in that quarter. Beginning in FY 2021‐22, accounting for information technology maintenance, operations, and equipment replacement, fleet and equipment maintenance, operations, and replacement, and risk management activities each occur in a stand‐alone internal service fund. An internal service fund is used to report any activity that provides goods or services to other funds, departments, or agencies of the primary government. Incorporating internal services funds allows for better transparency as to what the total cost of IT, fleet maintenance, and risk management functions are, as well as how much of each fund is contributing towards these services.
Fiduciary Funds
The City maintains fiduciary funds for assets held in trust for the benefit of agencies outside of the City or employees. As of June 30, 2023, the assets of the fiduciary funds totaled $16.3 million, compared to $15.9 million in the prior fiscal year. The increase can be attributed to the investment portfolio associated with the Section 115 Pension Trust. The portfolio continues to perform positively from year to year.
DEBT ADMINISTRATION
As of June 30, 2023, the City had $62.5 million of outstanding long‐term obligations (excluding the GASB Statement No. 87 activity) related to governmental activities and $60.7 million related to business‐type activities, for a total of $123.2 million. Debt outstanding as of June 30, 2023, with a comparison to prior year and the net change are as follows:
Governmental Activities Business‐Type Activities Total 2021‐22 2022‐23 2020‐21 2022‐23 2021‐22 2022‐23
DEBT DESCRIPTION
Compensated absences $2,671,162 $2,976,592 $396,342 $409,191 $3,067,504 $3,385,783 Financed leases payable 301,151 159,789 52,774 32,037 353,925 191,826 Certificates of participation 286,436 ‐ ‐ ‐ 286,436 ‐ Bonds payable 11,060,091 9,369,900 10,604,579 9,805,830 21,664,670 19,175,730 Premium on refunding bond ‐ ‐ 247,497 222,747 247,497 222,747 Loans payable 1,893,891 1,748,210 43,378,422 40,922,501 45,272,313 42,670,711 Landfill closure, post‐closure cost 4,125,970 4,552,750 ‐ ‐ 4,125,970 4,552,750 Net OPEB liability 6,181,475 4,532,762 1,837,131 1,095,212 8,018,606 5,627,974 Net pension liability 19,546,834 39,202,830 5,386,919 8,232,055 24,933,753 47,434,885 Total long‐term debt $46,067,010 $62,542,833 $61,903,664 $60,719,573 $107,970,674 $123,262,406 Total outstanding long‐term debt for governmental activities increased in fiscal year 2022‐23 by $16.5 million. This increase can largely be attributed to a $19.7 million increase in net pension liability which is due to the California Public Employees Retirement System (CalPERS) not meeting its expected rate of return in FY 2021‐22.
CASH MANAGEMENT
To obtain flexibility in cash management, the City employs a pooled cash system (reference Note 2 – Cash and Investments in the notes to the basic financial statements). Under the pooled cash concept, the City invests the cash of all funds with maturities planned to coincide with cash needs. Idle cash is invested in certain eligible securities as constrained by law and further limited by the City’s Investment Policy. The goals of the City’s Investment Policy are safety, liquidity, and yield.
Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2023
CAPITAL ASSETS
As of June 30, 2023, net capital and right‐to‐use lease assets of the governmental activities totaled $228.3 million and of the business‐type activities totaled $136.7 million. Depreciation on capital assets is recognized in the Government‐Wide Financial Statements. The City has elected to depreciate its infrastructure assets. In order to depreciate the infrastructure assets, an estimated useful life for each type of asset was determined using engineering standards as well as discussions with City staff regarding the City’s maintenance program for each type of asset. This allowed the estimated useful life of each asset type to be tailored to include the unique attributes of the City. The following table presents summary information on the City’s capital assets as of June 30, 2022, and 2023:
Governmental Activities Business‐Type Activities Total 2021‐22 2022‐23 2021‐22 2022‐23 2020‐21 2022‐23
CAPITAL ASSET DESCRIPTION
Land $20,997,495 $20,997,495 $8,562,314 $8,562,314 $29,559,809 $29,559,809 Construction in progress 23,384,332 40,826,011 6,154,448 5,974,158 29,538,780 46,800,169 Building & improvements 68,942,482 68,942,482 2,488,110 2,488,110 71,430,592 71,430,592 Equipment 15,682,731 17,290,947 7,303,684 7,600,367 22,986,415 24,891,314 Infrastructure 218,015,857 219,099,832 198,405,294 199,809,165 416,421,151 418,908,997 Leased building & improvements 1,540,419 878,213 ‐ ‐ 1,540,419 878,213 Subscription‐based software ‐ 175,897 ‐ ‐ ‐ 175,897 Accumulated depreciation (132,176,179) (139,413,345) (81,121,198) (87,704,172) (213,297,377) (227,117,517) Accumulated amortization (339,511) (511,906) ‐ ‐ (339,511) (511,906) Net capital assets $216,047,626 $228,285,626 $141,792,652 $136,729,942 $357,840,278 $365,015,568 The major capital asset additions for FY 2022‐23 included:
Various street infrastructure replacement and rehabilitation ‐ $5.7 million Union Road/Golden Hill round‐about ‐ $4.5 million
Design and construction of Fire Station No. 3 ‐ $4.5 million Various vehicles and pieces of equipment ‐ $2.1 million Police 9‐1‐1 communications system upgrade ‐ $890 thousand Recycled water distribution ‐ $591 thousand
Police computer aided dispatch system ‐ $487 thousand City‐wide fiber optic network ‐ $333 thousand
Additional information on capital assets can be found in Note 3 – Capital Assets in the notes to the basic financial statements.
GENERAL FUND BUDGETARY HIGHLIGHTS
The City’s budget is prepared according to California law, with the mostsignificant budgeted fund being the General Fund given that the majority of city activities are subsidized by taxes. The City’s budget is a spending plan, which commits resources to the accomplishment of City Council goals and objectives. Once adopted, operating appropriations shall not be subsequently adjusted unless specifically authorized by resolution identifying the fund and amount from which the appropriations are to be made. The City Manager may authorize the transfer of appropriations from one expenditure line item to another within the same fund; however, under no circumstances can an increase in appropriations occur without City Council authorization. Quarterly reports are used to keep the City Council informed of key budget issues, forecasts, and required changes. The budget amendments reported in the financial reports fall into three categories:
1) The carryover of appropriations for contracts, equipment, and/or projects approved in the previous fiscal year(s), but not completed as of fiscal year‐end.
Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2023
2) Increases or decreases in estimated revenues to reflect actual receipts of major revenues. 3) Additional appropriations for unforeseen, but necessary expenses or expenditures.
The General Fund’s original adopted budget for FY 2022‐23 had assumed a significant decrease in fund balance in the amount of $8.6 million. This was because the capital improvement program (CIP) for FY 2022‐23 and FY 2023‐ 24 focused on a theme of moving large projects to “shovel ready” status. This included investment of one‐time general fund revenue to fund several large transportation improvements to expand economic development opportunities and traffic improvements. The final and amended budget increased appropriations by an additional net $1.2 million, which was largely attributed to the Memorandums of Understanding the City entered into with each of the City’s labor groups in December 2022.
Despite the increase in budget from what was originally adopted, the City’s General Fund change in fund balance had a $5 million positive variance at the end of the fiscal year. Significant variances form actual to budget were due to tax revenues, which exceed estimates by $1.2 million; department operating costs at 98% of appropriations, which resulted in additional budgetsavings of approximately $941,000; and delaysin certain General funded facility projects resulted in a temporary budget savings in transfers out to the CIP of $2.5 million (it is anticipated that this entire $2.5 million appropriation will be carried forward into the next fiscal year).
ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS
The City’s budget for FY 2023‐24 was formally adopted by the City Council in June 2022. At that time, it was anticipated that General Fund revenues would total $54.3 million for the upcoming fiscal year. Updated revenue projectionsthat were conducted in June 2023 now predict General Fund revenuestotaling $54.9 million, an increase of about $631,500, or an increase of 1.2%, when compared to the original estimates. The majority of the adjustments related to property and transient occupancy tax (also known as TOT, or Hotel Tax). For property taxes, the City realized solid growth over the past couple of years (5% from FY 20‐21 to FY 21‐22, and another 6.4% is anticipated from FY 21‐22 to FY 22‐23), mainly due to sales of residential properties and property tax valuations being reset. This growth is more than what was originally anticipated,so the models now anticipate just under $13.5 million in property tax revenue for the upcoming fiscal year, an increase of approximately $337,000.
From a sales tax perspective, increased online sales from local big box retailer stock have attributed to an increase in revenues. This has counteracted a pattern of reduced sales activity for retail categories such as family apparel, auto sales, and winery purchases. Over the past year, there has been a notable shift in spending to travel, dining, leisure, and entertainment. That all being said, sales tax is anticipated to be relatively flat for the upcoming fiscal year. The good news is that we are not anticipating any backslide to pre‐COVID revenue levels.
Moving forward, the forecasted revenue related to property tax remains positive due to the residential housing development occurring in the City. However, it should be noted that it generally takes a couple of years for the City to realize the full property tax generation when a development is occupied. For example, Arrive Paso, the 200‐unit apartment complex on Creston Road, anticipates occupancy at the end of December this year. If that were to occur, the City could realize property tax revenue generation as early as FY 2024‐25. But if the majority of occupancy doesn’t occur until 2024, those revenues won’t be seen by the City until FY 2025‐26.
As previously mentioned, tourism activity in the City has been robust and appears positive moving forward. After realizing year over year loss in 2020 due to the COVID‐19 pandemic, the City realized a 40% increase from FY 19‐20 to FY 20‐21, and another 37% from FY 20‐21 to FY 21‐22, where as previously, annual revenue growth was around 7% each year. As a result, growth at that pace was not sustainable, but revenues for FY 22‐23 were $9.8 million, essentially the same as the previous fiscal year, but still significantly higher than it was prior to the COVID‐19 pandemic. Based on recent tourism data, occupancy rates (the percentage of hotel rooms occupied citywide) are Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2023
falling back to historic norms, but the room rates (the actual cost of the room) have and continue to stay well above norms. Furthermore, the voters approved Measure F‐22, increasing the transient occupancy tax from 10% to 11%.
As a result, the model anticipates returning to historical year over year growth at about 7% over estimated FY 22‐ 23 amounts.
Measure E‐12 Sunset
Fiscal Year 2023‐24 represents the last full fiscal year in which Measure E‐12 is in place. The Measure generates over $6 million annually, of which 100 percent is invested locally. The one half‐centsupplementalsales tax provides most of the funding for local street repair, maintenance, and rehabilitation projects. By 2025, over $60 million in Measure E‐12 will have been invested in local roadway repairs since the Measure was established in 2012.
Nevertheless, the City continues to see cost increases, additional traffic volumes on local roadways and a high percentage of streets that need to be fully reconstructed. For Fiscal Year 2023‐24, Measure E‐12 funds will be applied to several local road repair projects acrossthe City, including Creston Road, Dallons Drive and neighborhood roads in west, southeast, central and northeast Paso Robles.
Absent the City Council placing the extension of the tax before the voters during the November 2024 general election, the Measure will sunset in early 2025. Without a locally controlled, reliable funding source, the street repair program will be significantly and negatively impacted beginning in 2025. If a measure is placed on the ballot and approved by voters, City staff is developing a new framework that is intended to repair more roadways more quickly, and implement a robust, comprehensive maintenance program to maximize life expectancy of localstreets.
CONTACTING THE CITY’S FINANCIAL MANAGEMENT TEAM
Thisfinancial report is designed to provide our citizens, taxpayers, customers, investors, and creditors with a general overview of the City’sfinances and to show the City’s accountability for the money it receives. If you have questions regarding this report, separate reports of the City’s component units or need any additional financial information, please contact the Office of Administrative Services at 821 Pine Street, Suite A, Paso Robles, CA 93446 or by phone at (805)237‐3999 or by email at [email protected].
Attachment 1
City Council Agenda December 19, 2023
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Attachment 1
City Council Agenda December 19, 2023
STATEMENT OF NET POSITION AND STATEMENT OF ACTIVITIES
The Statement of Net Position and the Statement of Activities are required by the Governmental Accounting Standards Board Statement No. 34 (GASB 34). Their purpose is to summarize the entire City’s financial activities and financial position. They are prepared on the same basis as is used by most businesses, which means they include all the City’s assets and deferred outflows of resources and all its liabilities and deferred inflows of resources, as well as all its revenues and expenses. This is known as the full accrual basis of accounting – the effect of all the City’s transactions is taken into account, regardless of whether or when cash changes hands.
The Statement of Net Position reports the difference between the City’s total assets and deferred outflows of resources and the City’s total liabilities and deferred inflows of resources, including all the City’s capital assets and all its long-term debt. The Statement of Net Position presents similar information to the old balance sheet format but presents it in a way that focuses the reader on the composition of the City’s net position, by subtracting total liabilities and deferred inflows of resources from total assets and deferred outflows of resources.
The Statement of Net Position summarizes the financial position of the City’s governmental activities in a single column, and the financial position of all City business-type activities in a single column; these columns are followed by a total column that presents the financial position of the entire City.
The City’s governmental activities include the activities of its General Fund, along with all its Special Revenue, Capital Projects, and Debt Service Funds. The City’s business-type activities include all its Enterprise Fund activities.
The Statement of Activities reports increases and decreases in the City’s net position. It is also prepared on the full accrual basis of accounting, which means it includes all the City’s revenues and all its expenses, regardless of when the cash changes hands. This differs from the “modified accrual” basis of accounting used in the governmental funds financial statements, which reflect only current assets, current liabilities, available revenues, and measurable expenditures.
The format of the Statement of Activities differs considerably from those prepared in the past. It presents the City’s expenses first, listed by program, and follows these with the expenses of its business-type activities. Program revenues – that is, revenues which are generated directly by these programs – are then deducted from program expenses to arrive at the net expense of each governmental and business-type program. The City’s general revenues are then listed in the governmental activities or business-type activities column, as appropriate, and the change in net position is computed and reconciled with the Statement of Net Position.
Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
STATEMENT OF NET POSITION
June 30, 2023
ASSETS
Current assets:
CaCash and investments $ 99,586,642 $ 32,943,051 $ 132,529,693 AcAccounts receivable 9,568,216 3,407,130 12,975,346 IntInterest receivable 1,095,015 337,273 1,432,288 DuDue from private‐purpose trust fund 16,479 ‐ 16,479 Pr Prepaid items 760,046 3,294 763,340 DeDeposits 16,000 250 16,250 InvInventory ‐ 494,995 494,995 IntInternal balances 545,773 (545,773) ‐ Total current assets 111,588,171 36,640,220 148,228,391 Noncurrent assets:
Le Leases receivable 4,818,892 13,598,738 18,417,630 Lo Loans receivable 6,573,336 919,557 7,492,893 NoNondepreciable capital assets 61,823,506 14,536,472 76,359,978 NeNet depreciable capital assets 165,919,916 122,193,470 288,113,386 NeNet right‐to‐use leased capital assets ‐ 542,204 542,204 Total noncurrent assets 239,677,854 151,248,237 390,926,091 Total assets 351,266,025 187,888,457 539,154,482
DEFERRED OUTFLOWS OF RESOURCES
Deferred loss on refunding bonds ‐ 260,914 260,914 Deferred other post‐employment benefits (OPEB) 11,773 2,846 14,619 Deferred pensions outflows 14,404,342 2,568,391 16,972,733 Total deferred outflows of resources 14,677,029 2,571,237 17,248,266
LIABILITIES
Current liabilities:
AcAccounts payable 3,594,656 1,032,735 4,627,391 AcAccrued payroll expenses 651,387 121,456 772,843 IntInterest payable 632,857 590,481 1,223,338 CuCustomer deposits ‐ 220,932 220,932 UnUnearned revenue 8,141,562 42,847 8,184,409 CoCompensated absences due within one year 866,448 190,205 1,056,653 Le Leases due within one year ‐ 211,684 211,684 SuSubscriptions due within one year ‐ 70,936 70,936 DeDebt due within one year 1,982,796 3,371,955 5,354,751 Total current liabilities 16,152,326 5,570,611 21,722,937 Noncurrent liabilities:
CoCompensated absences 2,110,144 218,986 2,329,130 La Landfill closure, post‐closure costs 4,552,750 ‐ 4,552,750 Le Leases payable ‐ 227,285 227,285 Subscription liability ‐ 42,401 42,401 NeNet OPEB liability 4,532,762 1,095,212 5,627,974 NeNet pension liability 39,202,830 8,232,055 47,434,885 DeDebt due after one year 9,295,103 47,611,160 56,906,263 Total noncurrent liabilities 59,963,275 57,157,413 117,120,688 Total liabilities 76,115,601 62,728,024 138,843,625 Business‐Type
Activities Total
Governmental
Activities
The notes to financial statements are an integral part of this statement.
Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
STATEMENT OF NET POSITION (continued)
June 30, 2023
DEFERRED INFLOWS OF RESOURCES
Deferred leases $ 4,599,473 $ 12,900,338 $ 17,499,811 Deferred OPEB 2,720,165 657,250 3,377,415 Deferred pensionsinflows 3,435,172 83,161 3,518,333 Total deferred inflows of resources 10,754,810 13,640,749 24,395,559
NET POSITION
Net investment in capital assets 216,455,421 85,746,827 302,202,248 Restricted for:
Debt service 2,356,020 3,152,473 5,508,493 Disability access and compliance 100,300 ‐ 100,300 Health and welfare 560,678 ‐ 560,678 Highways and streets maintenance ‐ 6,757,596 6,757,596 Infrastructure and facilities expansion ‐ 16,871,885 16,871,885 Landfill maintenance 4,663,901 ‐ 4,663,901 Public, education, government access 352,941 ‐ 352,941 Unrestricted 30,953,901 25,191,621 56,145,522 Total net position $ 279,072,643 $ 114,090,921 $ 393,163,564 $ 556,402,748
556,402,748
0 Governmental
Activities Total
Business‐Type
Activities
The notes to financial statements are an integral part of this statement.
Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
STATEMENT OF ACTIVITIES
For the Fiscal Year Ended June 30, 2023
Function/Programs Expenses
Governmental Activities:
General government $ 8,296,909 $ 1,493,058 $ 99,863 $ ‐ Public safety 32,518,993 3,018,408 774,095 250,430 Highways and streets 10,714,433 3,626,819 43,656 681,177 Sanitation 937,337 ‐ ‐ ‐
Health and welfare 83,774 15,896 259,450 ‐
Culture‐recreation 9,258,774 1,271,674 ‐ 220,984 Urban redevelopment and housing 169,869 ‐ ‐ ‐
Economic development and assistance 919,319 ‐ 245,436 ‐ Unallocated interest on long‐term debt ‐ 1,133,573 ‐ ‐ Total governmental activities 64,032,981 9,425,855 1,422,500 1,152,591 Business‐Type Activities:
Water operations 14,052,151 17,792,089 62,745 ‐ Wastewater operations 9,518,425 13,374,038 43,054 ‐ Airport operations 1,016,792 1,070,782 ‐ 166,029 Transit operations 33,136 ‐ 1,056,063 ‐
Parking operations 769,332 635,777 ‐ ‐
Total business‐type activities 25,389,836 32,872,686 1,161,862 166,029 Total primary government $ 89,422,817 $ 42,298,541 $ 2,584,362 $ 1,318,620 General Revenues:
Taxes:
Property taxes
Sales and use taxes
Transient occupancy taxes
Other taxes
Use of money and property
Other revenues
Transfers Transfers
Total general revenues and transfers
Change in net position
Net position ‐ beginning of fiscal year
Prior period adjustments
Net position ‐ beginning of fiscal year, restated
Net position ‐ end of fiscal year
Program Revenues
Charges for
Services
Operating Grants
and Contributions
Capital Grants and
Contributions
The notes to financial statements are an integral part of this statement.
Attachment 1
City Council Agenda December 19, 2023
$ (6,703,988) $ ‐ $ (6,703,988)
(28,476,060) ‐ (28,476,060)
(6,362,781) ‐ (6,362,781)
(937,337) ‐ (937,337)
191,572 ‐ 191,572
(7,766,116) ‐ (7,766,116)
(169,869) ‐ (169,869)
(673,883) ‐ (673,883)
(1,133,573) ‐ (1,133,573)
(52,032,035) (52,032,035)
‐ 3,802,683 3,802,683
‐ 3,898,667 3,898,667
‐ 220,019 220,019
‐ 1,022,927 1,022,927
‐ (133,555) (133,555)
‐ 8,810,741 8,810,741
(52,032,035) 8,810,741 (43,221,294) 15,779,797 84,111 15,863,908
33,546,372 ‐ 33,546,372
9,824,200 ‐ 9,824,200
5,972,504 ‐ 5,972,504
1,885,763 452,761 2,338,524
19,996 56,053 76,049
802,286 (802,286) ‐
67,830,918 (209,361) 67,621,557 15,798,883 8,601,380 24,400,263 263,709,602 105,489,541 369,199,143
(340,988) ‐ (340,988)
263,368,614 105,489,541 368,858,155
$ 279,167,497 $ 114,090,921 $ 393,258,418 279,072,643 114,090,921 393,163,564
(94,854) ‐ (94,854)
(47,427)
(189,708)
Net (Expense) Revenue and Changes in Net Position
Governmental
Activities
Business‐Type
Activities Total
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City Council Agenda December 19, 2023
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Attachment 1
City Council Agenda December 19, 2023
GOVERNMENTAL FUNDS FINANCIAL STATEMENTS
GASB Statement No. 34 revises the format of the Governmental Funds Financial Statements so that only individual major funds are presented, while nonmajor funds are combined in a single column. Major funds are defined generally as having significant activities or balances in the current year.
The governmental funds described below were determined to be major funds of the City this fiscal year. Individual nonmajor funds may be found in the Combining Statements Section.
General Fund
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.
Measure J-20 Supplemental Sales Tax Fund
This fund accounts for and reports the financial resources generated by the voter-approved Measure J-20, a one-cent supplemental sales tax approved by voters in 2020. The City Council approved Resolution 20-118, committing these revenues to Fire/Emergency and Police services and Streets Repair and Maintenance. These commitments remain in effect until replaced by future Resolutions.
American Rescue Plan Act Fund
This fund accounts for receipts and expenditures of money appropriated by the American Rescue Plan Act, a COVID-19 federal stimulus relief package signed by President Biden in 2021.
Specific Plans Fund
This Special Revenue fund accounts for collection from the payment of development impact fees as identified in the Borkey, Union/46, Chandler Ranch and Olsen Beechwood specific plans for public facilities and infrastructure.
Capital Projects Fund
This fund accounts for the City’s Capital Improvement Program (CIP) which was established to account for large capital and infrastructure projects that typically take multiple fiscal years to complete.
Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
BALANCE SHEET
Governmental Funds
June 30, 2023
ASSETS AND DEFERRED OUTFLOWS OF RESOURCES
Assets:
Cash and investments $ 20,959,269 $ 12,148,231 $ 5,295,135 $ 439,949 Accounts receivable 5,947,818 2,478,949 ‐ ‐ Leases receivable 4,818,892 ‐ ‐ ‐ Interest receivable 1,228,484 44,029 18,814 1,542 Due from private‐purpose trust fund ‐ ‐ ‐ ‐ Loans receivable 3,404,724 ‐ ‐ ‐ Deposits 16,000 ‐ ‐ ‐ Prepaid items 195,269 ‐ ‐ ‐ Advances receivable 2,516,647 ‐ ‐ ‐ Total assets 39,087,103 14,671,209 5,313,949 441,491 Deferred outflows of resources:
Deferred interest expense ‐ ‐ ‐ 900,122 Total deferred outflows of resources ‐ ‐ ‐ 900,122 Total assets and deferred outflows of resources $ 39,087,103 $ 14,671,209 $ 5,313,949 $ 1,341,613 Liabilities:
Accounts payable $ 1,805,101 $ 9,367 $ ‐ $ ‐ Accrued payroll expenses 558,565 ‐ 72,590 ‐ Interest payable ‐ ‐ ‐ 900,122 Unearned revenue ‐ 2,827,613 ‐ 5,313,949 Advances payable ‐ ‐ ‐ 1,817,652 Total liabilities 5,191,279 81,957 5,313,949 2,717,774 Deferred inflows of resources:
Deferred leases ‐ 4,599,473 ‐ ‐ Unavailable revenue 4,468,020 ‐ ‐ ‐ Total deferred inflows of resources 9,067,493 ‐ ‐ ‐ Fund balances (deficits):
Nonspendable 2,711,916 ‐ ‐ ‐ Restricted ‐ ‐ ‐ ‐ Committed ‐ 14,589,252 ‐ ‐ Assigned 1,096,967 ‐ ‐ ‐ Unassigned 21,019,448 ‐ ‐ (1,376,161) Total fund balances (deficits) 24,828,331 14,589,252 ‐ (1,376,161) $ 39,087,103 $ 14,671,209 $ 5,313,949 $ 1,341,613 Total liabilities, deferred inflows of resources,
and fund balances (deficits)
LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND
FUND BALANCES (DEFICITS)
General Fund
Measure J‐20
Supplemental
Sales Tax Fund
American Rescue
Plan Act Fund
Specific Plans
Fund
The notes to financial statements are an integral part of this statement.
Attachment 1
City Council Agenda December 19, 2023
$ 23,785,637 $ 31,196,583 $ 93,824,804 569,942 462,561 9,459,270 ‐ ‐ 4,818,892 ‐ 759,635 2,052,504
‐ 16,479 16,479
‐ 3,168,612 6,573,336
‐ ‐ 16,000 ‐ ‐ 195,269 ‐ ‐ 2,516,647 24,355,579 35,603,870 119,473,201
‐ 76,816 976,938
‐ 76,816 976,938
$ 24,355,579 $ 35,680,686 $ 120,450,139 $ 1,335,847 $ 96,129 $ 3,246,444 ‐ 2,893 634,048
‐ 76,816 976,938
‐ ‐ 8,141,562 ‐ 153,222 1,970,874
1,335,847 329,060 14,969,866 ‐ ‐ 4,599,473 ‐ 3,841,527 8,309,547
‐ 3,841,527 12,909,020
‐ ‐ 2,711,916 ‐ 31,663,321 31,663,321
‐ ‐ 14,589,252 23,019,732 ‐ 24,116,699 ‐ (153,222) 19,490,065 7,238,617 (13,780,831) 23,019,732 31,510,099 92,571,253
$ 24,355,579 $ 35,680,686 $ 120,450,139 Capital Projects
Fund
Nonmajor
Governmental
Funds
Total
Governmental
Funds
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City Council Agenda December 19, 2023
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Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS
TO THE STATEMENT OF NET POSITION
June 30, 2023
Total fund balances ‐ governmental funds $ 92,571,253 Amounts reported for governmental activities in the Statement of Net Position are different because:
Capital assets at historical cost $ 367,156,767
Accumulated depreciation (139,413,345)
Right‐to‐use leased assets 1,054,110
Accumulated amortization (511,906)
Net capital assets 228,285,626
7,332,609
(632,857)
Compensated absences 2,976,592
Financed purchases 159,789
Subscription liability 113,337
Leases payable 438,969
General obligation bonds 9,369,900
Loans payable 1,748,210
Accrued landfill closure costs 4,552,750
Net OPEB liability 4,532,762
Net pension liability 39,202,830
Total long‐term liabilities (63,095,139)
260,914
8,260,778
6,089,459
Total net position ‐ governmental activities $ 279,072,643 279,072,643
‐
Internal service funds are used to charge activities involved with rendering services to departments within the City. Assets and liabilities of the internal service funds not mentioned above are:
Deferred outflows and inflows of resources relating to pensions and other post‐employment benefits are applicable to future periods and, therefore, are not reported in governmental funds. In the Statement of Net Position, deferred outflows and inflows of resources related to pensions and other post‐employment benefits are reported. The difference between deferred outflows of resources of $14,416,115 and deferred inflows of $6,155,337 is:
Capital assets are not current financial resources and, therefore, are not reported in the governmental funds. In the Statement of Net Position, all assets, including capital and right‐to‐use leased assets, and accumulated depreciation and amortization are reported.
Certain revenues in the governmental receivables are unavailable because they cannot be used to meet current financial obligations. In the Statement of Net Position, revenues are recognized when earned.
Long‐term liabilities are applicable to future periods and, therefore, are not reported in governmental funds. In the Statement of Net Position, all liabilities, including long‐term liabilities, are reported. Long‐term liabilities relating to governmental activities consist of:
Interest expense on long‐term debt is recognized in the period in which it matures and is paid in governmental funds. However, in the Statement of Net Position, it is recognized in the period that it is incurred.
The deferred loss on refunding of bonds is applicable to future periods and, therefore, is not reported in governmental funds. In the Statement of Net Position, the deferred loss on refunding of bonds is reported.
The notes to financial statements are an integral part of this statement.
Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES Governmental Funds
For the Fiscal Year Ended June 30, 2023
REVENUES
Taxes 47,608,397 $ $ 13,327,879 $ ‐ $ ‐ Licenses and permits ‐ 1,217,859 ‐ ‐ Fines and forfeitures ‐ 180,488 ‐ ‐ Use of money and property 1,364,319 68,260 27,901 1,839 Intergovernmental revenues 872,086 247,308 ‐ 48,901 Charges for current services ‐ 2,352,995 ‐ 6,708 Other revenues 238,449 ‐ ‐ 209 Total revenues 53,834,593 13,643,447 76,802 8,756
EXPENDITURES
Current:
GeGeneral government ‐ 7,388,089 ‐ ‐ PuPublic safety 22,577,297 3,492,760 ‐ ‐ Hi Highways and streets 4,571,911 163,853 ‐ ‐ Sa Sanitation 444,826 ‐ ‐ ‐ HeHealth and welfare ‐ ‐ ‐ ‐ CuCulture‐recreation 5,865,711 ‐ ‐ ‐ Urban redevelopment and housing ‐ 3,138,536 ‐ ‐ Ec Economic development and assistance ‐ 931,366 ‐ ‐ Capital outlay 148,954 32,100 ‐ ‐ Debt service:
IntInterest 82,494 ‐ ‐ ‐ Pr Principal 145,681 ‐ ‐ ‐ Agent fees ‐ ‐ ‐ ‐ Total expenditures 45,294,865 ‐ 3,688,713 ‐ 8,539,728 9,954,734 76,802 8,756
OTHER FINANCING SOURCES (USES)
Transfers in 971,019 ‐ ‐ ‐ Transfers out (14,754,947) (6,003,867) (76,802) ‐ Total other financing sources (uses) (13,783,928) (6,003,867) (76,802) ‐ Net change in fund balances (deficits) (5,244,200) ‐ 3,950,867 8,756 Fund balances (deficits) ‐ July 1 30,413,519 10,638,385 ‐ (1,384,917) Prior period adjustments (340,988) ‐ ‐ ‐ Fund balances (deficits), restated ‐ July 1 30,072,531 ‐ 10,638,385 (1,384,917) Fund balances (deficits) ‐ June 30 $ 24,828,331 $ 14,589,252 $ ‐ $ (1,376,161) ‐ ‐ ‐ ‐ Excess (deficiency) of revenues over (under)
expenditures
General Fund
Measure J‐20
Supplemental
Sales Tax Fund
Specific Plans
Fund
American Rescue
Plan Act Fund
The notes to financial statements are an integral part of this statement.
Attachment 1
City Council Agenda December 19, 2023
$ ‐ $ 4,186,597 $ 65,122,873 ‐ ‐ 1,217,859 ‐ ‐ 180,488 ‐ 409,251 1,871,570
758,406 553,536 2,480,237 ‐ 5,806,104 8,165,807
‐ ‐ 238,658 758,406 10,955,488 79,277,492
201,422 2,250 7,591,761 1,033 86,665 26,157,755
108,390 395,657 5,239,811 ‐ 60,557 505,383
‐ 83,774 83,774
188,330 1,989,865 8,043,906 ‐ ‐ 3,138,536 ‐ ‐ 931,366 17,790,886 701,832 18,673,772 ‐ 776,048 858,542
‐ 1,766,827 1,912,508
‐ 1,054 1,054 18,290,061 5,864,529 73,138,168 (17,531,655) 5,090,959 6,139,324 24,990,435 469,000 26,430,454 ‐ (4,792,552) (25,628,168)
24,990,435 (4,323,552) 802,286 7,458,780 767,407 6,941,610 15,560,952 30,742,692 85,970,631
‐ ‐ (340,988) 15,560,952 30,742,692 85,629,643
$ 23,019,732 $ 31,510,099 $ 92,571,253 ‐ ‐ ‐ Capital Projects
Fund
Nonmajor
Governmental
Funds
Total
Governmental
Funds
Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES For the Fiscal Year Ended June 30, 2023
Total net change in fund balances ‐ governmental funds $ 6,941,610 Amounts reported for governmental activities in the Statement of Activities are different because:
Capital outlay $ 20,339,743
Depreciation (7,443,039)
Amortization (378,134)
Gain on termination of leased asset 46,359 Total 12,564,929
2,520,233
48,423
2,263,670
(65,231)
(305,430)
(426,780)
(370,346)
In governmental funds, compensated absences are measured by the amount of financial resources used (essentially the amount paid). In the Statement of Activities, these items are measured by the amounts earned during the fiscal year. This fiscal year, compensated absences earned exceeded the amounts used by:
In governmental funds, other post‐employment benefit costs are recognized when employer contributions are made. In the Statement of Activities, other post‐employment benefit costs are recognized when incurred. This amount is the net change in net OPEB liability and deferred inflows of resources.
Landfill closure and post‐closure costs reported in the Statement of Activities do not require the use of current financial resources, and therefore, are not reported as expenditures in the governmental funds.
In governmental funds, capital outlays are reported as expenditures. However, in the Statement of Activities, the cost of those assets and right‐to‐use leased assets are allocated over their estimated useful lives as depreciation or amortization expense. This is the amount by which capital outlay and capital contributions exceed depreciation/amortization expense and gain on termination of leased asset during the current fiscal period.
In governmental funds, loan receivables and accrued interest are unavailable because they cannot be used to meet current financial obligations. In the Statement of Activities, revenues are recognized when earned. This amount is the net change in loan proceeds and accrued interest and the repayments made in the year.
In governmental funds, interest on long‐term debt is recognized in the period that it becomes due. In the Statement of Activities, it is recognized in the period that it is incurred. Unmatured interest owed at the end of the period, less matured interest paid during the period but owing from the prior period was:
In governmental funds, proceeds and repayments of long‐term debt are reported as other financing sources and uses, respectively. In the Statement of Activities, proceeds and repayments of long‐term debt are reported as increases and decreases in liabilities, respectively. This is the amount of repayments of debt made in the period.
In governmental funds, the impacts of premiums, discounts, and losses on refunding of debt are reported at the issuance of debt. In the Statement of Activities, those amounts are amortized over the life of the debt. This amount represents the amortization of a loss on refunding.
The notes to financial statements are an integral part of this statement.
Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES (continued) For the Fiscal Year Ended June 30, 2023
$ (7,367,154)
348,486
(448,381)
Change in net position ‐ governmental activities $ 15,704,029 In governmental funds, pension costs are recognized when employer contributions are made. In the Statement of Activities, pension costs are recognized when incurred. This amount is the net change in net pension liability, deferred outflows of resources and deferred inflows of resources.
Internal service funds are used to charge the cost of activities involved in rendering services to departments within the City. This amount is the net revenue of the internal service funds is reported with governmental activities.
In governmental funds, lease expenses are recognized when payments are made. In the Statement of Activities, payments are reported as decreases in leases payable. This is the net amount of repayments of debt made and incurred in the period.
The notes to financial statements are an integral part of this statement.
Attachment 1
City Council Agenda December 19, 2023
THIS PAGE IS INTENTIONALLY LEFT BLANK
Attachment 1
City Council Agenda December 19, 2023
PROPRIETARY FUNDS FINANCIAL STATEMENTS
The City maintains two different types of Proprietary Funds: Enterprise Funds and Internal Service Funds. Enterprise Funds are used when the City charges customers for the services it provides, whether to outside customers or to other units of the City. An internal service fund is used to report any activity that provides goods or services to other funds, departments, or agencies of the primary government. Both Enterprise and Internal Service Funds are generally reported as proprietary funds. Proprietary fund statements, like the government-wide statements, provide short-term and long-term financial information about the activities the City operates like businesses, such as utility services which are operated in a manner similar to a private business enterprise. The intent of the City is that the cost of providing goods and services be financed primarily through user charges.
The concept of major funds established by GASB Statement No. 34 extends to proprietary funds. The City has identified the funds below as major proprietary funds in the current fiscal year. GASB Statement No. 34 does not provide for the disclosure of budget versus actual comparisons regarding proprietary funds.
For the Proprietary Fund Financial Statements, the internal service funds are combined in a single column. Individual internal service funds may be found in the Individual Fund Financial Statements and Schedules.
Water Fund
This fund is used to account for the operation and maintenance of the City's water treatment, production, transmission, and distribution system, and includes accounting for water connections and the Nacimiento water project.
Wastewater Fund
This fund is used to account for the operation and maintenance of the City's sewer collection and treatment system as well as sewer connections.
Airport Fund
This fund is used to account for the operation, maintenance, and capital improvements of the City's airport.
Transit Fund
This fund is used to account for the operation and maintenance of the City's dial-a-ride and fixed route transit systems funded from Transportation Development Act funds.
Parking Fund
This fund is used to account for the operation and maintenance of the City’s Downtown Parking program.
Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
STATEMENT OF NET POSITION
Proprietary Funds
June 30, 2023
Water Wastewater Airport Transit
ASSETS
Current assets:
CaCash and investments $ 15,810,892 $ 7,936,081 $ 3,475,589 $ 4,679,361 AcAccounts receivable 1,960,233 1,388,656 18,717 ‐ IntInterest receivable 84,376 218,313 12,076 16,255 Pr Prepaid items 1,647 1,647 ‐ ‐ DeDeposits ‐ ‐ ‐ ‐ InvInventory 494,995 ‐ ‐ ‐ 0 Total current assets 18,352,143 9,544,697 3,506,382 4,695,616 0 Noncurrent assets:
Le Leases receivable ‐ ‐ ‐ 13,598,738 Lo Loans receivable 339,949 579,608 ‐ ‐ Capital assets:
NoNoNondepreciable capital assets 279,009 4,987,133 ‐ 9,246,659 NeNet depreciable capital assets 39,816,661 73,465,166 5,933,853 748,021 NeNeNet right‐to‐use subscription assets ‐ ‐ ‐ ‐ 0 Total noncurrent assets 40,435,619 79,031,907 28,779,250 748,021 Total assets 58,787,762 88,576,604 32,285,632 5,443,637
DEFERRED OUTFLOWS OF RESOURCES
Deferred other post‐employment benefits (OPEB) 1,153 1,308 126 ‐ Deferred pensions outflows 1,110,592 1,107,737 112,756 ‐ Total deferred outflows of resources 1,111,745 1,109,045 112,882 ‐
LIABILITIES
Current liabilities:
AcAccounts payable 378,801 435,706 146,301 ‐ AcAccrued payroll expenses 49,173 54,971 ‐ 5,875 AdAdvances payable ‐ ‐ ‐ ‐ IntInterest payable 44,644 540,802 5,035 ‐ CuCustomer deposits 220,932 ‐ ‐ ‐ UnUnearned revenue ‐ ‐ ‐ 42,847 CoCompensated absences due within one year 79,249 100,437 ‐ 5,000 Subscriptions due within one year ‐ ‐ ‐ ‐ DeDebt due within one year 492,491 2,822,193 ‐ 36,038 Total current liabilities 1,265,290 3,954,109 241,096 ‐ Noncurrent liabilities:
CoCompensated absences 70,112 90,653 ‐ 14,819 Subscription liability ‐ ‐ ‐ ‐ NeNet OPEB liability 443,484 503,704 48,401 ‐ NeNet pension liability 3,872,824 3,138,505 ‐ 393,198 DeDebt due after one year 5,773,339 41,530,543 ‐ 296,473 Total noncurrent liabilities 10,159,759 45,263,405 ‐ 752,891 Total liabilities 11,425,049 49,217,514 993,987 ‐ Enterprise Funds
The notes to financial statements are an integral part of this statement.
Attachment 1
City Council Agenda December 19, 2023
Parking Total
$ 315 $ 31,902,238 $ 6,802,651 39,524 3,407,130 108,946
‐ 331,020 25,702
‐ 3,294 564,777
250 250 ‐ ‐ 494,995 ‐ 40,089 36,138,927 7,502,076
‐ 13,598,738 ‐
‐ 919,557 ‐ ‐ 14,512,801 533,998
154,237 120,117,938 7,520,419
‐ ‐ 115,615 154,237 149,149,034 8,170,032
194,326 185,287,961 15,672,108
129 2,716 484 98,941 2,430,026 478,693
99,070 2,432,742 479,177
30,700 991,508 389,439
4,883 114,902 23,893
545,773 545,773 ‐ ‐ 590,481 2,406
‐ 220,932 ‐ ‐ 42,847 ‐ 5,519 190,205 ‐ ‐ ‐ 70,936 ‐ 3,350,722 107,647
586,875 6,047,370 594,321
13,497 189,081 107,609
‐ ‐ 42,401 49,526 1,045,115 186,286
345,023 7,749,550 1,669,285
‐ 47,600,355 84,182
408,046 56,584,101 2,089,763
994,921 62,631,471 2,684,084
Continued
Total Internal
Service Funds
Enterprise Funds
Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
STATEMENT OF NET POSITION (continued)
Proprietary Funds
June 30, 2023
Water Wastewater Airport Transit
DEFERRED INFLOWS OF RESOURCES
Deferred leases ‐ ‐ ‐ 12,900,338 Deferred OPEB 266,140 302,279 29,046 ‐ Deferred pensionsinflows 35,959 35,867 3,651 ‐ Total deferred inflows of resources 302,099 338,146 12,933,035 ‐
NET POSITION
Net investment in capital assets $ 33,829,840 $ 34,099,563 $ 14,848,001 $ 748,021 Restricted for debt service ‐ 3,152,473 ‐ ‐ Unrestricted 14,342,519 2,877,953 3,623,491 4,695,616 Total net position $ 48,172,359 $ 40,129,989 $ 18,471,492 $ 5,443,637 Net position of business‐type activities
Enterprise Funds
Adjustment to report the cumulative internal balance for the net effect of the activity between the internal service funds and the enterprise funds over time
The notes to financial statements are an integral part of this statement.
Attachment 1
City Council Agenda December 19, 2023
Parking Total
‐ 12,900,338 ‐
29,721 627,186 111,792
3,204 78,681 15,499
32,925 13,606,205 127,291
$ 154,237 $ 83,679,662 $ 7,864,866 ‐ 3,152,473 ‐
(888,687) 24,650,892 5,475,044
$ (734,450) 111,483,027 $ 13,339,910 2,607,894
$ 114,090,921
Concluded
Enterprise Funds Total Internal
Service Funds
Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION Proprietary Funds
For the Fiscal Year Ended June 30, 2023
Water Wastewater Airport Transit
OPERATING REVENUES
Charges for current services $ 17,792,089 $ 13,374,038 $ 146,354 $ ‐ Rents and leases ‐ ‐ 924,428 ‐ Operating grants and contributions 62,745 ‐ 43,054 1,056,063 Other revenues 34,944 5,898 10,624 ‐ Total operating revenues 17,889,778 13,422,990 1,081,406 1,056,063
OPERATING EXPENSES
Salaries and benefits 2,737,878 2,186,626 ‐ 9,789 Maintenance and operations 9,221,350 3,371,701 ‐ 545,058 Depreciation and amortization 2,128,535 3,808,129 466,404 33,136 Total operating expenses 14,087,763 9,366,456 1,021,251 33,136 Operating income (loss) 3,802,015 4,056,534 60,155 1,022,927
NONOPERATING REVENUES (EXPENSES)
Taxes ‐ ‐ 84,111 ‐ Investment income (loss) 59,337 51,377 318,367 18,114 Gain/(loss) on disposal of capital asset ‐ ‐ ‐ ‐ Interest expense (185,423) (849,517) ‐ (13,797) (126,086) (798,140) 388,681 18,114 3,675,929 3,258,394 448,836 1,041,041 Capital grants and contributions ‐ ‐ ‐ 166,029 Transfers in ‐ ‐ ‐ ‐ Transfers out (483,980) (373,357) (44,949) ‐ Change in net position 3,191,949 2,885,037 569,916 1,041,041 Net position ‐ July 1 44,980,410 37,244,952 17,901,576 4,402,596 Net position ‐ June 30 $ 48,172,359 $ 40,129,989 $ 18,471,492 $ 5,443,637 ‐ ‐ ‐ ‐ Change in net position of business‐type activities
Enterprise Funds
Adjustment for the net effect of the current year activity between the internal service funds and the enterprise
Total nonoperating revenues (expenses)
Income (loss) before capital grants and
contributions and transfers
The notes to financial statements are an integral part of this statement.
Attachment 1
City Council Agenda December 19, 2023
Parking Total
$ 635,777 $ 31,948,258 $ 7,457,100 ‐ 924,428 ‐ ‐ 1,161,862 ‐
‐ 51,466 96,062
635,777 34,086,014 7,553,162
344,549 5,278,842 1,330,846
362,245 13,500,354 3,566,016
38,559 6,474,763 1,202,304
745,353 25,253,959 6,099,166
(109,576) 8,832,055 1,453,996
‐ 84,111 ‐ (126) 447,069 18,951
‐ ‐ 37,635 (18,745) (1,067,482) (5,546) (18,871) (536,302) 51,040 (128,447) 8,295,753 1,505,036
‐ 166,029 629,094
100,000 100,000 ‐ ‐ (902,286) ‐ (28,447) 7,659,496 2,134,130
(706,003) 11,205,780
$ (734,450) $ 13,339,910
‐ ‐
941,884
$ 8,601,380
Total Internal
Service Funds
Enterprise Funds
Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
STATEMENT OF CASH FLOWS
Proprietary Funds
For the Fiscal Year Ended June 30, 2023
Water Wastewater Airport Transit
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers and other agencies $ 17,802,705 $ 13,490,630 $ 1,283,581 $ 1,056,063 Payments to employees (2,576,033) (3,161,957) (375,965) ‐ Payments to suppliers (9,442,801) (3,180,860) ‐ (484,437) Net cash provided by operating activities 5,783,871 7,147,813 423,179 1,056,063
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Transfers out to other funds (483,980) (373,357) (44,949) ‐ Tax revenue received ‐ ‐ 84,111 ‐ (483,980) (373,357) 39,162 ‐ Grant revenues received ‐ ‐ 166,029 ‐ Transfers in from other funds ‐ ‐ ‐ ‐ Purchase of capital assets (162,173) (792,965) (384,651) ‐ Lease payments made ‐ ‐ ‐ ‐ Debt payments made (478,749) (2,640,846) (34,639) ‐ Interest payments made (188,835) (883,766) (14,826) ‐ Net proceeds from interfund advances ‐ ‐ ‐ ‐ Proceeds from sale of capital assets ‐ ‐ ‐ ‐ (829,757) (4,317,577) (268,087) ‐
CASH FLOWS FROM INVESTING ACTIVITIES
Net investment income received 3,559 (152,672) 314,917 11,672 Net cash provided (used) by investing activities 3,559 (152,672) 314,917 11,672 4,473,693 2,304,207 509,171 1,067,735 Cash and cash equivalents ‐ beginning of fiscal year 11,337,199 5,631,874 2,966,418 3,611,626 Cash and cash equivalents ‐ end of fiscal year $ 15,810,892 $ 7,936,081 $ 3,475,589 $ 4,679,361 15,810,892 7,936,081 3,475,589 4,679,361 ‐ ‐ ‐ ‐ Enterprise Funds
Net cash used by capital and related financing
activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING
ACTIVITIES
Net increase in cash and cash equivalents
Net cash provided (used) by noncapital financing
activities
The notes to financial statements are an integral part of this statement.
Attachment 1
City Council Agenda December 19, 2023
Parking Total
$ 647,426 $ 34,280,405 $ 7,503,522 (250,387) (6,364,342) (1,412,022)
(361,726) (13,469,824) (3,394,595)
35,313 14,446,239 2,696,905
‐ ‐ (902,286)
‐ ‐ 84,111
‐ ‐ (818,175)
‐ ‐ 166,029
100,000 ‐ 100,000
‐ (1,339,789) (2,211,919)
‐ ‐ (62,606) ‐ (3,154,234) (162,098)
(18,745) (1,106,172) (8,525) (116,253) ‐ (116,253)
‐ ‐ 37,635 (34,998) (5,450,419) (2,407,513)
‐ 177,476 9,212
‐ 177,476 9,212
315 8,355,121 298,604
‐ 23,547,117 6,504,047
$ 315 $ 31,902,238 $ 6,802,651 315 6,802,651
‐ ‐
Total Internal
Service Funds
Enterprise Funds
Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
STATEMENT OF CASH FLOWS (continued)
Proprietary Funds
For the Fiscal Year Ended June 30, 2023
Water Wastewater Airport Transit
Operating income (loss) $ 3,802,015 $ 4,056,534 $ 60,155 $ 1,022,927 Adjustments to reconcile operating activities:
Depreciation and amortization expense 2,128,535 3,808,129 466,404 33,136 Accounts receivable (161,690) (104,529) 559,811 ‐ Prepaid items (1,392) (1,647) ‐ ‐ Inventory (154,320) ‐ ‐ ‐ Loans receivable 36,092 172,169 ‐ ‐ Leases receivable ‐ ‐ (1,035,804) ‐ Deferred outflows of resources for pensions (707,750) (676,170) ‐ (16,658) Deferred outflows of resources for OPEB 26,464 33,845 2,396 ‐ Accounts payable (65,739) 192,488 60,621 ‐ Accrued payroll expenses (57,503) (101,541) ‐ (29,551) Customer deposits 38,525 ‐ ‐ ‐ Unearned revenue ‐ ‐ ‐ (2,510) Compensated absences 47,440 (13,242) ‐ (18,925) Net OPEB liability (267,766) (401,597) (16,550) ‐ Net pension liability 1,730,434 843,351 ‐ (117,872) Deferred inflows of resources for leases ‐ ‐ ‐ 680,678 Deferred inflows of resources for pensions (768,680) (826,147) ‐ (188,297) Deferred inflows of resources for OPEB 159,206 166,170 19,281 ‐ Net cash provided by operating activities $ 5,783,871 $ 7,147,813 $ 423,179 $ 1,056,063 5,783,871 7,147,813 423,179 1,056,063 Non‐cash activity: ‐ ‐ ‐ ‐ Contributed capital asset $ ‐ $ ‐ $ ‐ $ ‐ Amortization on premium on refunding bonds ‐ ‐ 24,750 ‐ Enterprise Funds
Changes in assets, deferred outflows of resources,
liabilities and deferred inflows of resources:
Reconciliation of operating income (loss) to net cash
provided by operating activities:
The notes to financial statements are an integral part of this statement.
Attachment 1
City Council Agenda December 19, 2023
Parking Total
$ (109,576) $ 8,832,055 $ 1,453,996 38,559 6,474,763 1,202,304
11,649 305,241 (49,640)
‐ (3,039) (18,934)
‐ (154,320) ‐
‐ 208,261 ‐
‐ (1,035,804) ‐
(74,717) (1,475,295) (283,956) 2,891 65,596 9,947
519 187,889 190,355
(2,677) (191,272) (29,157) ‐ 38,525 ‐
‐ (2,510) ‐
7,876 23,149 (27,242)
(28,254) (714,167) (82,337) 216,197 2,672,110 633,635
‐ 680,678 ‐
(45,181) (1,828,305) (373,471)
18,027 362,684 71,405
$ 35,313 $ 14,446,239 $ 2,696,905 35,313 2,696,905
‐ ‐
$ ‐ $ ‐ $ 629,094
‐ 24,750 ‐
Total Internal
Service Funds
Enterprise Funds
Attachment 1
City Council Agenda December 19, 2023
THIS PAGE IS INTENTIONALLY LEFT BLANK
Attachment 1
City Council Agenda December 19, 2023
FIDUCIARY FUNDS
Fiduciary Funds Financial Statements are reported using the economic resources measurement focus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. These funds are used to account for assets held by the City for individuals, private organizations, other governmental units, and/or other funds, and therefore, they cannot be used to support the government's own programs.
For the Fiduciary Fund Financial Statements, the custodial funds are combined in a single column. Individual custodial funds may be found in the Individual Fund Financial Statements and Schedules.
Private-Purpose Trust Fund
This fund is to account for the financial activities of the Successor Agency (the former and dissolved Redevelopment Agency) of the City.
Pension Trust Fund
This fund was established to prefund the City’s outstanding pension obligation and can only be used to offset CalPERS pension costs.
Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
STATEMENT OF FIDUCIARY NET POSITION
June 30, 2023
ASSETS
CaCash and cash equivalents $ 3,809,926 $ ‐ $ 122,124 Investments held in mutual funds ‐ ‐ 8,811,336 Interest receivable 547,839 ‐ 382
Loans receivable 3,020,000 ‐ ‐
Total assets 7,377,765 8,811,336 122,506
LIABILITIES
Accounts payable ‐ ‐ 14,297
Unearned revenue 421,172 ‐ ‐
Interest payable 296,033 ‐ ‐
Bonds payable 9,782,247 ‐ ‐
Due to the City 16,478 ‐ ‐
Total liabilities 10,515,930 ‐ 14,297
NET POSITION
Restricted in trust for:
Individuals, organizations, and other governments ‐ ‐ 108,209 (3,138,165) ‐ ‐
Pension benefits ‐ 8,811,336 ‐
Total net position $ (3,138,165) $ 8,811,336 $ 108,209 Successor Agency to the former
Redevelopment Agency
Total Custodial
Funds
Pension Trust
Fund
Private‐Purpose
Trust Fund
The notes to financial statements are an integral part of this statement.
Attachment 1
City Council Agenda December 19, 2023
City of El Paso de Robles
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
For the Fiscal Year Ended June 30, 2023
ADDITIONS
Property taxes $ 1,250,323 $ ‐ $ ‐ Use of money and property 95,584 716,048 457 Investment‐related expense ‐ ‐ (30,342) Custodial fund contributions ‐ ‐ 26,268 Total additions 1,345,907 685,706 26,725
DELETIONS
Administration 9,946 ‐ ‐ Interest and fiscal agent fees ‐ 602,404 ‐ Beneficiary payments ‐ ‐ 26,268 Total deletions 612,350 ‐ 26,268 Change in net position 733,557 685,706 457 Net position ‐ July 1 (3,871,722) 8,125,630 ‐ Prior period adjustments ‐ ‐ 107,752 Net position, restated ‐ July 1 (3,871,722) 8,125,630 107,752 Net position ‐ June 30 $ (3,138,165) $ 8,811,336 $ 108,209 Total Custodial
Funds
Pension Trust
Fund
Private‐Purpose
Trust Fund
The notes to financial statements are an integral part of this statement.
Attachment 1
City Council Agenda December 19, 2023
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The basic financial statements of the City of El Paso de Robles (the “City”) have been prepared in conformity with accounting principles generally accepted in the United States as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant accounting policies for the City are described below:
A. Reporting Entity
The accompanying annual comprehensive financial report includes the financial activities of the City and its component unit, El Paso de Robles Public Financing Authority (Authority). The financial activities of the foregoing entity have been aggregated and merged (termed “blended”) with those of the City in the accompanying financial statements, as it meets the criteria for inclusion as set forth in the GASB Statement No. 14, as amended by GASB Statements No. 39, No. 61, and No. 80.
The City was incorporated in 1889 and operates under the State of California City Council-Manager form of government.
The governing body consists of a five-member City Council: the Mayor, elected at large by voters of the City; and four councilmembers elected by-district elections. The City also elects one City Treasurer at large; the City Clerk is an appointed position. The City is a “full-service” municipality providing: public safety (police and fire), library, recreation, planning, zoning, streets and road maintenance, public improvements, water, sewer, airport operations, and general administrative services.
The City Council members, in separate sessions, serve as the governing board of the Authority and, as such, this entity is presented as a blended component unit. The Authority was formed by the City as a conduit for long-term debt financing and is governed by the City Council. The Authority exists and acts as a separate public entity and has the power to acquire, purchase, construct, finance, lease, and/or sell public facilities and appurtenances necessary or convenient for the public purposes of the City. The Authority has no assets of its own. All capital assets acquired by the City under the Authority are included in the financial statements.
B. Basis of Presentation
The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, deferred outflows of resources, liabilities, deferred inflows of resources, fund balance or net position, revenues, and expenditures or expenses, as appropriate. Governmental resources are allocated to and accounted for in individual funds based upon the purposes for which the governmental resources are to be spent and the means by which spending activities are controlled.
Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of GASB.
Government-Wide Financial Statements: The Statement of Net Position and a Statement of Activities. These statements present summaries of Governmental and Business-Type Activities for the City accompanied by a total column. Fiduciary activities of the City are not included in these statements.
Fund Financial Statements: The Fund Financial Statements provide information about the City’s funds, including fiduciary funds and the blended component unit. Separate statements for each fund category (governmental, proprietary, and fiduciary) are presented. The emphasis of the Fund Financial Statements is on major individual funds, each of which is displayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds.
Proprietary funds operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Nonoperating revenues, such as subsidies and investment earnings, result from non-exchange transactions or Attachment 1
City Council Agenda December 19, 2023
ancillary activities. Operating expenses for proprietary funds include the cost of sales and services, administrative expenses, depreciation, and amortization on capital assets. All expenses not meeting this definition are reported as nonoperating expenses.
C. Major Funds
The City reported the following major governmental funds in the accompanying financial statements:
General Fund – 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.
Measure J-20 Supplemental Sales Tax Fund – Accounts for and reports the financial resources generated by the voterapproved Measure J-20, a one-cent supplemental sales tax approved by voters in 2020. The City Council approved Resolution 20-118, committing these revenues to Fire/Emergency and Police services and Streets Repair and Maintenance. These commitments remain in effect until replaced by future Resolutions.
American Rescue Plan Act (ARPA) Fund – Accounts for receipts and expenditures of money appropriated by the American Rescue Plan Act, a COVID-19 federal stimulus relief package signed by President Biden in 2021.
Specific Plans Fund – Accounts for development impact fees assessed and collected for certain permits constructed within the Borkey, Union/46, Chandler Ranch, and Olsen Beechwood specific plans. Funds are to be used for public facilities and infrastructure in those specific areas.
Capital Projects Fund – Accounts for and reports the financial resources that are restricted, committed or assigned to expenditures for major capital outlays including the acquisition or construction of capital equipment, facilities, and infrastructure.
The City reported all enterprise funds as major proprietary funds in the accompanying financial statements:
Water Fund – Accounts for the operation and maintenance of the City’s water production, transmission, and distribution system which is necessary to provide water service to the residents of the City.
Wastewater Fund – Accounts for the operation and maintenance of the City’s sewer collection, treatment, and recycled water system which is necessary to provide sewer services to the residents of the City.
Airport Fund – Accounts for the operation and maintenance activities of the City’s airport.
Transit Fund – Accounts for the operation and maintenance activities for the City’s transit system, including both demand response and fixed route services as well as funding contributions to the regional transit system.
Parking Fund – Accounts for the operation and maintenance activities for the City’s parking program.
The City reports the following internal service funds as proprietary funds:
Information Technology Fund – Accounts for the maintenance and replacement of business equipment used by City departments.
Fleet and Equipment Fund – Accounts for the operations, maintenance, and replacement of the City’s fleet of vehicles and related equipment.
Risk Management Fund – Accounts for liability, property, and workers’ compensation insurance.
Attachment 1
City Council Agenda December 19, 2023
The City also reports the following fiduciary funds:
Private-Purpose Trust Fund – The Successor Agency to the Former Redevelopment Agency is a private-purpose trust fund to account for the financial activities of the dissolved Redevelopment Agency (RDA). Private-purpose trust funds are used to report all trust arrangements (other than pension and investment trust funds) “under which principal and income benefit individuals, private organizations, or other governments.” Pension Trust Fund – The Section 115 Pension Trust was established to prefund the City’s outstanding pension obligation and can only be used to offset California Public Employees’ Retirement System pension costs.
Custodial Funds – 1) Accounts for funds to provide scholarships to graduated local high school students who undertake courses in the medical field; scholarships are awarded by the Paso Robles Joint Unified School District, and 2) Accounts for funds collected for the Business Improvement Area to be used by the Downtown Mainstreet Association to provide various improvements in the downtown core.
D. Basis of Accounting and Measurement Focus
The Government-Wide, Proprietary, and Fiduciary Funds Financial Statements are reported using the economic resources measurement focus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. These statements are presented on an economic resources measurement focus and the accrual basis of accounting. Accordingly, all of the City’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources are included in the accompanying Statement of Net Position. This includes capital assets, infrastructure assets, and long-term liabilities. The Statement of Activities presents changes in net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. The types of transactions reported as program revenues for the City are reported in three categories: 1) charges for services, 2) operating grants and contributions, and 3) capital grants and contributions.
Certain eliminations have been made as prescribed by GASB Statement No. 34 in regard to inter-fund activities, payables, and receivables. All internal balances in the Statement of Net Position have been eliminated except those representing balances between the governmental activities and business-type activities, which are presented as internal balances and eliminated in the total primary government column. In the Statement of Activities, those transactions between governmental and business-type activities have not been eliminated.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The City considers all revenues reported in the governmental funds to be available if the revenues are collected within sixty (60) days after the fiscal yearend. Expenditures are recorded when the related fund liability is incurred, except for the principal and interest on longterm debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds and proceeds of long-term debt and acquisitions under financed purchases are reported as other financing sources.
Non-exchange transactions, in which the City gives or receives value without directly receiving or giving equal value in exchange, include property taxes, grants, entitlements, and donations. On an accrual basis of accounting, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants, entitlements, and donations are recognized in the fiscal year in which all eligibility requirements have been satisfied.
Other revenues susceptible to accrual include other taxes, intergovernmental revenues, interest, and charges for services.
Grant revenues are recognized in the fiscal year in which all eligibility requirements are met. Under the terms of grant agreements, the City may fund certain programs with a combination of cost-reimbursement grants, categorical block grants, and general revenues. Thus, both restricted and unrestricted net position may be available to finance program Attachment 1
City Council Agenda December 19, 2023
expenditures. The City’s policy is to first apply restricted grant resources to such programs, followed by general revenues if necessary. Certain indirect costs are included in program expenses reported for individual functions and activities.
E. Budgeting and Budgetary Accounting
The City has four primary priorities in budget development: long-term well-being and economic strength of the community; long-term fiscal stability of the City; nature and scope of the services the City provides; and overall well-being of the organization and its employees, given that the City is a service-based organization that relies heavily on its human capital to provide services to the community. The City must find the path that best promotes all four working together.
The operating budget is prepared in the context of a ten-year financial plan with operating expenditures and revenues being balanced over the term of the ten-year financial plan. The City typically adopts a two-year budget, except in special situations (as in the case of the COVID-19 pandemic) which may call for a one-year budget. The intent is that the ten-year financial plan be updated every two years, during the mid-cycle of the biennial budget. The process for updating the twoyear budget is generally described as follows: Administrative Services prepares base budget schedules consisting of maintenance and operations, personnel services, operating capital, revenue estimating forms and forms for submitting budgetary requests for new and/or expanded services, as well as requests for operating capital not already provided for on various pre-authorized replacement schedules. These schedules are distributed to all executive managers for affirmation and/or completion. Upon affirmation and return of new request forms, Administrative Services compiles and publishes the draft budget. Executive managers meet to review the draft budget and prepare specific recommendations to balance the budget should resources not cover budgetary requests. The draft budget and executive manager recommendations are then reviewed by the City Council and then formally adopted in June. The budget preparation, review, and approval process take place in the context of and with the objective of addressing the goals established by the City Council during a goal setting workshop held just prior to the process noted above.
This approved budget covers substantially all City expenditures including re-budgeted items. All appropriated amounts are as originally adopted or as amended by the City Council and lapse at fiscal year-end. The City Manager is authorized to transfer budget amounts between objects within the same fund. Transfers of appropriations between funds may be made only by the City Council. Total departmental expenditures in excess of the total departmental budgeted amounts are discouraged and executive managers are held accountable accordingly. Formal budgetary integration is employed as a management control tool during the fiscal year for all funds including enterprise funds. All budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America. Furthermore, it is City policy to prepare periodic financial reports for review by the City Council.
F. Cash and Investments
In accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, highly liquid market investments with maturities of one year or less at time of purchase are stated at amortized cost. All other investments are stated at fair value. Market valuation data provided by Zions Bancorporation is used as fair value for those securities for which market quotations are readily available. The City’s investments with fiscal agents required by bond indentures are stated at cost, which approximates fair value.
The City participates in an investment pool managed by the State of California titled Local Agency Investment Fund (LAIF) which has invested a portion of the pool funds in Structured Notes and Asset-Backed Securities. LAIF’s investments are subject to credit risk with the full faith and credit of the State of California collateralizing these investments. In addition, these Structured Notes and Asset-Backed Securities are subject to market risk as to change in interest rates.
For purposes of the Statement of Cash Flows, the City considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. All cash and investments of the proprietary fund types are pooled with the City’s pooled cash and investments.
Attachment 1
City Council Agenda December 19, 2023
G. Inventories and Prepaid Items
Inventory is recorded using the purchases method and cost is recorded as an expenditure at the time individual inventory items are purchased. Inventory held in the Water Department is valued at cost using the first in, first out (FIFO) inventory method. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items.
H. Leases Receivable
Leases receivable are recognized at the commencement of the lease term, with certain exceptions for leases of assets held as investments, certain regulated leases, short‐term leases, leases below the capitalization threshold of $5,000, and leases that transfer ownership of the underlying asset. A lessor does not derecognize the assets underlying the lease. The lease receivable is measured at the present value of lease payments expected to be received during the lease term. The present value of the future lease payments to be received are discounted based on the interest rate the City charges the lessee or Consumer Price Index (CPI) rate. The City uses the interest rate identified in the contract as the discount rate. If no interest rate is specified, the City uses its implicit rate as the discount rate. The lease term includes the noncancelable period of the lease and extensions the City is reasonably certain to exercise. The City monitors changes in circumstances that are expected to significantly affect the amount of a lease receivable that may require a remeasurement of its lease.
I. Capital Assets
In accordance with GASB Statement No. 34, the City is required to report the inclusion of capital assets including infrastructure capital assets in the local governments’ basic financial statements. Capital assets are defined as property, plant, equipment, and infrastructure assets (roads, sidewalks, bridges, drainage systems, lighting systems, etc.). The City’s policy is to capitalize all assets with costs exceeding certain minimum thresholds, $5,000 for machinery and equipment and $25,000 for buildings, improvements, and infrastructure, all with useful lives exceeding two years. Capital assets are reported in the applicable governmental or business-type activities columns in the Government-Wide Financial Statements. All capital assets including infrastructure are valued at historical cost or estimated historical cost if actual historical cost is not available. Contributed capital assets are valued at their estimated fair value on the date contributed.
For all infrastructure systems, the City elected to use the Basic Approach as defined by GASB Statement No. 34 for infrastructure reporting. The City commissioned an appraisal of City owned infrastructure and property as of June 30, 2002, and has completed an internal update as of June 30, 2021. This appraisal determined the original cost, which is defined as the actual cost to acquire new property in accordance with market prices at the time of first construction/acquisition.
When actual cost information was not available, current replacement cost was estimated and trended back to the date of acquisition by using either the Bureau of Labor Statistics; Consumer Price Index for All Urban Consumers, Los AngelesRiverside-Orange County, not seasonally adjusted for all items; or the Construction Cost Index compiled by Engineering News Record (ENR), revised in June 2002. The Consumer Price Index was used for traffic signals and streetlights. The Construction Cost Index was used for all other infrastructure assets. The book value was then computed by deducting the accumulated depreciation from the original cost.
Depreciation Expense: The purpose of depreciation is to spread the cost of capital assets equitably among all users over the useful life of these assets. The City utilizes the straight-line method which means the cost of the asset is divided by its expected useful life in years and the result is charged to expense each year until the asset is fully depreciated. The amount charged to depreciation expense each year represents that year’s pro rata share of the cost of capital assets. See Note 3 for further detail.
The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend the life of asset are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed.
J. Right-to-Use Leased Assets
In accordance with GASB Statement No. 87, the City is required to report the inclusion of right-to-use leased assets in the local governments’ basic financial statements. Right-to-use leased assets are recognized at the lease commencement date Attachment 1
City Council Agenda December 19, 2023
and represent the City's right to use an underlying asset for the lease term. Right-to-use leased assets are measured at the initial value of the lease liability plus any payments made to the lessor before commencement of the lease term, less any lease incentives received from the lessor at or before the commencement of the lease term, plus any initial direct costs necessary to place the leased asset into service. Right-to-use leased assets are amortized over the shorter of the lease term or useful life of the underlying asset using the straight-line method.
K. Compensated Absences
Employees are paid 100% of their accumulated vacation pay and compensatory time when they terminate their employment with the City. As a result, the City accounts for the cost of annual vacation, compensatory time, and fringe benefits as earned in accordance with the GASB Statement No. 101, Compensated Absences, in that, accumulated unpaid vacation leave and compensatory time is accrued when incurred in the proprietary Government-Wide Financial Statements. Employees may accumulate sick leave without limitation but accumulated sick pay, under no circumstances, is paid to employees at any time. Employees retiring from the City may convert their unused sick leave to service credit.
As such, it is assumed that sick leave is more likely than not to be settled through conversion to defined benefit postemployment benefits and is not included in a liability for compensated absences.
L. Receivables and Payables
Activity between funds that is representative of lending/borrowing arrangements outstanding at fiscal year-end are referred to as “due to/due from other funds.” In some cases, “due to/due from other funds” represents the short-term transfer of cash resources at fiscal year-end to eliminate negative cash balances that are temporary in nature. Cash resources have been loaned from one fund to another to provide resources to prepare a “specific plan,” a planning/development tool, until fees generated from the specific plan area repay the loan.
Proprietary fund receivables are shown net of any allowance for uncollectible accounts. Utility customers are billed monthly, and the value of services provided have been included in the accompanying financial statements.
M. Deferred Outflows and Inflows of Resources
Pursuant to GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, and GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, the City recognizes deferred outflows and inflows of resources.
In addition to assets, the City will sometimes report a separate section for deferred outflows of resources. A deferred outflow of resources is defined as a consumption of net assets or fund balance that applies to future periods. The Statement of Net Position has three items which qualify for reporting in this category: loss on refunding bonds, pensions, and other post-employment benefits (OPEB). The Governmental Funds Balance Sheet has one item which qualifies for reporting in this category, deferred interest expense.
In addition to liabilities, the City will sometimes report a separate section for deferred inflows of resources. A deferred inflow of resources is defined as an acquisition of net assets or fund balance by the City that applies to future periods. The Statement of Net Position has three items which qualify for reporting in this category: leases, pensions, and other postemployment benefits (OPEB). The Governmental Funds Balance Sheet has two items which qualifies for reporting in this category: leases and unavailable revenue.
Refer to Note 7 for further details on the deferred inflows and outflows of resources the City has recognized.
N. Fund Balances and Net Position
Fund balance is the difference between the assets added to deferred outflows of resources and liabilities added to deferred inflows of resources reported in governmental funds. In compliance with GASB Statement No. 54, the City has established the following fund balance classifications:
Attachment 1
City Council Agenda December 19, 2023
Nonspendable – The nonspendable fund balance classification includes amounts that cannot be spent because they are either (a) not in a spendable form or (b) legally or contractually required to be maintained intact.
Restricted – The restricted fund balance classification includes amounts with constraints placed on the use of resources (other than nonspendable items) that are either (a) externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or (b) imposed by law through constitutional provisions or enabling legislation.
Committed – The committed fund balance classification includes amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the City Council. Those committed amounts cannot be used for any other purpose unless the City removes or changes the specified use by taking the same type of action (legislation, resolution, ordinance, etc.) it employed to previously commit those amounts. Committed fund balance should also incorporate contractual obligations to the extent that existing resources in the fund have specifically committed for use in satisfying those contractual requirements.
Assigned – The assigned fund balance classification includes amounts that are constrained by the City’s intent to be used for specific purposes, but that are neither restricted nor committed. Such intent is to be established by (a) the City Council itself or (b) the City Manager to whom the City Council has delegated the authority to assign amounts to be used for specific purposes.
Unassigned – The unassigned fund balance classification includes amounts that do not fall into one of the above four categories. The General Fund is the only fund that should report this category of fund balance other than other governmental funds that report a negative fund balance if there is an over-spending for specific purposes for which amounts have been restricted, committed, or assigned.
GASB Statement No. 63 requires that the difference between assets added to the deferred outflows of resources and liabilities added to the deferred inflows of resources be reported as net position. Net position is classified in the following categories:
Net Investment in Capital Assets – Net position that is the net investment in capital assets consists of capital assets, net of accumulated depreciation and amortization, and reduced by outstanding debt directly attributed to the acquisition, construction, or improvement of the assets.
Restricted – The restricted net position is the portion of net position that has external constraints placed on it by external creditors, grantors, contributors, laws, or regulations of other governments, or through constitutional provisions or enabling legislations.
Unrestricted – The unrestricted net position classification is the amount remaining that does not fall into one of the above two categories.
When an expense is incurred for purposes for which both restricted and unrestricted fund balances are available, the City’s policy is to spend restricted fund balance first followed by committed, then assigned, and if applicable, unassigned.
To address unanticipated emergency and contingency needs, and to secure the continued financial well-being of the City, the City Council has established fiscal policies where unrestricted General Fund reserves shall be maintained at no less than 30% of the actual 10-year revenue trend. For the Water and Wastewater Funds, reserves shall be maintained at 25% of operating expenditures, plus $1.0 million.
Attachment 1
City Council Agenda December 19, 2023
O. Property Taxes
Property taxes are assessed, collected, and allocated by the County of San Luis Obispo throughout the fiscal year according to the following property tax calendar:
Secured Taxes Unsecured Taxes
Lien Date January 1 January 1
Levy Date July 1 July 1
Due Date – Secured Taxes 1st Installment, November 1
2nd Installment, February 1 June 30
Collection Date 1st Installment, December 10
2nd Installment, March 10 August 31
Under California law, property taxes are assessed and collected by counties up to 1 percent of assessed value, plus other increases approved by the voters. Under Proposition 13, adopted by the voters in a statewide ballot in 1978, assessed valuation is increased annually by a cost-of-living index not to exceed 2% except for those properties that changed ownership during the twelve-month period since the lien date. In these cases, the property is re-assessed at current value.
The property taxes go into a pool and are then allocated to the cities based on a complex formula prescribed by the state statute. Accordingly, the City recognizes property tax revenues when it becomes both measurable and available to finance expenditures of the current period.
Beginning with fiscal year 1993-94, the County of San Luis Obispo, for those taxing agencies desirous of participating on a volunteer basis, converted the property tax collection and distribution system to the “Teeter Plan.” The City chose to participate in the “Teeter Plan” wherein the City receives 100% of the property tax levy during the fiscal year without deduction for property tax payment delinquencies. Accordingly, the County of San Luis Obispo keeps all property tax penalties collected.
P. Pensions
For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the City’s California Public Employees’ Retirement System (CalPERS) Miscellaneous and Safety Plans and additions to/deductions from the plans’ 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.
Q. Other Post-Employment Benefits
For purposes of measuring the net other post-employment benefits (OPEB) liability, deferred outflows and inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the City’s plan, the assets of which are held by the International City Management Associations Retirement Corporation (ICMA-RC), and additions to/deductions from the OPEB plan’s fiduciary net position have been determined by an independent actuary. For this purpose, benefit payments are recognized when currently due and payable in accordance with the benefit terms.
Investments are reported at fair value.
R. Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America, as prescribed by GASB and the American Institute of Certified Public Accountants, require management to make assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses/expenditures during the reporting period. Actual results could differ from those estimates.
Attachment 1
City Council Agenda December 19, 2023
S. New Governmental Accounting Standards Board Pronouncements Governmental Accounting Standards Board Statement No. 96 For the fiscal year ended June 30, 2023, the City implemented GASB Statement No. 96, Subscription-Based Information Technology Arrangements. This statement provides guidance on the accounting and financial reporting for subscriptionbased information technology arrangements (SBITAs) for government end users (governments). This statement (1) defines an SBITA; (2) establishes that an SBITA results in a right-to-use subscription asset—an intangible asset—and a corresponding subscription liability; (3) provides the capitalization criteria for outlays other than subscription payments, including implementation costs of an SBITA; and (4) requires note disclosures regarding an SBITA. To the extent relevant, the standards for SBITAs are based on the standards established in Statement No. 87, Leases, as amended. Implementation of GASB Statement No. 96 and the impact on the City’s financial statements are explained in Note 10, Right-to-Use Leased and Subscription Assets and Leases Payable.
Governmental Accounting Standards Board Statement No. 99 For the fiscal year ended June 30, 2023, the City implemented GASB Statement No. 99, Omnibus 2022. The objectives of this statement are to enhance comparability in accounting and financial reporting and to improve the consistency of authoritative literature by addressing practice issues that have been identified during implementation and application of certain GASB Statements and accounting and financial reporting for financial guarantees. The practice issues addressed by this statement are as follows:
• Classification and reporting of derivative instruments within the scope of GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments, that do not meet the definition of either an investment derivative instrument or a hedging derivative instrument; • Clarification of provisions in GASB Statement No. 87, Leases, as amended, related to the determination of the lease term, classification of a lease as a short-term lease, recognition and measurement of a lease liability and a lease asset, and identification of lease incentives; • Clarification of provisions in GASB Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements, related to (a) the determination of the public-private and publicpublic partnership (PPP) term and (b) recognition and measurement of installment payments and the transfer of the underlying PPP asset;
• Clarification of provisions in GASB Statement No. 96, Subscription-Based Information Technology Arrangements, related to the subscription-based information technology arrangement (SBITA) term, classification of an SBITA as a short-term SBITA, and recognition and measurement of a subscription liability;
• Extension of the period during which the London Interbank Offered Rate (LIBOR) is considered an appropriate benchmark interest rate for the qualitative evaluation of the effectiveness of an interest rate swap that hedges the interest rate risk of taxable debt; • Accounting for the distribution of benefits as part of the Supplemental Nutrition Assistance Program; • Disclosures related to nonmonetary transactions;
• Pledges of future revenues when resources are not received by the pledging government; • Clarification of provisions in GASB Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, as amended, related to the focus of the government-wide financial statements;
• Terminology updates related to certain provisions of GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position; and • Terminology used in GASB Statement No. 53 to refer to resource flows statements.
Governmental Accounting Standards Board Statement No. 100 For the fiscal year ended June 30, 2023, the City implemented GASB Statement No. 100, Accounting Changes and Error Corrections – an Amendment of GASB Statement No. 62. The primary objective of this statement is to enhance accounting and financial reporting requirements for accounting changes and error corrections to provide more understandable, Attachment 1
City Council Agenda December 19, 2023
reliable, relevant, consistent, and comparable information for making decisions or assessing accountability. This GASB Statement prescribes the accounting and financial reporting for (1) each type of accounting change and (2) error corrections. This statement requires that (a) changes in accounting principles and error corrections be reported retroactively by restating prior periods, (b) changes to or within the financial reporting entity be reported by adjusting beginning balances of the current period, and (c) changes in accounting estimates be reported prospectively by recognizing the change in the current period.
Governmental Accounting Standards Board Statement No. 101 For the fiscal year ended June 30, 2023, the City implemented GASB Statement No. 101, Compensated Absences. The objective of this statement is to better meet the information needs of financial statement users by updating the recognition and measurement guidance for compensated absences. That objective is achieved by aligning the recognition and measurement guidance under a unified model and by amending certain previously required disclosures. Implementation of GASB Statement No. 101 and the impact on the City’s financial statements are explained in Note 8, Long-term Debt.
NOTE 2 – CASH AND INVESTMENTS
The composition of cash and investments as of June 30, 2023, is as follows:
Cash in bank and on hand $ 2,569,902
Cash and investments held with fiscal agent 2,540,714
Cash and investments held by pension trust 8,811,336
Investments 131,351,127
Total $ 145,273,079
Cash and investments are classified in the financial statements as shown below, based on whether or not their use is restricted under the terms of the City’s debt instruments or agency’s agreements:
Cash and investments, statement of net position $ 132,529,693 Cash and investments, statement of fiduciary net position 12,743,386 Total $ 145,273,079
A. Investment Policy
Cash balances from all funds are combined and invested pursuant to the City Council’s adopted Investment Policy and State Government Code Section 53647. Authorized investments include U.S. Treasury Obligations, U.S. Agency Notes, U.S.
Agency Mortgaged Backed Securities, Banker’s Acceptances, Commercial Paper, Corporate Notes, Certificates of Deposit, Municipal Bonds issued by the State of California, Municipal Bonds issued by California Local Agency, Municipal Bonds issued by Other 49 States, Negotiable Certificates of Deposit, Money Market Funds, Local Government Investment Pools, Asset-Backed Securities, Supranationals, LAIF, and the California Asset Management Program. The earnings from these investments are allocated monthly to each fund based upon the closing balance of each fund at month end. Funds held by outside fiscal agents under the provisions of bond indentures that are maintained separately, and interest income earned on said funds, are credited directly to the bond fund or reported as if the interest were credited directly to said funds.
At no time during the fiscal year did the City borrow funds through the use of reverse purchase agreements.
The table below identifies the investment types that are specifically authorized by the City’s Investment Policy and identifies certain provisions of the City’s Investment Policy that address interest rate risk and concentration of credit risk per GASB Statement No. 40. It does not address investments of debt proceeds held by bond trustees that are governed by the provisions of the debt agreement between the City and the trustee nor does it address investments held by the Section 115 Trust as those provisions are governed by the post-employment benefits trust agreement. Any investment type not listed is either prohibited by California Government Code, prohibited by the City’s Investment Policy, or not specifically addressed by the City’s Investment Policy.
Attachment 1
City Council Agenda December 19, 2023
Investment Types Authorized by Law & Policy
Maximum
Maturity
Maximum
Percent of
Portfolio
Maximum in
One Issuer
U.S. Treasury Obligations 7 years None None
U.S. Agency Notes 7 years None None
U.S. Agency Mortgaged Backed Securities 5 years None None Banker’s Acceptances 180 days 40% 5%
Commercial Paper 270 days 25% 5%
Corporate Notes 5 years 30% 5%
Certificates of Deposit (CD’s) 5 years 30% 5%
Municipal Bonds Issued by State of California 5 years 25% 5% Municipal Bonds Issued by California Local Agency 5 years 25% 5% Municipal Bonds Issued by Other 49 States 5 years 25% 5% Negotiable Certificates of Deposit 5 years 30% 5%
Money Market Funds 5 years 20% 5%
Local Government Investment Pools 5 years None 5%
Asset-Backed Securities 5 years 20% 5%
Supranationals 5 years 30% 5%
Local Agency Investment Fund (LAIF) None None $65 million California Asset Management Program (CAMP) None None $65 million Note: Only 15% of the aggregate total of 60% may be invested between 5 and 7 years.
B. Collateral and Categorization Requirements
The California Government Code requires California banks and savings and loan associations to secure the City’s cash deposits by pledging securities as collateral. This code states that collateral pledged in this manner shall have the effect of perfecting a security interest in such collateral superior to those of a general creditor. This collateral for cash deposits is considered to be held in the City’s name. The fair value of the pledged securities must equal at least 110% of the City’s deposits. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of a City’s total deposits. The collateral for certificates of deposit is generally held in safekeeping by the Federal Home Loan Bank in San Francisco as the third-party trustee. The securities are physically held in an undivided pool for all California public agency depositors. The State Public Administrative Office for public agencies and the Federal Home Loan Bank maintain detailed records of the security pool that are coordinated and updated weekly. The City Treasurer, at their discretion, may waive the collateralization requirement for deposits that are insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC).
C. Disclosures Relating to Interest Risk
Per GASB Statement No. 40, interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, there is a greater sensitivity of its fair value to changes in market interest rates. One of the ways the City manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer-term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide cash flow and liquidity needed for operations.
Information about the sensitivity of the fair values of the City’s investments to market interest rate fluctuations is provided by the following table that shows the distribution of the City’s investments by maturity. For purposes of the table shown below, any callable securities are assumed to be held to maturity and all investments are shown at fair value.
Attachment 1
City Council Agenda December 19, 2023
Remaining Maturity (in months)
Investments Total
12 Months or
Less
13 to 24
Months
25 to 60
Months
More Than 60
Months
U.S. Agency Notes $ 10,985,317 $ 944,814 $ 6,409,495 $ 3,631,008 $ - Municipal Bonds 115,000 115,000 - - -
U.S. Treasuries 56,438,354 7,556,582 4,675,604 44,206,168 - U.S. Obligations 1,914,013 1,914,013 - - -
Collateralized Mortgage
Obligations 589,186 - - 589,186 -
Corporate Notes 14,284,045 2,395,404 4,126,244 7,762,397 - Supranationals 819,561 - 819,561 - -
Certificates of Deposit 599,849 - 599,849 - -
LAIF 44,446,738 44,446,738 - - -
CAMP 104,873 104,873 - - -
Money Market Funds 1,054,191 1,054,191 - - -
Held in Pension Trust: 0 0 0 0
Money Market Funds 15,820 15,820 - - -
Mutual Funds 8,795,516 8,795,516 - - -
Held by Bond Trustee: 00 0 0 0
Money Market Funds 2,540,714 2,540,714 - - -
Total Investments $ 142,703,177 $ 69,883,665 $ 16,630,753 $ 56,188,759 $ - D. Investments with Fair Values Highly Sensitive to Interest Rate Fluctuations The City investments did not include any investments that are highly sensitive to interest rate fluctuations (to a degree other than already indicated in the information provided above).
E. Disclosures Relating to Credit Risk
Generally, credit risk is the risk that the 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. Presented below is the minimum rating required by (where applicable) the California Government Code, the City’s Investment Policy, or debt agreements, and the actual rating as of year-end for each investment type.
Rating as of Fiscal Year-End
Investments Total
Minimum
Legal Rating
Exempt from
Disclosure AAA AA A Not Rated
U.S. Agency Notes $ 10,985,317 N/A $ - $ - $ 10,985,317 $ - $ - Municipal Bonds 115,000 A - - - - 115,000
U.S. Treasuries 56,438,354 N/A - - 56,438,354 - -
U.S. Obligations 1,914,013 N/A - - 1,914,013 - -
Collateralized Mortgage
Obligations 589,186 AA 589,186
Corporate Notes 14,284,045 A - 1,366,344 6,077,084 6,840,617 - Supranationals 819,561 AA - 819,561 - - -
Certificates of Deposit 599,849 A - - - - 599,849
LAIF 44,446,738 N/A - - - - 44,446,738
CAMP 104,873 N/A - - - - 104,873
Money Market Funds 1,054,191 N/A - - - - 1,054,191
Held in Pension Trust: 00 0 0
Money Market Funds 15,820 N/A 15,820 - - - -
Mutual Funds 8,795,516 N/A 8,795,516 - - - -
Held by Bond Trustee: 00 0 0
Money Market Funds 2,540,714 N/A - - - - 2,540,714
Total Investments $142,703,177 $ 8,811,336 $ 2,185,905 $ 76,003,954 $ 6,840,617 $ 48,861,365 F. Concentrations of Credit Risk
The Investment Policy of the City contains limitations that are, in some cases, more restrictive than those stipulated by the California Government Code. In some cases, the Investment Policy of the City contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. Investments in any one issuer Attachment 1
City Council Agenda December 19, 2023
(other than U.S. Treasury securities and external investment pools) that represent 5% or more of the total City investments are as follows:
Issuer Amount
Federal Home Loan Bank $ 2,487,530
Federal Home Loan Mortgage Corporation 5,331,246
Federal National Mortgage Association 5,080,554
Total $ 12,899,330
G. 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 in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., brokerdealer) 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 deposits or investments, other than the following provision for deposits: The California Government Code requires that a financial institution 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 (unless so waived by the governmental unit). The fair value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. 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.
H. Marking Investments to Fair Value
GASB Statement No. 31 requires that the City’s investments be carried at fair value instead of cost. The City must adjust the book value of its investments to reflect their fair value at each fiscal year-end, and it must include the effects of these adjustments in income for that fiscal year.
GASB Statement No. 31 applies to all the City’s investments, even if they are held to maturity and redeemed at full face value. Since typically the City holds all investments until maturity or until fair value equals or exceeds cost, the fair value adjustments required by GASB Statement No. 31 result in accounting gains or losses (called “recognized” or “unrealized” gains or losses) which do not reflect actual sales of the investments (called “realized” gains or losses). Thus, recognized gains or losses on an investment purchased at par will now reflect changes in value at each succeeding fiscal year-end, but these recognized gains or losses will net to zero if the investment is held to maturity. By following GASB Statement No. 31, the City is reporting the amount of available resources that would actually have been available if it had been required to liquidate all its investments at fiscal year-end. The fair value is provided by Zions Bancorporation, the City’s safekeeping custodial institution.
GASB Statement No. 72 addresses accounting and financial reporting issues related to fair value measurements. The definition of fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. GASB Statement No. 72 also provides guidance for applying fair value to certain investments and disclosures related to all fair value measurements.
The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset and has three tiers.
• Level 1: Investments reflect prices quoted in active markets. • Level 2: Investments reflect prices that are based on a similar observable asset either directly or indirectly, which may include inputs in the markets that are not considered active. • Level 3: Investments reflect prices based upon unobservable sources.
Attachment 1
City Council Agenda December 19, 2023
The City had the following recurring fair value measurements as of June 30, 2023:
Investments by Fair Value Total
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs (Level 3)
U.S. Agency Notes $ 10,985,317 $ - $ 10,985,317 $ -
Municipal Bonds 115,000 - 115,000 -
U.S. Treasuries 56,438,354 - 56,438,354 -
U.S. Obligations 1,914,013 - 1,914,013 -
Collateralized Mortgage Obligations 589,186 - 589,186 - Corporate Notes 14,284,045 - 14,284,045 -
Supranationals 819,561 - 819,561 -
Mutual Funds 8,795,516 - 8,795,516 -
Total investments measured at fair value 93,940,992 $ - $ 93,940,992 $ - Investments by Fair Value
Investments measured at amortized cost
Certificates of Deposit 599,849
LAIF 44,446,738
CAMP 104,873
Money Market Funds 3,610,725
Total Investments $ 142,703,177
I. Investment in State Investment Pool
The City is a voluntary participant in LAIF which is regulated by the California Government Code under the oversight of the California State Treasury. Each governmental agency may invest up to $75,000,000 for each account in the fund.
Investments in LAIF are highly liquid, as deposits can be converted to cash within twenty-four hours without loss of interest or principal. The full faith and credit of the State of California secure investments in LAIF.
NOTE 3 – CAPITAL ASSETS
A. Governmental Activities
Capital asset activity for the City’s governmental activities for the fiscal year ended June 30, 2023, is as follows:
Balance
July 1, 2022 Additions1 Deletions
Balance
June 30, 2023
Nondepreciable capital assets
Land $ 20,997,495 $ - $ - $ 20,997,495
Construction in progress 23,384,332 19,154,748 1,713,069 40,826,011 Total nondepreciable capital assets 44,381,827 19,154,748 1,713,069 61,823,506 Depreciable capital assets
Building and improvements 68,942,482 - - 68,942,482
Equipment 15,682,731 1,814,089 205,873 17,290,947
Infrastructure 218,015,857 1,083,975 - 219,099,832
Total depreciable capital assets 302,641,070 2,898,064 205,873 305,333,261 Accumulated depreciation
Building and improvements 26,512,659 1,609,664 - 28,122,323 Equipment 8,579,427 1,096,696 205,873 9,470,250
Infrastructure 97,084,093 4,736,679 - 101,820,772
Total accumulated depreciation 132,176,179 7,443,039 205,873 139,413,345 Net depreciable capital assets 170,464,891 (4,544,975) - 165,919,916
Attachment 1
City Council Agenda December 19, 2023
Balance
July 1, 2022 Additions1 Deletions
Balance
June 30, 2023
Amortized right-to-use assets
Leased buildings and improvements $ 1,540,419 $ 383,634 $ 1,045,840 $ 878,213 Subscriptions - 175,897 - 175,897
Total amortized right-to-use assets 1,540,419 559,531 1,045,840 1,054,110 Accumulated amortization
Leased buildings and improvements 339,511 317,852 205,739 451,624 Subscriptions - 60,282 - 60,282
Total accumulated amortization 339,511 378,134 205,739 511,906 Net amortized right-to-use assets 1,200,908 181,397 840,101 542,204 Net capital and right-to-use assets $ 216,047,626 $ 14,791,170 $ 2,553,170 $ 228,285,626 Note to table above:
1- There was no restatement of net position related to SBITA’s as it was impractical.
B. Business-Type Activities
Capital asset activity for the City’s business-type activities for the fiscal year ended June 30, 2023, is as follows:
Balance
July 1, 2022 Additions Deletions
Balance
June 30, 2023
Nondepreciable capital assets
Land $ 8,562,314 $ - $ - $ 8,562,314
Construction in progress 6,154,448 1,223,581 1,403,871 5,974,158 Total nondepreciable capital assets 14,716,762 1,223,581 1,403,871 14,536,472 Depreciable capital assets
Buildings and improvements 2,488,110 - - 2,488,110
Equipment 7,303,684 537,861 241,178 7,600,367
Infrastructure 198,405,294 1,403,871 - 199,809,165
Total depreciable capital assets 208,197,088 1,941,732 241,178 209,897,642 Accumulated depreciation
Buildings and improvements 883,755 56,296 - 940,051
Equipment 4,152,308 527,591 241,178 4,438,721
Infrastructure 76,085,137 6,240,263 - 82,325,400
Total accumulated depreciation 81,121,200 6,824,151 241,178 87,704,172 Net depreciable capital assets 127,075,888 (4,882,419) - 122,193,470
Net capital assets $ 141,792,650 $ (3,658,838) $ 1,403,871 $ 136,729,942 C. Depreciation Expense
Depreciation expense is charged to functions and programs based on their usage of related assets. The amounts allocated to each function or program is presented below:
Function/Program
Governmental
Activities
Business-Type
Activities Total
General government $ 686,387 $ - $ 686,387
Public safety 901,792 - 901,792
Highways and streets 4,926,223 - 4,926,223
Sanitation 2,403 - 2,403
Culture-recreation 926,234 - 926,234
Water - 2,309,939 2,309,939
Wastewater - 3,939,291 3,939,291
Attachment 1
City Council Agenda December 19, 2023
Function/Program
Governmental
Activities
Business-Type
Activities Total
Airport - 491,354 491,354
Transit - 33,136 33,136
Parking - 50,431 50,431
Total $ 7,443,039 $ 6,824,151 $ 14,267,190
D. Amortization Expense
Amortization expense is charged to functions and programs based on their usage of related assets. The amounts allocated to each function or program are presented below:
Function/Program
Total
Governmental
Activities
General government $ 153,012
Public safety 3,144
Culture-recreation 119,109
Economic development and assistance 102,869
Total $ 378,134
NOTE 4 – LEASES RECEIVABLE
On December 9, 1999, the City entered into a 55-year lease with Depot Associates for the use of property and improvements located on Pine Street, between 7th and 8th Streets (also known as the “Historic Paso Robles Train Station Depot”). An initial lease receivable was recorded on July 1, 2021, in the amount of $544,819, and as of June 30, 2023, the value of the lease receivable is $533,893. The lessee is required to make monthly fixed payments of $1,567 and carries an interest rate of
2.5830%. The value of the deferred inflow of resources as of June 30, 2023, was $524,326; the City recognized lease revenue of $10,247 during the fiscal year.
On September 22, 2017, the City entered into a 60-month lease with New Cingular Wireless PCS, LLC (now Octagon Towers, LLC), to install a cellular tower on City-owned property located at 9000 East Highway 46 (also known as the “Landfill”). The initial lease receivable was recorded on July 1, 2021, in the amount of $1,184,137, and as of June 30, 2023, the value of the lease receivable is $1,101,993. The lessee is required to make monthly fixed payments of $4,400 and carries an interest rate of
1.0590%. The value of the deferred inflow of resources as of June 30, 2023, was $1,066,702; the City recognized lease revenue of $58,718 during the fiscal year. The lessee has four extension options, each for 60 months, with a lease escalation of 15% per extension.
On March 1, 2020, the City entered into an 8-year lease with the California Department of Air Resources, for the use of building and improvements located at 235 Santa Fe Avenue. An initial lease receivable was recorded on July 1, 2021, in the amount of $9,059, and as of June 30, 2023, the value of the lease receivable is $6,892. The lessee is required to make monthly fixed payments of $100 and carries an interest rate of 1.4510%. The value of the deferred inflow of resources as of June 30, 2023, was $6,794; the City recognized lease revenue of $1,132 during the fiscal year.
On November 3, 2020, the City purchased the leasehold agreement entered into by Greater California Financial, Inc. for the use of a building located at 4301 Second Wind Way. The original lease was for 10 years, expiring on May 31, 2027. The City recorded an initial lease receivable on July 1, 2021, in the amount of $1,675,450, and as of June 30, 2023, the value of the lease receivable is $1,363,324. The lessee is required to make monthly fixed payments of $14,164 and carries an interest rate of
1.2170%. The value of the deferred inflow of resources as of June 30, 2023, was $1,299,648; the City recognized lease revenue of $187,901 during the fiscal year. The lessee has one extension option for 36 months.
On August 24, 2021, the City entered into a 59-month lease with G3 Enterprises, Inc. for the use of a building located at 4309 Second Wind Way. An initial lease receivable was recorded on July 1, 2021, in the amount of $2,723,386 and as of June 30, 2023, the value of the lease receivable is $1,790,058. The lessee is required to make a monthly fixed payments of $45,612 on Attachment 1
City Council Agenda December 19, 2023
average over the term of the lease; the lease has an interest rate of 0.9010%. The value of the deferred inflow of resources as of June 30, 2023, was $1,679,421; the City recognized lease revenue of $544,677 during the fiscal year.
On February 22, 2023, the City entered into a 24-month lease with U.S. Representative Jimmy Panneta for use of a regional office building located at 800 Pine Street. An initial lease receivable was recorded in the amount of $27,693 and as of June 30, 2023, the value of the lease receivable is $22,730. The lessee is required to make monthly fixed payments of $1,222 and carries an interest rate of 2.56%. The value of deferred inflows of resources as of June 30, 2023, was $22,582; the City recognized lease revenue of $5,111 during the fiscal year. The lessee cannot extend the term of the lease beyond January 2, 2025, which is the end of the constitutional term of the Congress to which the lessee was elected.
The City leases its facilities to private and corporate companies and aircraft users for office space, airport hangar and land leases at and around the City’s municipal airport. The lease terms vary from 2 to 85 years, including the noncancelable period of the lease and extensions the City is reasonably certain to exercise and vary with each contract. Agreements typically allow for Consumer Price Index (CPI) annual increases to the lease payments. Where applicable, the actual CPI as of the measurement date was applied throughout the term of the lease. During the fiscal year, the City recognized $384,405 in lease revenue and $302,434 in interest income related to these agreements. On June 30, 2023, the City recorded $13.6 million in lease receivables for these arrangements. Also, the City has a deferred inflows of resources associated with these leases that will be recognized as revenue over the lease terms. As of June 30, 2023, the balance of deferred inflows of resources was $12.9 million.
A summary of lease receivable for year ended June 30, 2023, is as follows:
Fund
Balance
July 1, 2022 Additions Deletions
Balance
June 30, 2023
General Fund $ 6,581,062 $ 27,695 $ 1,789,865 $ 4,818,892 Airport Fund 12,562,934 1,065,083 29,279 13,598,738
Total leases receivable $ 19,143,996 $ 1,092,778 $ 1,819,144 $ 18,417,630 Future minimum rental receipts on the leases mentioned above are as follows:
Fiscal Year Ending
June 30 Amount Interest Total
2024 $ 780,812 $ 433,494 $ 1,214,306
2025 874,567 398,176 1,272,743
2026 913,093 389,675 1,302,768
2027 392,757 382,720 775,477
2028 369,923 378,493 748,416
2029-2033 1,258,561 1,800,404 3,058,965
2034-2038 1,155,735 1,683,579 2,839,314
2039-2043 1,238,394 1,571,835 2,810,229
2044-2048 1,305,374 1,449,601 2,754,975
2049-2053 513,716 1,328,951 1,842,667
2054-2058 476,281 1,269,365 1,745,646
2059-2063 395,155 1,190,320 1,585,475
2064-2068 386,342 1,135,064 1,521,406
2069-2073 222,845 1,068,738 1,291,583
2074-2078 11,553 1,050,642 1,062,195
2079-2083 213,456 1,038,172 1,251,628
2084-2088 515,898 992,312 1,508,210
2089-2093 915,961 901,430 1,817,391
2094-2098 1,438,564 751,390 2,189,954
2099-2103 2,114,407 524,487 2,638,894
2104-2108 2,924,236 198,606 3,122,842
Total $ 18,417,630 $ 19,937,454 $ 38,355,084
Attachment 1
City Council Agenda December 19, 2023
Regulated Leases Excluded by GASB Statement No. 87: A significant portion of the City’s revenue comes from regulated leases of which the City is the lessor. Regulated leases as defined by the Department of Transportation and the Federal Aviation Administration and outlined in GASB Statement No. 87 paragraphs 42 and 43 are specially excluded.
The City leases buildings, land, hangars to various businesses and individuals with month-to-month arrangements or under long-term leases with terms from 1 to 55 years for aeronautical-related purposes. Rental revenues from regulated leases excluded by GASB Statement No. 87, including month-to-month leases, were $362,160 for the year ended June 30, 2023.
Future minimum rental receipts on regulated leases excluded by GASB Statement No. 87 are as follows:
Fiscal Year Ending
June 30 Amount
2024 $ 195,993
2025 190,580
2026 198,066
2027 205,846
2028 210,473
2029-2033 1,070,278
2034-2038 792,592
2039-2043 359,136
2044-2048 128,972
Total $ 3,351,936
NOTE 5 – LOANS RECEIVABLE
The Community Development Block Grant (CDBG) Fund and Cal Home Loan Program Fund include various loans to individuals that qualify under the programs’ guidelines that include items such as refurbishing a home for a quadriplegic person, or blighted homes within the RDA project area that the owner is unable to address due to personal financial issues. The total amount outstanding for CDBG loans as of June 30, 2023, was $737,690 and Cal Home loan was $103,900.
On January 31, 2013, the City entered into a fee deferral agreement with Oak Park 1, LP, to construct 39 new low-income residential units as part of Phase I of the Oak Park Housing Project. Commencing on the date of the note, and continuing throughout the term of the note, the outstanding principal balance of deferred fees accrues at a compounded interest rate of
3.75% per year. A portion of the residual receipts received from the rental income shall be made to the City but is due and payable in full upon the 30th anniversary of this note. The total amount outstanding as of June 30, 2023, was $776,351.
On February 7, 2014, the City entered into a fee deferral agreement with Oak Park 2, LP, to construct 41 new low-income residential units as part of Phase II of the Oak Park Housing Project. Commencing on the date of the note, and continuing throughout the term of the note, the outstanding principal balance of deferred fees accrues at a simple interest rate of 3.75% per year. A portion of the residual receipts received from the rental income shall be made to the City but is due and payable in full upon the 30th anniversary of this note. The total amount outstanding as of June 30, 2023, was $685,492.
On November 15, 2017, the City entered into a fee deferral agreement with Oak Park 3, LP, to construct 33 new low-income residential units as part of Phase III of the Oak Park Housing Project. Commencing on the date of the note, and continuing throughout the term of the note, the outstanding principal balance of deferred fees accrues at a simple interest rate of 3.75% per year. A portion of the residual receipts received from the rental income shall be made to the City but is due and payable in full upon the 30th anniversary of this note. The total amount outstanding as of June 30, 2023, was $792,114.
On November 16, 2018, the City entered into a fee deferral agreement with Oak Park 4, LP, to construct 57 new low-income residential units as part of Phase IV of the Oak Park Housing Project. Commencing on the date of the note, and continuing throughout the term of the note, the outstanding principal balance of deferred fees accrues at a simple interest rate of 3.75% per year. A portion of the residual receipts received from the rental income shall be made to the City but is due and payable in full upon the 30th anniversary of this note. The total amount outstanding as of June 30, 2023, was $1,428,679.
Attachment 1
City Council Agenda December 19, 2023
On May 16, 2023, the City entered into an agreement with Sunrise Villas, LP to construct 69 new low-income multi-family residential units located on Lot A of Chandler Ranch development. Commencing on the date of the note, and continuing throughout the term of the note, the outstanding principal balance of deferred fees accrues at a simple interest rate of 3.75% per year. A portion of the residual receipts received from the rental income shall be made to the City but is due and payable in full upon the 30th anniversary of this note. The total amount outstanding as of June 30, 2023, was $1,729,488.
On May 16, 2023, the City entered into an agreement with River Walk Terrace, LP to construct 79 new low-income multi-family residential units located near the Woodland Shopping Plaza. Commencing on the date of the note, and continuing throughout the term of the note, the outstanding principal balance of deferred fees accrues at a simple interest rate of 3.75% per year. A portion of the residual receipts received from the rental income shall be made to the City but is due and payable in full upon the 30th anniversary of this note. The total amount outstanding as of June 30, 2023, was $1,239,179.
Fund
Balance
July 1, 2022 Additions Deletions
Balance
June 30, 2023
General Fund $ 436,057 $ 2,968,667 $ - $ 3,404,724
CDBG Fund 737,690 - - 737,690
Cal Home Loan Fund 303,900 - 200,000 103,900
Transportation Facilities Fund 1,147,762 - - 1,147,762
Public Safety Facilities Fund 127,469 - 41,730 85,739
General Government Facilities Fund 475,381 - - 475,381
Parks and Recreation Facilities Fund 464,778 - - 464,778 Library Facilities Fund 153,362 - - 153,362
Water Fund 339,949 - - 339,949
Wastewater Fund 579,608 - - 579,608
Total loans receivable $ 4,765,956 $ 2,968,667 $ 241,730 $ 7,492,893 NOTE 6 – INTERFUND TRANSACTIONS
A. Advances Receivable and Payable
On November 2, 1993, the City entered into an agreement where General Fund resources were loaned to the Chandler Ranch and Olsen Beechwood Specific Plan Fund. Total amount outstanding as of June 30, 2023, for Chandler Ranch was $1,130,537 and Olsen Beechwood was $687,115.
On August 3, 2004, the City entered into an agreement where the General Fund resources were loaned to the Airport Road Project Study Report (PSR) Fund to review improvements to the intersection of Airport Road and Highway 46 East. Total amount outstanding as of June 30, 2023, was $153,222.
On October 1, 2019, the City Council approved Resolution 19-106 where General Fund resources were loaned to the Parking Fund in an amount not-to-exceed $1.0 million to cover the initial start-up costs and infrastructure of the parking program (i.e., pay stations, parking signage, and vehicle license recognitions equipment and software). Total amount outstanding on June 30, 2023, was $545,773.
B. Due from Private-Purpose Trust Fund
On June 10, 2010, the City and the RDA, subsequently the Successor Agency to the former Redevelopment Agency of Paso Robles, entered into an agreement with South River Road Associates, LP to construct Hidden Creek Village, an 81-unit lowincome apartment complex, in the amount of $1,000,000. Total amount outstanding as of June 30, 2023, was $16,479.
C. Transfers Between Funds
With City Council approval, resources may be transferred from one City fund to another. Typically, these transfers are broken down into three categories: miscellaneous transfers, capital transfers and cost allocation transfers. The main purpose of miscellaneous transfers is to charge one fund for services provided by another fund. Capital transfers are Attachment 1
City Council Agenda December 19, 2023
utilized to keep capital projects in a central fund. And lastly, cost allocation transfers are utilized to charge enterprise funds for central services provided by the General Fund. Transfers are identified below:
Miscellaneous Transfers Capital Transfers Cost Allocation Transfers Transfer In Transfer Out Transfer In Transfer Out Transfer In Transfer Out Major Governmental Funds:
General Fund $ - $ 537,000 $ - $ 14,217,947 $ 971,019 $ - Measure J-20 SST Fund - - - 6,003,867 - -
ARPA Fund - - - 76,802 - -
Capital Projects Fund - - 24,990,435 - - -
Nonmajor Governmental
Funds:
L&L District Fund - - - - - 68,733
Landfill Closure Fund 180,000 - - - - -
TIF Fund - - - 4,634,154 - -
General Gov’t Facilities Fund - 32,000 - - - -
Parks and Rec Facilities Fund - - - 57,665 - -
1993 Public Facilities Fund 289,000 - - - - -
Enterprise Funds:
Water Fund - - - - - 483,980
Wastewater Fund - - - - - 373,357
Airport Fund - - - - - 44,949
Parking Fund 100,000 - - - - -
Total $ 569,000 $ 569,000 $ 24,990,435 $ 24,990,435 $ 971,019 $ 971,019 NOTE 7 – DEFERRED OUTFLOWS AND INFLOWS OF RESOURCES
On June 30, 2023, deferred outflows and inflows of resources, reported in the governmental fund financial statements, consisted of the following:
Deferred
Outflows of
Resources Deferred Inflows of Resources
Deferred
Interest
Expense
Unavailable
Revenues Leases Total
Major Governmental Funds:
General Fund $ - $ 4,468,020 $ 4,599,473 $ 9,067,493
Specific Plan Fund 900,122 - - -
Nonmajor Governmental Funds: 0
Community Development Block Grant Fund - 887,688 - 887,688 Cal Home Loan Program Fund - 166,873 - 166,873
Transportation Facilities Fund - 1,348,950 - 1,348,950
Public Safety Facilities Fund - 107,744 - 107,744
General Government Facilities Fund - 578,315 - 578,315
Parks and Recreation Facilities Fund - 565,541 - 565,541 Library Facilities Fund - 186,416 - 186,416
Airport Road PSR Fund 76,816 - - -
Total $ 976,938 $ 8,309,547 $ 4,599,473 $12,090,020
On June 30, 2023, deferred outflows and inflows of resources, reported on the Statement of Net Position, consisted of the following:
Governmental
Activities
Business-Type
Activities
Deferred Outflows of Resources:
Deferred loss of refunding bonds $ 260,914 $ -
Deferred OPEB 11,773 2,846
Deferred pensions 14,404,342 2,568,391
Total deferred outflows of resources $ 14,677,029 $ 2,571,237 Attachment 1
City Council Agenda December 19, 2023
Governmental
Activities
Business-Type
Activities
Deferred Inflows of Resources:
Deferred leases $ 4,599,473 $ 12,900,338
Deferred OPEB 2,720,165 657,250
Deferred pensions 3,435,172 83,161
Total deferred inflows of resources $ 10,754,810 $ 13,640,749 NOTE 8 – LONG-TERM DEBT
A. Compensated Absences
City employees accumulate earned, but unused vacation and other leave pay benefits, which can be converted to cash at termination of employment. Since no means exist to reasonably estimate the amounts that might be liquidated with current available financial resources, if any, they are reported as long-term debt on the Statement of Net Position. No expenditure is reported for these amounts in the fund statements. However, in the Statement of Activities the expenditure is allocated to each function based on usage. The noncurrent portion of these vested benefits (payable in accordance with various collective bargaining agreements) on June 30, 2023, totals $2,976,592 for governmental activities and $409,194 for business-type activities.
B. Financed Purchases
On September 12, 2014, the City entered into a lease purchase agreement for the acquisition of multiple pieces of equipment, including a mower, utility trailer, aerator, vehicles, etc., for a total of $864,464. Principal and interest payments are due semi-annually beginning March 12, 2015, with the last payment due September 12, 2024. Total amount outstanding on June 30, 2023, was $76,283.
In 2015, the City entered into a $527,000 lease purchase agreement for the purchase of a new Fire Engine, with an annual payment of $59,841 for 10 years, with the first payment beginning on August 15, 2015 and the last payment due August 15, 2024. Total amount outstanding on June 30, 2023, was $115,543.
The future minimum payment obligations for each financed purchase is as follows:
Fiscal Year Ending June 30 Equipment
Fire
Engine Total
2024 $ 52,071 $ 59,841 $ 111,912
2025 26,035 59,841 85,876
Total 78,106 119,682 197,788
Less: amount representing interest 1,823 0 4,139 0 5,962 Present value of net minimum
payment $ 76,283 0 $ 115,543 0 $ 191,826
C. General Obligation Bonds Payable
On February 1, 2019, the City issued $13,095,000 of General Obligation (GO) Bonds with an interest rate of 5% to refund prior GO Bonds with interest rates ranging from 3.5% to 5.0% and par value of $17,320,000. The prior GO Bonds matured annually on August 1 between 2008 and 2028 and were called on March 1, 2019. The current GO Refunding Bonds were issued at a premium of $1,888,198 and, after paying issuance costs of $144,874 and the underwriter’s discount of $42,559, the net proceeds were $14,795,765. The net proceeds from the issuance of the GO Bonds were deposited into an irrevocable trust with an escrow agent. The current refunding met the requirements of an in-substance defeasance and the GO Bonds were moved from the City’s Government-Wide financial statements. As a result of the current refunding, the City reduced its total debt service requirements by $5,301,431 which results in an economic gain (difference between the present value of the debt service payments on the old and new debt) of $4,890,150.
Attachment 1
City Council Agenda December 19, 2023
On September 28, 2001, the City issued $6,999,603 in GO Bonds, Series B Capital Appreciation and Term Bonds (2001) for the purpose of providing construction funds for a variety of citywide projects. The outstanding bonds bear a net interest cost of 5.09% and are due in annual installments ranging from $297,970 to $615,806 through January 1, 2028. These bonds are payable from ad valorem taxes levied against all taxable real property in the City (with the exception of certain classes of personal property).
The annual requirements to amortize general obligation bonds payable are as follows:
Fiscal Year Ending
June 30 Principal Interest Total
2024 $ 1,536,109 0 $ 715,391 0 $ 2,251,500
2025 1,597,320 653,430 2,250,750
2026 1,660,312 591,188 2,251,500
2027 1,727,352 521,273 2,248,625
2028 1,799,809 0 447,066 0 2,246,875
Total $ 8,320,902 0 $ 2,928,348 0 $ 11,249,250
D. Wastewater Revenue Refunding Bonds Payable
On April 24, 2012, the City issued $6,355,000 of Wastewater Revenue Refunding Bonds with interest rates ranging from
2.0% to 5.0% to refund prior Wastewater Revenue Bonds with interest rates ranging from 3.5% to 5.0% and a par value of $6,895,000. The purpose of the bonds was the retrofitting of the City’s 50 year-old wastewater treatment plant. The prior Wastewater Revenue Bonds matured annually on June 1 between 2012 and 2032. The prior Wastewater Revenue Bonds were called on April 30, 2012. The current Wastewater Revenue Refunding Bonds were issued at a premium of $494,996 and, after paying issuance costs of $123,631 and the underwriter’s discount of $68,538, the net proceeds were $6,657,827.
The net proceeds from the issuance of the Wastewater Revenue Bonds were deposited into an irrevocable trust with an escrow agent who called the bonds on April 30, 2012. The current refunding met the requirements of an in-substance defeasance and the Wastewater Revenue Bonds were removed from the City’s Government-Wide financial statements.
As a result of the current refunding, the City reduced its total debt service requirements by $1,172,865 which resulted in an economic gain (difference between the present value of the debt service payments on the old and new debt) of $837,029.
The annual requirements to amortize revenue refunding bonds payable are as follows:
Fiscal Year Ending
June 30 Principal Interest Total
2024 $ 335,000 0 $ 136,575 0 $ 471,575
2025 355,000 0 119,825 0 474,825
2026 370,000 102,075 472,075
2027 380,000 90,050 470,050
2028 395,000 76,750 471,750
2029-2032 1,705,000 0 161,550 0 1,866,550
Total $ 3,540,000 0 $ 686,825 0 $ 4,226,825
E. Water Revenue Bond Payable
On March 1, 2019, the City issued $8,118,000 Water Revenue Bonds with an interest rate of 2.85% for the purpose of providing funds for the replacement of the 21st Street Reservoir, an approximately four-million-gallon water storage tank.
The water revenue bonds were issued at par and, after paying issuance costs of $111,173, the net proceeds were $8,006,827. Principal and interest payments are due March 1 and September 1, each year, beginning on September 1, 2019. The annual requirements to amortize the water revenue bonds payable are as follows:
Attachment 1
City Council Agenda December 19, 2023
Fiscal Year Ending
June 30 Principal Interest Total
2024 $ 492,491 0 $ 175,092 0 $ 667,583
2025 506,627 160,956 667,583
2026 521,169 146,414 667,583
2027 536,128 131,455 667,583
2028 551,516 116,067 667,583
2028-2033 3,004,319 0 333,594 0 3,337,913
2034 653,580 0 14,003 0 667,583
Total $ 6,265,830 0 $ 1,077,581 0 $ 7,343,411
F. Landfill Closure, Post-Closure, and Corrective Action State Financial Assurance Mechanism regulations require landfill operators to set aside funds, or provide alternative funding mechanisms, to fund the closure, post-closure, and corrective action maintenance of landfills. Closure, postclosure and corrective action care costs include, but are not limited to, such items as final cover, groundwater monitoring, well installations and landfill gas monitoring systems. The funding must be completed prior to the final date of closure.
These regulations apply to solid waste landfills that have been or will be operated on or after January 1, 1988.
The City currently has one landfill that is subject to State and Federal regulations. Total permitted capacity for this landfill is 4,701,338 tons. As of June 30, 2023, the remaining permitted capacity was at 3,056,648 tons with the actual capacity filled during the fiscal year at 1,644,740 tons. The estimated year of closure is currently set at 2062.
The annually inflated landfill closure, post-closure and corrective action care cost estimates of $5,700,414, $7,131,171 and $183,708, respectively, for a total of $13,015,293, are based upon the most recently submitted Closure, Post-Closure and Corrective Action Maintenance Plan documents filed with the State permitting agencies. If, at some future date, these closure cost estimates are adjusted (due to change in inflation, technology, regulations, etc.), the City is required to make corresponding changes in the amount of funds deposited for closure.
Each year a portion of the landfill’s estimated closure and post-closure cost is recognized as an expense and liability based upon the amount of capacity used during the fiscal year. As of June 30, 2023, the cumulative liability recorded by the City based upon landfill capacity usage is $4,552,750. The remaining $8,462,543 of estimated closure, post-closure and corrective action costs will be recorded and funded as landfill capacity is used.
G. Loans Payable
On March 12, 2013, the City entered into an installment sale agreement with the State Water Resource Control Board for the construction of the Wastewater Treatment Plant. Annual installments, including accrued interest, began on September 1, 2016, one year after completion of construction. The current balance on June 30, 2023, is $31,392,588.
On December 11, 2013, the City entered into a loan agreement with the State of California, Department of Transportation (DOT) for the Airport Fuel Facility project, with an annual payment of $49,465 for 17 years, with the first payment beginning in January 30, 2015, and the last payment due January 30, 2031. The current balance on June 30, 2023, is $332,511.
On March 7, 2017, the City entered into an installment sale agreement with the State Water Resources Control Board for the construction of Tertiary Treatment Facilities at the Wastewater Treatment Plant in the amount of $14.4 million. Annual installments, including accrued interest, began on December 19, 2019, one year after completion of construction. This project, by way of producing recycled water, was eligible for a loan forgiveness grant in the amount of $4.0 million. The current balance on June 30, 2023, is $9,197,402.
On June 9, 2017, the City entered into a loan agreement with Siemens Industry, Inc., Building Technologies Division for the replacement and upgrade of lighting, heating, ventilation, and air conditioning units on a number of City facilities including City Hall, Library, Public Safety Center, Centennial Park, and Senior and Veterans Center. Annual payments, including interest, are $205,469 per year for the next 15 years, with the first payment beginning on September 9, 2018, and the last Attachment 1
City Council Agenda December 19, 2023
payment due June 9, 2033. The debt payments will be offset, in part, by energy savings generated by the upgrade equipment. The current balance on June 30, 2023, is $1,748,210.
The future minimum payment obligations for loans payable are shown below:
Fiscal Year Ending June 30
Wastewater
Treatment
Plant
Airport Fuel
Facility
Tertiary
Treatment
Facilities
HVAC &
Lighting Total
2024 $ 2,711,858 $ 49,465 $ 440,615 $ 205,469 $ 3,407,407 2025 2,711,858 49,465 440,615 205,469 3,407,407
2026 2,711,857 49,465 440,615 205,469 3,407,406
2027 2,711,857 49,464 440,615 205,469 3,407,405
2028 2,711,858 49,465 440,615 205,469 3,407,407
2029-2033 13,559,289 148,394 2,203,076 1,027,341 16,938,100 2034-2038 8,135,574 - 2,203,076 - 10,338,650
2039-2043 - - 2,203,075 - 2,203,075
2044-2048 - - 2,203,075 - 2,203,075
2049 - - 440,615 - 440,615
Total 35,254,151 395,718 11,455,992 2,054,686 49,160,547 Less: amount representing interest 3,861,563 0 63,207 2,258,590 0 306,476 0 6,489,836 Present value of net minimum
payment $31,392,588 0 $ 332,511 0 $ 9,197,402 0 $ 1,748,210 0 $42,670,711 H. Net Other Post-Employment Benefits Liability
In accordance with GASB Statement No. 75, the City is required to measure and report liabilities associated with OPEB. The City’s estimated net OPEB liability on June 30, 2023, was $5,627,974. See Note 12 for further detail.
I. Net Pension Liability
In accordance with GASB Statement No. 68, the City is required to measure and report liabilities associated with its pension liability. Pension expense is charged to functions and programs based on their proportionate share of total payroll cost.
For governmental funds, these expenses are typically incurred by the General and Landscape and Lighting District Funds.
The City’s estimated net pension liability on June 30, 2023, was $47,434,885. See Note 11 for further detail.
J. Changes in Long-Term Liabilities
Long-term liability activity for the fiscal year ended June 30, 2023, is as follows:
Governmental Activities
Balance
July 1, 2022 Additions Deletions
Balance
June 30, 2023
Due Within
One Year
Compensated absences $ 2,671,162 $ 305,430 $ - $ 2,976,592 $ 866,448 Financed purchases 301,151 - 141,362 159,789 86,414
General obligation bonds payable 9,801,293 - 1,480,391 8,320,902 1,536,109 Premium on GO bonds 1,258,798 - 209,800 1,048,998 209,800 Certificates of participation 286,436 - 286,436 - -
Landfill closure, post-closure costs 4,125,970 426,780 - 4,552,750 - Loans payable 1,893,891 - 145,681 1,748,210 150,473
Net OPEB liability 6,181,475 1,050,473 2,699,186 4,532,762 - Net pension liability 19,546,834 26,004,843 6,348,847 39,202,830 - Total $ 46,067,010 $ 27,787,526 $ 11,311,703 $ 62,542,833 $ 2,849,244 Attachment 1
City Council Agenda December 19, 2023
Business-Type Activities
Balance
July 1, 2022 Additions Deletions
Balance
June 30, 2023
Due Within
One Year
Compensated absences $ 396,381 $ 12,810 $ - $ 409,191 $ 190,205 Financed purchases 52,772 - 20,735 32,037 21,233
Wastewater bonds payable 3,860,000 - 320,000 3,540,000 335,000 Premium on wastewater bonds 247,497 - 24,750 222,747 24,750 Water bonds payable 6,744,579 - 478,749 6,265,830 492,491 Loans payable 43,378,422 - 2,455,921 40,922,501 2,498,481 Net OPEB liability 1,837,131 253,818 995,737 1,095,212 - Net pension liability 5,386,919 4,534,213 1,689,077 8,232,055 - Total $ 61,903,701 $ 4,800,843 $ 5,984,969 $ 60,719,573 $ 3,562,160 K. Legal Debt Margin
California Government Code Section 43605 establishes a legal debt limit of 15% of gross assessed valuation for municipalities. However, this provision was enacted when assessed valuation was established based on 25% of market value. Effective in fiscal year 1981-82, taxable property is assessed at 100% of market value. Although the debt limit provision has not been amended by the State since this change, the percentage has been proportionately modified to
3.75% for the purposes of this calculation for consistency with the original intent of the State's limit.
For fiscal year 2022-23, the total assessed valuation was $6,096,685,558, for a total debt limit of $228,625,708. The total amount of debt subject to this limit was $10,228,901, resulting in a legal debt margin of $218,396,807.
NOTE 9 – NACIMIENTO WATER PROJECT
The City has entered into a contract with the San Luis Obispo County Financing Authority (SLO Authority). The SLO Authority was created on August 15, 2000, to issue bonds for the purpose of financing part or all of the costs of the purchase, construction, expansion, improvement, or rehabilitation of any real or other tangible property. On September 26, 2007, the SLO Authority issued $196,410,000 of revenues bonds for the Nacimiento Water Project. On May 7, 2018, the SLO Authority refunded said bonds.
The City is considered a participating agency of the SLO Authority and the City’s share of the Nacimiento Water Project is based upon the City’sshare of the quantity of water to be distributed by the SLO Authority from Nacimiento Lake. The City is obligated to pay for the debt service of the SLO Authority based on its water share. The City is further obligated to make contract payments until September 2040. The future minimum contract payments for the debt service are shown below:
Fiscal Year Ending
June 30
Net Annual Debt
Service
2024 $ 4,167,373
2025 4,163,664
2026 4,164,954
2027 4,166,842
2028 4,164,352
2029-2033 20,835,965
2034-2038 20,824,693
2039-2041 12,335,380
Total $ 74,823,223
NOTE 10 – LEASES PAYBLE AND SUBSCRIPTION-BASED INFORMATION TECHNOLOGY AGREEMENTS On August 1, 2017, the City entered into a 60-month lease agreement (City as lessee) for the use of building and improvements located at 821 Pine St, Unit A (also known as the “City Hall Annex”). On August 1, 2022, the term of the lease was extended for an additional two years. An initial lease liability was recorded on July 1, 2021, in the amount of $127,327 and as of June 30, 2023, with the additional term extension, the value of the lease liability is $309,207. The City is required to make monthly fixed payments of $8,005 and has an interest rate of 2.445%. The interest rate was determined by using the City’s incremental borrowing rate which uses municipal bond yields at the time the City entered into this agreement. The building’s estimated useful life exceeds the lease contract term, so the lease term was used to determine amortization expense. The value of the Attachment 1
City Council Agenda December 19, 2023
right-to-use leased asset as of June 30, 2023, was $426,701, with accumulated amortization of $213,406, resulting in a net value of $213,295.
On April 25, 2021, the City entered into a 24-month lease agreement (City as lessee) for the use of building and improvements located at 625 Riverside Avenue (also known as the “Corporation Yard”). An initial lease liability was recorded on July 1, 2021, in the amount of $367,252 and as of June 30, 2023, the value of the lease liability is $129,762. The City is required to make monthly fixed payments of $10,000 and has an interest rate of 0.3160%. The interest rate was determined by using the City’s incremental borrowing rate which uses municipal bond yields at the time the City entered into this agreement. The building’s estimated useful life exceeds the lease contract term, so the lease term was used to determine amortization expense. The value of the right-to-use leased asset as of June 30, 2023, was $367,252, with accumulated amortization of $238,218, resulting in a net value of $129,034. City has one option to extend for an additional 12-months.
On July 15, 2021, the City entered into a 24-month subscription agreement for the use of ArcGIS, a geographic information mapping and analysis solution. An initial subscription liability was recorded on July 1, 2022, in the amount of $63,490 and as of June 30, 2023, the value of the lease liability is $37,736. The City is required to make annual payments of $25,800 and has an interest rate of 2.0237%. The interest rate was determined by using the City’s incremental borrowing rate which uses municipal bond yields at the time the City entered into this agreement. The value of the right-to-use subscription as of June 30, 2023, was $63,490, with accumulated amortization of $31,182, resulting in a net value of $32,308.
On June 30, 2022, the City entered into a 48-month subscription agreement for the use of eScribe, a City Council agenda preparation software solution. An initial subscription liability was recorded on July 1, 2022, in the amount of $63,909 and as of June 30, 2023, the value of the lease liability is $52,269. The City is required to make annual payments of $18,090 and has an interest rate of 1.902%. The interest rate was determined by using the City’s incremental borrowing rate which uses municipal bond yields at the time the City entered into this agreement. The value of the right-to-use subscription as of June 30, 2023, was $63,909, with accumulated amortization of $15,977, resulting in a net value of $47,932.
On August 22, 2022, the City entered into a 36-month subscription agreement for the use of Desigo Software, an HVAC-related building management solution. An initial subscription liability was recorded on September 1, 2022, in the amount of $35,923 and as of June 30, 2023, the value of the lease liability $13,923. The City is required to make annual payments of $22,000 and has an interest rate of 2.1843%. The interest rate was determined by using the City’s incremental borrowing rate which uses municipal bond yields at the time the City entered into this agreement. The value of the right-to-use subscription as of June 30, 2023, was $35,923, with accumulated amortization of $9,979, resulting in a net value of $25,944.
On February 20, 2023, the City entered into a 15-month subscription agreement for the use of Cordico Shield, a wellness platform which provides access to critical mental health information and resources that is utilized by the public safety departments. An initial subscription liability was recorded on March 1, 2023, in the amount of $12,575 and as of June 30, 2023, the value of the lease liability is $9,409. The City is required to make annual payments of $9,499 and has an interest rate of
2.8943%. The interest rate was determined by using the City’s incremental borrowing rate which uses municipal bond yields at the time the City entered into this agreement. The value of the right-to-use subscription as of June 30, 2023, was $12,575, with accumulated amortization of $3,144, resulting in a net value of $9,431.
The future minimum right-to-use lease and subscription payments are shown below:
Leases Payable Subscriptions Payable
Fiscal Year Ending
June 30 Principal Interest Total Principal Interest Total 2024 $ 211,684 $ 6,776 0 $ 218,460 $ 70,936 $ 2,173 $ 72,909 2025 107,184 4,236 111,420 24,648 827 25,475
2026 102,660 1,796 104,456 17,753 337 18,090
2027 17,441 53 17,494 - - -
Total $ 438,969 0 $ 12,861 0 $ 451,830 $ 113,337 $ 3,337 $ 116,474 Attachment 1
City Council Agenda December 19, 2023
NOTE 11 – DEFINED BENEFIT PENSION PLANS
A. General Information about the Pension Plans
Plan Description: The City participates in two separate types of employer plans where all qualified permanent and probationary employees are eligible to participate, depending on the employee classification: 1) Miscellaneous Employee Pension Plan, an agent multiple-employer defined benefit plan or 2) Safety Employee Pension Plan, a cost-sharing employer defined pension plan. Both plans are administered by the California Public Employees’ Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Miscellaneous and Safety Plans are established by State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website (https://www.calpers.ca.gov). CalPERS does not, however, provide separate reports for the City's Safety and Miscellaneous Plans.
Benefits Provided: CalPERS provides service retirement and disability benefits, annual cost-of-living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full-time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for nonduty disability benefits after 10 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost-of-living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law. The Miscellaneous and Safety Plans’ provisions and benefits in effect on June 30, 2023, are summarized below:
Miscellaneous Employee Plan
Tier I Tier II1 Tier III (PEPRA)
Hire date Prior to
May 27, 2012
On or after
May 27, 2012
On or after
January 1, 2013
Benefit formula 2.5% @ 55 2.0% @ 60 2.0% @ 62
Benefit vesting schedule 5 years of service 5 years of service 5 years of service Benefit payment Monthly for life Monthly for life Monthly for life Retirement age 50-55 50-63 52-67
Monthly benefits, as a % of eligible
compensation 2.00% to 2.70% 1.43% to 2.42% 1.00% to 2.50% Final average compensation period One year Three year Three year Required employee contribution rate 8.000% 7.000% 7.000% Required employer normal cost rate 9.520% 9.520% 9.520% Required employer payment of UAL2 |--------------------------------------$2,215,554--------------------------------------| Police Safety Employee Plan
Tier I Tier II1 Tier III (PEPRA)
Hire date Prior to
May 27, 2012
On or after
May 27, 2012
On or after
January 1, 2013
Benefit formula 3.0% @ 50 3.0% @ 55 2.7% @ 57
Benefit vesting schedule 5 years of service 5 years of service 5 years of service Benefit payment Monthly for life Monthly for life Monthly for life Retirement age 50 50-55 50-57
Monthly benefits, as a % of eligible
compensation 3.00% 2.40% to 3.00% 2.00% to 2.70%
Final average compensation period One year Three year Three year Required employee contribution rate 9.000% 9.000% 13.000% Required employer normal cost rate 23.750% 20.640% 12.780% Required employer payment of UAL $1,278,776 $17,649 $14,044 Attachment 1
City Council Agenda December 19, 2023
Fire Safety Employee Plan
Tier I Tier II1 Tier III (PEPRA)
Hire date Prior to
May 27, 2012
On or after
May 27, 2012
On or after
January 1, 2013
Benefit formula 3.0% @ 55 3.0% @ 55 2.7% @ 57
Benefit vesting schedule 5 years of service 5 years of service 5 years of service Benefit payment Monthly for life Monthly for life Monthly for life Retirement age 50 50-55 50-57
Monthly benefits, as a % of eligible
compensation 3.00% 2.40% to 3.00% 2.00% to 2.70%
Final average compensation period One year Three year Three year Required employee contribution rate 9.000% 9.000% 13.000% Required employer normal cost rate 21.840% 20.640% 12.780% Required employer payment of UAL $416,273 $1,617 $1,663 Note to table above:
1- Second tier will only apply to employees transferring from another CalPERS agency or one with reciprocity on or after May 27, 2012. 2- The Miscellaneous Plan’s required employer payment of the Unfunded Actuarial/Accrued Liability (UAL) was calculated for the entire plan and is not allocated by Tier.
Employees Covered: On June 30, 2023, the following employees were covered by the benefit terms for the Miscellaneous Plan:
Miscellaneous
Plan
Inactive employees or beneficiaries currently receiving benefits 169 Inactive employees entitled to but not yet receiving benefits 103 Active employees 135
Total 407
Contributions: Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for the plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees.
B. Pension Liability, Pension Expense, and Deferred Outflows and Inflows of Resources Related to Pensions Net Pension Liability: The City’s net pension liability for the Miscellaneous Plan is measured as the total pension liability, less the plan’s fiduciary net position. On June 30, 2023, the City reported a net pension liability of $29,277,336 for the Miscellaneous Plan.
The City’s net pension liability for the Safety Plan is measured as the proportionate share of the net pension liability. On June 30, 2023, the City reported a net pension liability of $18,157,549 for the Safety Plan. 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 plan relative to the projected contributions of all participating employers, actuarially determined. The proportionate share of the net pension liability for the Safety Plan as of June 30, 2021 and 2022 was as follows:
Safety
Plan
Proportion – June 30, 2021 0.0896%
Proportion – June 30, 2022 0.1891%
Increase (decrease) in proportion 0.0995%
Attachment 1
City Council Agenda December 19, 2023
The net pension liability of both the Miscellaneous and Safety Plans are measured as of June 30, 2022, using an annual actuarial valuation as of June 30, 2021 rolled forward to June 30, 2022 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below.
Pension Expense: For the fiscal year ended June 30, 2023, the City recognized pension expense in the amount of $3,265,579 for the Miscellaneous Plan and $9,208,798 for the Safety Plan. Pension expense represents the change in the net pension liability during the measurement period, adjusted for actual contributions and the deferred recognition of changes in investment gain/loss, actuarial gain/loss, actuarial assumptions or method, and plan benefits.
Actuarial Assumptions: The total pension liabilities actuarial valuations were determined using the following actuarial assumptions:
Miscellaneous and Safety Plans
Valuation date June 30, 2021
Measurement date June 30, 2022
Actuarial cost method Entry age normal
Actuarial assumptions:
Inflation 2.300%
Salary increases Varies by entry age and service
Payroll growth 2.75%
Investment rate of return 6.90% net pension plan investment and administrative expense; includes inflation
Retirement age The probabilities of retirement are based on the 2021 CalPERS Experience Study for the period from 1997 to 2015.
Mortality
The probabilities of mortality are based on the 2021 CalPERS Experience Study for the period from 1997 to 2015. Pre-retirement and Post-retirement mortality rates include 15 years of projected mortality improvement using 90% of Scale MP-2016 published by the Society of Actuaries.
Changes of Assumptions: Effective with the June 30, 2021 valuation date (2022 measurement date), the accounting discount rate was reduced from 7.15% to 6.90%. In determining the long-term expected rate of return, CalPERS took into account long-term market return expectations as well as the expected pension fund cash flows. Projected returns for all asset classes are estimated, combined with risk estimates, and are used to project compound (geometric) returns over the long-term. The discount rate used to discount liabilities was informed by the long-term projected portfolio return. In addition, demographic assumptions and the inflation rate assumption were changed in accordance with the 2021 CalPERS Experience Study and Review of Actuarial Assumptions. The accounting discount rate was 7.15% for measurement dates 2017 through 2021, 7.65% for measurement dates 2015 through 2016, and 7.50% for measurement date 2014.
Discount Rate: The discount rate used to measure the total pension liability was 6.90%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, the plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability.
Long-Term Expected Rate of Return: The long-term expected rate of return on pension plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.
In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations. Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the next 20 years using a building-block approach. The expected rate of return was then adjusted to account for assumed administrative expenses of 10 basis points. The expected real rates of return by asset class are as follows:
Attachment 1
City Council Agenda December 19, 2023
Asset Class
Assumed Asset
Allocation
Real Return
Years 1-101,2
Global Equity – cap-weighted 30.00% 4.45%
Global Equity – non-cap-weighted 12.00% 3.84%
Private Equity 13.00% 7.28%
Treasury 5.00% 0.27%
Mortgage Backed Securities 5.00% 0.50%
Investment Grade Corporates 10.00% 1.56%
High Yield 5.00% 2.27%
Emerging Market Debt 5.00% 2.48%
Private Debt 5.00% 3.57%
Real Assets 15.00% 3.21%
Leverage -5.00% -0.59%
Note to table above
1 – An expected inflation of 2.30% used for this period. 2 – Figures are based on the 2021 Asset Liability Management Study.
Subsequent Events: On July 12, 2021, CalPERS reported a preliminary 21.3% net return on investments for fiscal year 2020-
21. Based on the thresholds specified in CalPERS Funding Risk Mitigation policy, the excess return of 14.3% prescribes a reduction in investment volatility that corresponds to a reduction in the discount rate used for funding purposes of 0.20%, from 7.00% to 6.80%. Since CalPERS was in the final stages of the four-year Asset Liability Management (ALM) cycle, the board elected to defer any changes to the asset allocation until the ALM process concluded, and the board could make its final decision on the asset allocation in November 2021.
On November 17, 2021, the board adopted a new strategic asset allocation. The new asset allocation along with the new capital market assumptions, economic assumptions and administrative expense assumption support a discount rate of
6.90% (net of investment expense but without a reduction for administrative expense) for financial reporting purposes.
This includes a reduction in the price inflation assumption from 2.50% to 2.30% as recommended in the November 2021 CalPERS Experience Study and Review of Actuarial Assumptions. This study also recommended modifications to retirement rates, termination rates, mortality rates and rates of salary increases that were adopted by the board. These new assumptions will be reflected in the GASB 68 accounting valuation reports for the June 30, 2022, measurement date.
Changes in Net Pension Liability: The changes in net pension liability for the Miscellaneous Plan are shown below:
Total Pension
Liability
Plan Fiduciary
Net Position
Net Pension
Liability
Balance at July 1, 2021 $ 88,546,936 $ 70,996,713 $ 17,550,223 Changes in the fiscal year:
Service cost 1,829,087 - 1,829,087
Interest on total pension liability 6,161,948 - 6,161,948 Change of assumptions 2,696,110 - 2,696,110
Differences between expected and actual experience (561,548) - 561,548 Contributions – employer - 2,716,313 (2,716,313)
Contributions – employee - 1,120,973 (1,120,973)
Net investment income/(loss) - (5,394,575) 5,394,575
Benefit payments, including refunds of employee
contributions (4,584,918) (4,584,918) -
Administrative expenses - (44,227) 44,227
Net change in fiscal year 5,540,679 12,237,191 11,727,113 Balance at June 30, 2022 $ 94,087,615 $ 64,810,279 $ 29,277,336 Attachment 1
City Council Agenda December 19, 2023
Sensitivity of the Net Pension Liability to Changes in the Discount Rate: The following represents the City’s proportionate share of the net pension liability calculated using the discount rate of 6.90 percent, 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 (5.90 percent) or 1- percentage point higher (7.90 percent) than the current rate:
Net pension liability
Discount
Rate -1%
(5.90%)
Current
Discount
Rate (6.90%)
Discount
Rate +1%
(7.90)
Miscellaneous Plan $ 41,389,561 $ 29,277,336 $ 19,230,373 Safety Plan 29,418,670 18,157,549 8,954,127
Total $ 70,808,231 $ 47,434,885 $ 28,184,500
Pension Plans’ Fiduciary Net Position: Detailed information about the Miscellaneous and Safety Plans’ fiduciary net position is available in the separately issued CalPERS financial reports.
Deferred Outflows and Inflows of Resources Related to Pensions: On June 30, 2023, the City reported deferred outflows of resources and deferred inflows of resources related to Miscellaneous and Safety Plans pension from the following sources:
Miscellaneous Plan Safety Plan
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Pension contributions subsequent to measurement date $ 3,107,204 $ - $ 2,803,778 $ - Changes of assumptions 2,004,800 - 2,012,352 -
Differences between expected and actual experiences - (271,840) 609,255 - Net difference between projected and actual earnings
on pension plan investments 3,283,727 - 3,151,617 -
Differences in proportions - - - (1,047,647)
Differences in actual contributions and proportionate
share of contributions - - - (2,198,846)
Total $ 8,395,731 $ (271,840) $ 8,577,002 $ (3,246,493) The reported deferred outflows of resources related to pensions in the amount of $3,107,204 and $2,803,778 resulting from City contributions subsequent to the measurement date will be recognized as a reduction in net pension liability in the 2023-24 fiscal year. The additional amounts reported as deferred outflows and inflows of resources related to pensions will be recognized as pension expense as shown below:
Fiscal Year Ending
June 30
Miscellaneous
Plan
Safety
Plan
2024 $ 1,158,520 $ 808,034
2025 1,079,204 400,244
2026 726,665 (604,074)
2027 2,052,298 1,922,527
Total $ 5,016,687 $ 2,526,731
C. Payable to the Pension Plans
The City had no amount outstanding for contributions to the pension plans for the fiscal year ended June 30, 2023.
NOTE 12 – OTHER POST-EMPLOYMENT BENEFITS
A. General Information about Other Post-Employment Benefits Plan Description: The City provides other post-employment benefits (OPEB), a single employer contribution plan, in accordance with State statutes, to all employees retiring from the City and enrolled in an insurance program under the California Public Employees’ Medical and Hospital Care Act (PEMHCA). Providing healthcare benefits under the City’s group Attachment 1
City Council Agenda December 19, 2023
health plan may provide benefits at a substantially lower cost than if the retirees purchased their own individual benefits.
For the fiscal year ending June 30, 2023, the City contracted with Total Compensation Systems, Inc. to prepare the GASB Statement No. 75 Actuarial Valuation Report. This report was prepared in compliance with the requirements set forth in GASB Statement No. 75, Accounting and Financial Reporting by Employers for Post-Employment Benefits Other than Pensions. The report can be viewed on the City’s website.
Benefits Provided: The City is required to contribute the PEMHCA minimum to CalPERS on behalf of annuitants eligible for, and participating in, CalPERS health insurance. The City joined the CalPERS health program in 2015, contracting for the “unequal” minimum contribution amount to annuitants. The unequal minimum contribution increases annually by the number of years an agency contracts multiplied by 5% of the current monthly contribution for active employees, for 20 years, at which point it becomes 100% and equal. A history of the full minimum required contribution and the City’s partial minimum required contribution is presented below:
Calendar Year
Full Minimum Required
Contribution
City’s Minimum Required
Contribution
2015+ $122 $1.00
2016+ $125 $6.25
2017+ $128 $12.80
2018+ $133 $19.95
2019+ $136 $27.20
2020_ $139 $34.75
2021_ $143 $42.90
2022_ $149 $52.15
2023_ $151 $60.40
2024+ Adjusted annually to reflect
medical portion of Consumer
Price Index (CPI)
Adjusted annually to reflect
medical portion of CPI & years of
participation
In addition to the City’s contributions under PEMHCA stated above, the City has agreed to provide the following retiree medical reimbursement:
• Retirees in the Management, Police, Fire and Service Employees International Union (SEIU) labor groups that were hired before January 1, 2012, and who have a minimum of 10 years of service with the City, are eligible for medical reimbursements up to $500 per month (including PEMHCA minimum) with no age limitation.
• Retirees in the Management, Police, Fire and SEIU labor groups that were hired on or after January 1, 2012, and who have a minimum of 20 years of service with the City, are eligible for medical reimbursements up to $500 per month (including the PEMHCA minimum) until the Medicare eligible age of 65.
Employees Covered: On June 30, 2023, the following current and former employees were covered by the benefit terms under the plan membership:
Inactive employees or beneficiaries currently receiving benefits 114 Inactive employees entitled to but not yet receiving benefits - Active employees 210
Total 324
Contributions: The City’s OPEB plan is established by agreements with the applicable employee labor groups and may be amended by agreements between the City and the labor groups. The City is not required to fund based on the actuarially determined contribution; however, the City has established an employer investment program with Mission Square Attachment 1
City Council Agenda December 19, 2023
investments to prefund OPEB obligations. For the fiscal year ended June 30, 2023, the City’s cash contributions were $349,500 in payments to this trust.
B. OPEB Liability, OPEB Expense, and Deferred Inflows and Outflows of Resources Related to OPEB Net Other Post-Employment Benefit Liability: The City’s net OPEB liability is measured as the total OPEB liability, less the plan’s fiduciary net position. On June 30, 2023, the City reported a net OPEB liability of $5,627,974.
OPEB Expense: For the fiscal year ended June 30, 2023, the City recognized other post-employment benefit expense in the amount of $607,658. Other post-employment benefit expense represents the change in net OPEB liability during the measurement period, adjusted for actual contributions and the deferred recognition of changes in investment gain/loss, actuarial gain/loss, actuarial assumptions or methods, and plan benefits.
Actuarial Assumptions: The City’s net OPEB liability is based on the following actuarial methods and assumptions:
Valuation date June 30, 2022
Measurement date June 30, 2023
Measurement period July 1, 2022 to June 30, 2023
Actuarial cost method Entry age normal
Actuarial assumptions:
Funding practice
The City does not currently have a pre-funding policy but has been making annual contributions of $349,500 to the trust. The projection of cash flows used to determine the discount rate assumed future pre-funding contributions of $349,500 are made to the trust.
Asset return 6.20% per annum
Discount rate 5.33% per annum, net of expenses
Inflation 2.50% per annum
Payroll increases 2.75% per annum, plus merit scale increases Pre-retirement turnover According to the termination rates under the most recent CalPERS pension plan valuations.
Mortality 2017 CalPERS Mortality for Safety, Miscellaneous and Schools Employees Retirement age According to the retirement rates under the most recent CalPERS pension plan valuation.
Participation rates
100% of eligible active employees are assumed to elect medical coverage at retirement. Future retirees are assumed to elect similar coverage as current retirees. Actual plan coverage is used for current retirees.
Spouse coverage
80% of future retirees are assumed to elect coverage for their spouse.
Male spouses are assumed to be three years older than female spouses.
Actual spouse coverage and spouse ages are used for current retirees.
Dependent coverage Not explicitly valued.
Claim cost development
The valuation claim costs are based on the premiums paid for medical insurance coverage. The City participates in CalPERS, a community rated plan. An implicit rate subsidy can exist when the non-Medicare rates for retirees are the same as for active employees. Since non-Medicare eligible retirees are typically much older than active employees, their actual medical costs are typically higher than for active employees. The current valuation contains an estimate of the implicit rate subsidy.
Medical trends
Assumed 4.00% per year. Long-term trend assumption is based on the conclusion that, while medical trend will continue to be cyclical, the average increase over time cannot continue to outstrip general inflation by a wide margin. Trend increases in excess of general inflation result in dramatic increases in unemployment, the number of uninsured and the number of underinsured. These effects are nearing a tipping point which Attachment 1
City Council Agenda December 19, 2023
will inevitably result in fundamental changes in health care finance and/or delivery which will bring increases in health care costs more closely in line with general inflation. As a result, it is reasonable to project historical trend vs. inflation differences several decades into the future.
Medicare participation 100%
Minimum contributions The minimum required contribution increases each year based on medical portion of CPI. The assumed increase is 4% per year.
Maximum contributions The City’s maximum contribution is assumed to remain constant in all future years.
Actuarial value of assets Eligible plan assets will be valued on a market value basis.
Discount Rate: The long-term expected rate of return of OPEB plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the OPEB plan’s target asset allocation as of June 30, 2023, are summarized in the following table:
Asset Class Target Allocation
Long-Term
Expected Real
Rate of Return
All Equities 38.0% 7.545%
All Fixed Income 62.0% 4.250%
Total 100.0%
Long-term expected rate of return is 6.2%.
The discount rate used to measure the total OPEB liability was 5.33%. The projection of cash flows used to determine the discount rate assumed that City contributions will be made at a rate of $349,500 per year, reduced by future employees’ normal costs. Based on those assumptions, the OPEB plan’s fiduciary net position was projected to be available to make all projected OPEB payments for current active and inactive employees and beneficiaries. Therefore, the long-term expected rate of return on OPEB plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability.
Changes in Net OPEB Liability: The changes in the net OPEB liability for the City are as follows:
Total OPEB
Liability
Plan Fiduciary
Net Position Net OPEB Liability
Balance on July 1, 2022 $ 16,372,383 $ 8,353,777 $ 8,018,606 Changes in the fiscal year:
Service cost 631,164 - 631,164
Interest on total OPEB liability 673,127 - 673,127
Differences between expected and actual experience (43,681) - (43,681) Changes of assumptions (2,052,895) - (2,052,895)
Employer contributions - 529,697 (529,697)
Net investment income/(loss) - 1,068,650 (1,068,650)
Benefit payments (735,316) (735,316) -
Net change in fiscal year (1,527,601) 863,031 (2,390,632) Balance on June 30, 2023 $ 14,844,782 $ 9,216,808 $ 5,627,974 Sensitivity of the Net OPEB Liability to Changes in the Discount Rate: The following presents the net OPEB liability of the City if it were calculated using a discount rate that is one percentage point lower and one percentage point higher than the current rate, for the measurement period ending on June 30, 2023:
Attachment 1
City Council Agenda December 19, 2023
Discount Rate
-1% (4.33%)
Current
Discount Rate
(5.33%)
Discount Rate
+1% (6.33%)
Net OPEB liability $ 7,325,535 $ 5,627,974 $ 4,350,880
Sensitivity of the Net OPEB Liability to Changes in Health Care Cost Trend Rates: The following represents the net OPEB liability of the City if it were calculated using healthcare cost trend rates that are one percentage point lower and one percentage point higher than the current rate, for measurement period ending on June 30, 2023:
1% Decrease
(3.0%)
Current
Healthcare
Cost Trend
Rates (4.00%)
1% Increase
(5.0%)
Net OPEB liability $ 4,923,513 $ 5,627,974 $ 6,314,969
OPEB Plan Fiduciary Net Position: Detailed information about the OPEB plan’s fiduciary net position is shown below:
Assets June 30, 2023
Investments:
Balanced funds $ 9,199,826
Stable value 16,982
Total assets 9,216,808
Net position restricted for OPEB $ 9,216,808
Additions
Employer contributions $ 529,697
Net investment income/(loss) 1,068,650
Total additions 1,598,347
Deletions
Benefit payments 735,316
Total deletions 735,316
Change in net position 863,031
Net position restricted for OPEB
Beginning of fiscal year 8,353,777
End of fiscal year $ 9,216,808
Recognition of Deferred Outflows and Deferred Inflows of Resources: Gains and losses related to changes in net OPEB liability and fiduciary net position are recognized in OPEB expense systematically over time. Amounts are first recognized in OPEB expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to OPEB and are to be recognized in future OPEB expense. The recognition period for all sources is five (5) years.
Deferred Outflows and Inflows of Resources Related to OPEB: On June 30, 2023, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Changes of assumptions $ - $ (3,234,228)
Difference between expected and actuarial experience in measurement of the total OPEB liability 14,619 -
Attachment 1
City Council Agenda December 19, 2023
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Difference between projected and actual earnings on
OPEB plan investments $ - $ (143,187)
Total $ 14,619 $ (3,377,415)
Amounts reported as deferred inflows and outflows of resources related to OPEB will be recognized as expense as follows:
Fiscal Year Ending
June 30
Deferred
Inflows and
Outflows of
Resources
2024 $ (297,662)
2025 (627,641)
2026 (229,680)
2027 (580,545)
2028 (469,127)
Thereafter (1,158,141)
Total $ (3,362,796)
NOTE 13 – OTHER EMPLOYEE BENEFITS
A. Deferred Compensation Plan
City employees may defer a portion of their compensation under one separate, optional City-sponsored deferred compensation plan, ICMA-RC, created in accordance with Internal Revenue Code Section 457. Under this plan, participants are not taxed on the deferred portion of their compensation until distributed to them; distributions may be made only at termination, retirement, death, or in an emergency as defined by the plan.
Effective January 1, 1998, the law governing deferred compensation plan assets now requires plan assets to be held for the exclusive benefit of plan participants and their beneficiaries. Since the assets held under this new plan are not the City’s property and are not subject to claims by general creditors of the City, they have been excluded from these financial statements.
In accordance with adopted wage and benefit agreements and memorandums of understanding, the City makes contributions to City-sponsored deferred compensation plan for all employees. For employees in the unrepresented confidential, professional and management group (MGMT), the City contributes $5,000 annually with no matching required from the employee. Executive managers, a sub-group of MGMT employees, are eligible to receive up to an additional $2,500 in contributions with a one-to-one matching requirement. For employees in the Service Employees International Union (SEIU), the City will match employee contributions to a maximum of $25 per pay period, or $650 per year. For the fiscal year ended June 30, 2023, the total City contribution on behalf of eligible employees was $289,602.
B. Section 125 Benefit Plan
The City has a Section 125-benefit plan established pursuant to Section 125 of the IRS code. Under this plan, eligible employees may elect to contribute pre-tax dollars into any combination of the following two benefit categories:
1) Unreimbursed Medical Spending Account
2) Dependent Day Care Spending Account
Under no circumstances may an employee direct more than $5,000 annually into the Dependent Day Care Spending Account and more than $3,050 into the Unreimbursed Medical Spending Account. All regular full-time employees employed on a regular and continuous basis, including certain contractual employees, are eligible to participate in this Attachment 1