Point Arena City Council
March 26, 2024

CITY OF POINT ARENA, CALIFORNIA

ANNUAL FINANCIAL REPORT

FOR THE FISCAL YEAR ENDED
JUNE 30, 2023
Prepared by:

Joseph Arch, CPA
Financial Consultant
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City of Point Arena, California
Basic Financial Statements
For the year ended June 30, 2023
Table of Contents
i
Page
Table of Contents ............................................................................................................................................... i Letter of Transmittal ....................................................................................................................................... iii List of Officials ................................................................................................................................................. vi Independent Auditors’ Report ......................................................................................................................... 1 Management’s Discussion and Analysis (Required Supplementary Information) ..................................... 3 Basic Financial Statements:

Government-Wide Financial Statements:

Statement of Net Position..................................................................................................................... 19 Statement of Activities ......................................................................................................................... 20 Fund Financial Statements:

Governmental Funds:

Balance Sheet ............................................................................................................................................ 24 Reconciliation of Governmental Funds Balance Sheet to the Statement of Net Position..................................................................................................................... 25 Reconciliation of Fund Basis Balance Sheet to Government-wide Statement of Net Position – Governmental Activities ......................................................................... 26 Statement of Revenues, Expenditures, and Changes
in Fund Balances – Governmental Funds ............................................................................................ 27 Reconciliation of Fund Basis Statements to Government-wide Statement of Activities ......................................................................................................................... 28 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities ........................................... 29 Statement of Revenues, Expenditures, and Changes in
Fund Balances - Budget to Actual – General Fund and
Major Special Revenue Funds ............................................................................................................. 30 Proprietary Funds:

Statement of Net Position – Enterprise Funds ........................................................................................... 34 Statement of Revenues, Expenses, and Changes in Fund Net Position – Enterprise Funds ............................................................................................................................. 35 Statement of Cash Flows – Enterprise Funds ............................................................................................ 36

INTRODUCTORY SECTION

FINANCIAL SECTION
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City of Point Arena, California
Basic Financial Statements
For the year ended June 30, 2023
Table of Contents, Continued
ii
Page
Basic Financial Statements, Continued:

Notes to Basic Financial Statements ....................................................................................................... 40 Draft
iii
March 8, 2024
To the Honorable Mayor and Members of the City Council and Citizens of the City of Point Arena:

We are pleased to submit the City of Point Arena Basic Financial Statements for the fiscal year ended June 30, 2023. It is the policy of the Council that a licensed certified public accountant conducts an annual audit at the end of each fiscal year and issues a complete an audit of financial statements to be submitted to them. The financial statements are presented in conformity with accounting principles generally accepted in the United States ( US GAAP) and audited in accordance with generally accepted auditing standards.

Responsibility for the accuracy of the data and the fairness of presentation, including all footnotes and disclosures, rests with the City. We believe the data presented in this report is accurate in all material respects and all statements and disclosures necessary for the reader to obtain a thorough understanding of the City’s financial activities have been included. Management of the City has established an 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 framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatements.

While traditionally addressed to the governing body of the City, this report is intended to provide relevant financial information to the citizens of the City of Point Arena, City staff, creditors, investors, and other concerned readers. We encourage all readers to contact the City Manager with any questions or comments concerning this report.

The City’s financial statements have been audited by Chavan and Associates LLP, a firm of certified public accountants. The goal of the independent audit is 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. Based upon the audit, the independent auditors concluded that there was reasonable basis for rendering an unmodified opinion, which states that the City’s financial statements for the fiscal year ended June 30, 2023, are fairly presented in conformity with US GAAP. The independent auditors’ report is presented as the first component of the financial section of this report.

GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of a 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.

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iv
Profile of the City of Point Arena
The City of Point Arena operates under a Council-Manager form of government and provides planning and zoning, public works, wastewater, pier and park services. This report includes all funds of the City of Point Arena, for which the City is financially accountable.

The City Council establishes annual budgets for the General Fund, Capital Project Fund, and all Special Revenue Funds. Budgetary control is legally maintained at the fund level for these funds. Department heads submit budget requests to the City Manager. The City Manager prepares an annual budget, with a mid-year review, with an estimate of revenues and prepares recommendations for the next year’s budget. The preliminary budget may or may not be amended by the City Council and is adopted by resolution by the City Council on or before June 30 in accordance with the municipal code.

The City of Point Arena was incorporated in 1908, as a general law City. The Point Arena City Council consists of five members, who are each elected to represent a district to four-year overlapping terms. Council members must be residents of the City. The positions of Mayor and Mayor Pro Tempore are chosen by the City Council. The Mayor conducts the Council meetings and represents the City on ceremonial occasions.

The City Council serves as the policy board for the municipality. As an elected Board of Directors, the City Council provides policy direction, establishes goals, and sets priorities for the City government. In addition to serving as the policy makers for the community, the City Council also is responsible for numerous land use decisions within its borders, including the General Plan. The City Council appoints the City Manager, City Attorney, and all members of advisory boards, committees and commissions.

Current Economic Conditions and Outlook
At the direction of Council, staff continues to conduct a systematic review of operations, resulting in some cases in the transition from an in-house operational model to contract service; in other instances a renegotiation of existing service contracts; and in other instances, retention of the contract operational model with a different service provider. These operational analyses and reforms are intended to promote long-term savings to the City and ensure a return to longterm stability. Current operational deficits due to inefficiencies and overspending have resulted in an extended strain on cash flow to the point of an inability to meet current needs. Due to inflationary trends, some revenues were constrained, but expenditures increased in an exponential fashion.

The City of Point Arena anticipates low revenue growth for the next two years. Even though a fund balance policy has been established, further erosion of cash and fund balances has reduced reserves to a nominal level.

Financial Information
During the past fiscal year, other than the fund balance policy, there were no changes to the City’s financial policies or items in which policies impacted the financial information or presentation. Information concerning significant accounting policies affecting the finances of the City is summarized in the Notes to the Financial Statements.

Awards and Acknowledgements
The preparation of this Annual Financial Report could not be accomplished without the efficient and dedicated service of the entire staff of the City, particularly Administrative Clerk, Jeana Gevas and the auditing firm of Chavan and Associates, LLP. I would like to express my Draft
v
appreciation to the other employees and contractors who assisted and contributed to its preparation.

I would also like to thank members of the City Council and the various departments for their cooperation and support in planning and conducting the financial operations of the City during the fiscal year.

Respectfully Submitted,
Joseph Arch, CPA
Interim Finance Director
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City of Point Arena, California
Basic Financial Statements
For the year ended June 30, 2023
List of Officials
vi
 Barbara Burkey, Mayor
 Anna Dobbins, Vice Mayor
 Jim Koogle, Councilmember
 Jeff Hansen, Councilmember
 Dan Doyle, Councilmember
 Peggy Ducey, Interim City Manager
 Marie Jones, City Planner, Contracted

CITY COUNCIL

CITY OFFICIALS
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INDEPENDENT AUDITOR’S REPORT
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City of Point Arena, California
Basic Financial Statements
For the year ended June 30, 2023
Management’s Discussion and Analysis
3 This section provides a narrative overview and analysis of the financial activities of the City of Point Arena (City) for the fiscal year ended June 30, 2023. It should be read in conjunction with the accompanying transmittal letter and basic financial statements.

FINANCIAL HIGHLIGHTS
♦ As of June 30, 2023, total assets of the City exceeded its liabilities by $5,679,796 (net position). The portion of net position that may be used to meet the government’s ongoing obligations (unrestricted net position) is $23,587. The remaining $5,656,209 is net investment in capital assets (page 6). ♦ As of June 30, 2023, the City’s Governmental Activities reported combined net position of $4,766,329, of that amount none of the balance is restricted.
♦ As of June 30, 2023, the City’s governmental funds reported combined ending fund balances of $306,422. Of that amount $582,194 is assigned for specific purposes as provided by Council direction and $12,109 is nonspendable, since this amount has already been spent in advance for prepaid items. The remaining fund deficit of $287,881 is unassigned and represents the General Fund balance of $119,221 and a deficit fund balance in the Capital Projects Fund of $407,102 (page 24). ♦ Capital assets, net of depreciation, increased to $5,656,209 (page 6) from $5,533,968 in fiscal year (FY) 2022.

Government Wide Highlights
The City of Point Arena’s operating revenues continue to contract as the economy falters from inflationary pressure. For the fiscal year ended June 30, 2023 the General Fund balance is approximately 35% of the General Fund revenues, which results in a reduction to fund balance after transfers. Overall fund balances are decreasing rapidly as capital improvements take over City priorities. The City’s business-type activities are also experiencing overall decreases as sewer and pier fee rates are not keeping pace with increased expenses and capital replacement requirements. The collection system capital project in the Wastewater Fund has drained all available cash resources with unrestricted net position in a deficit for both enterprise funds.

Overall the government-wide balance sheet shows further deterioration of asset amounts and limited working capital balances.

Fund Highlights
As of June 30, 2023, the primary governmental funds reported a combined net fund balance of $306,422 another reduction over the previous year of $209,352. This reduction is mainly due to the City’s overspending the capital improvement program and departmental overspending for unfunded operations. Expenditures continued to outpace revenues in the operating funds (General and Special Revenue) by approximately $214,000 a direct result of contractual service cost increases in the Revolving Loan Fund and contract planning cost increases in the General Fund.

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City of Point Arena, California
Basic Financial Statements
For the year ended June 30, 2023
Management’s Discussion and Analysis, Continued
4 OVERVIEW OF FINANCIAL STATEMENTS
This Annual Financial Report is in two major parts:
1) Introductory section, which includes the Transmittal Letter and general information; 2) Financial section, which includes the Management’s Discussion and Analysis (this part), the Basic Financial Statements, which include the Government-wide and the Fund Financial Statements along with the notes to these financial statements and Combining and Individual Fund Financial Statements and Schedules.

The Basic Financial Statements
The Basic Financial Statements are comprised of the Government-wide Financial Statements and the Fund Financial Statements; these two sets of financial statements provide two different views of the City’s financial activities and financial position.

The Government-wide Financial Statements
The Government-wide Financial Statements provide a broad overview of the City’s activities as a whole and comprise the Statement of Net Position and the Statement of Activities. The Statement of Net Position provides information about the financial position of the City as a whole, including all its capital assets and long-term liabilities on the accrual basis, similar to that used by corporations. The Statement of Activities provides information about all the City’s revenues and all its expenses, also using accrual basis, with the emphasis on measuring net revenues or expenses of each the City’s programs. The Statement of Activities explains in detail the change in Net Position for the year.

All of the City’s activities are grouped into Governmental Activities and Business-type activities, as explained below. All the amounts in the Statement of Net Position and the Statement of Activities are separated into Governmental Activities and Business-type Activities in order to provide a summary of these two activities of the City as a whole.
♦ Governmental activities – All of the City’s basic services are considered to be governmental activities, including general government, community development, public safety, public works, public improvements, planning and engineering, and general administration. These services are supported by general City revenues such as taxes and by specific program revenues such as user fees. ♦ Business-type activities – All the City’s enterprise activities are reported here. The City’s Business-type activity funds are the Wastewater and Pier Funds. Unlike governmental services, these services are completely supported by charges paid by users.

Fund Financial Statements
A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. For the fiscal year ended June 30, 2023, the City’s major funds are as follows:

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City of Point Arena, California
Basic Financial Statements
For the year ended June 30, 2023
Management’s Discussion and Analysis, Continued
5 Fund Financial Statements, continued
GOVERNMENTAL FUNDS:
♦ General Fund
♦ Revolving Loan Special Revenue Fund
♦ Gas Tax Special Revenue Fund
♦ Capital Projects Fund
PROPRIETARY FUNDS:
♦ Wastewater Enterprise
♦ Pier Enterprise
Governmental funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the Government-wide Financial Statements. However, unlike the Government-wide Financial Statements, Governmental Fund Financial Statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements.

Because the focus of the Governmental Fund Financial Statements is narrower than that of the Government-wide Financial Statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the Government-wide Financial Statement. By doing so, readers may better understand the long-term impact of the government’s near-term financial decisions. Both the governmental fund balance sheet and the Governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The Governmental Fund Financial Statements provide detailed information about each of the City’s most significant funds, called major funds. The concept of major funds, and the determination of which are major funds, was established by GASB Statement 34 and replaces the concept of combining like funds and presenting them as one total. Instead, each major fund is presented individually, with all non-major funds summarized and presented only in a single column. Subordinate schedules present the detail of these non-major funds. Major funds present the major activities of the City for the year, and may change from year to year as a result of changes in the pattern of the City’s activities.

Proprietary funds The City maintains Enterprise-type proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the Government-wide Financial Statements. The City uses enterprise funds to account for sewer activities. Proprietary funds provide the same type of information as the Government-wide Financial Statements, only in more detail.

Notes to the Basic Financial Statements
The notes provide additional information that is essential to a full understanding of the data provided in the Government-wide and Fund Financial Statements. The notes to the basic financial statements can be found on pages 40-56 of this report.

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City of Point Arena, California
Basic Financial Statements
For the year ended June 30, 2023
Management’s Discussion and Analysis, Continued
6 GOVERNMENT-WIDE FINANCIAL ANALYSIS
As noted earlier, net position may serve over time as a useful indicator of the City’s financial position. In the case of the City, assets exceeded liabilities by $5,679,796 at the close of the most recent fiscal year. Capital assets (e.g., land, buildings, machinery, equipment, and vehicles), less any related debt used to acquire those assets, represent 100% of the City’s net position. The City uses these capital assets to provide services to its citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

Govern- Business- Govern- Businessmental type mental type Activities Activities Total Activities Activities Total Amount Percent Current and other assets $ 434,598 $ 62,107 $ 496,705 $ 1,539,829 $ 143,803 $ 1,683,632 $ (1,186,927) -70.5% Internal balances 345,913 (345,913) 265,409 - (265,409) - 0.0% - Noncurrent assets 4,387,013 1,269,196 5,656,209 4,448,893 1,085,075 5,533,968 122,241 2.2% Total assets and deferred
outflows of resources 5,167,524 985,390 6,152,914 6,254,131 963,469 7,217,600 (1,064,686) -14.8% Current and other liabilities 401,195 71,923 473,118 1,198,882 38,700 1,237,582 (764,464) -61.8% Long-term liabilities - - - - - - 0.0% -
Total liabilities and deferred
inflows of resources 401,195 71,923 473,118 1,198,882 38,700 1,237,582 (764,464) -61.8% Net position:

Net investment in capital
assets 4,387,013 1,269,196 5,656,209 4,448,893 1,085,075 5,533,968 122,241 2.2% Unrestricted 379,316 (355,729) 23,587 606,356 (160,306) 446,050 (422,463) -94.7% Total net position $ 4,766,329 $ 913,467 $ 5,679,796 $ 5,055,249 $ 924,769 $ 5,980,018 $ (300,222) -5.0% 2023 2022
Summary of Net Position
Total change
The table is a summary of the City’s net position for this fiscal year compared to last fiscal year. The table shows the total capital assets for this year ($5,656,209), no restricted funds and the remaining amount, which is an unrestricted balance of $23,587, which shows a considerable decrease to governmental activities receivables and business-type activities current assets as well as an overall reduction to cash balances as a result of overspending.

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City of Point Arena, California
Basic Financial Statements
For the year ended June 30, 2023
Management’s Discussion and Analysis, Continued
7 GOVERNMENT-WIDE FINANCIAL ANALYSIS, Continued
Revenues
The City’s total revenues for governmental and business-type activities were $2,173,189 (see table on Page 8) for the fiscal year ended June 30, 2023. Approximately 85% of the City’s revenues are generated from three major sources, Charges for Services, Operating Grants and Contributions, and Capital Grants and Contributions. This fiscal years’ total revenue is $1,979,374 less than fiscal year 2022 resulting in an overall 5% decrease in net position.

The following discusses variances in these and other key revenues from the prior fiscal year:

1. Charges for Services – Charges for services increased slightly by 7% or $21,365 from last year.

Pier and Wastewater fees contributed to most of this increase. Even though revenues for this category increased slightly, operating deficits continued to occur in the enterprise funds.

2. Grants and Contributions – Operating – The Grants and Contributions (Operating) category for FY 2023 increased 27% from last fiscal year and included the sub-categories of the State Citizens’ Option for Public Safety (COPS) program grant which accounted for approximately $30,000 of the increase with the rest covered by a Housing and Community Development Program sponsored Small Business Employee Retention Grant Program.

3. Grants and Contributions – Capital – The Grants and Contributions (Capital) category for 2023 was the highest revenue decrease from 2022 of 73% or $2,144,081. This marked the cessation of reimbursable, capital projects as City resources dwindled to their lowest levels.

Expenses
Governmental and business-type activities expenses of the City totaled $2,473,411 for the year a 3% increase from last fiscal year, which mimics inflation for the year. Governmental activities expenses totaled $1,634,065 or 66% of total expenses. Streets and Public Works Services costs, which include Planning and Community Development costs represented 51% ($834,772) of total governmental activities expenses, which was an 61% increase from FY2022.

Community Development expenses included grants from the Housing and Community Development Program sponsored Small Business Employee Retention Grant Program in the amount of $86,500 with Planning and Engineering costs accounting for $171,131; the highest unreimbursed costs for the City. Even though, Planning fees, which should be full cost recovery were only $17,800 for the year.

Public Safety expense increases were commensurate with revenue collected and the County Sheriff contract increase.

This also marked an increase in interest charges as a result of Line of credit balances remaining unchanged throughout the year, further signifying the City’s cash flow difficulties.

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City of Point Arena, California
Basic Financial Statements
For the year ended June 30, 2023
Management’s Discussion and Analysis, Continued
8 GOVERNMENT-WIDE FINANCIAL ANALYSIS, Continued
The change in net position for the fiscal years ended June 30, 2023, and 2022, follows (pages 20 and 21):

Govern- Business- Govern- Businessmental type mental type Activities Activities Total Activities Activities Total Revenues:

Program revenues:

Charges for services $ 7,004 $ 342,047 $ 349,051 $ 11,473 $ 316,213 $ 327,686 $ 21,365 7% Grants and contributions: -
Operating 524,510 - 524,510 414,192 - 414,192 110,318 27% Capital 299,613 485,966 785,579 2,129,087 800,573 2,929,660 (2,144,081) -73% General revenues:

Property taxes
and assessments 61,499 - 61,499 85,260 - 85,260 (23,761) -28% Motor vehicle in-lieu tax 24,331 - 24,331 - - - 24,331
Sales and use tax 163,967 - 163,967 71,700 - 71,700 92,267 129% Transient occupancy taxes 157,635 - 157,635 203,211 - 203,211 (45,576) -22% VLF Swap 23,859 - 23,859 44,819 - 44,819 (20,960) -47%
TOT Measure AC 31,527 - 31,527 30,043 - 30,043 1,484 5% Other taxes 2,106 - 2,106 509 - 509 1,597 314%
Franchises 6,425 - 6,425 11,088 - 11,088 (4,663) -42%
Licenses,permits & fees 23,819 23,819 22,908 22,908 911 4% Use of money and property 18,850 31 18,881 5,100 67 5,167 13,714 265% Other general revenues - - - 6,320 - 6,320 (6,320) -100% Total revenues 1,345,145 828,044 2,173,189 3,035,710 1,116,853 4,152,563 (1,979,374) -48% Expenses:

Governmental activities:

General Government 449,657 - 449,657 395,002 - 395,002 54,655 14% Public Safety 180,994 - 180,994 113,602 - 113,602 67,392 59% Streets and Public Works 329,266 - 329,266 989,516 - 989,516 (660,250) -67% Community Development 505,506 - 505,506 221,698 - 221,698 283,808 128% Culture and Recreation 132,072 - 132,072 87,227 - 87,227 44,845 51% Interest and fiscal charges 36,570 1,318 37,888 6,570 1,621 8,191 29,697 363% Business-type activities:

Wastewater - 492,335 492,335 - 391,410 391,410 100,925 26% Pier - 345,693 345,693 - 188,769 188,769 156,924 83%
Total expenses 1,634,065 839,346 2,473,411 1,813,615 581,800 2,395,415 77,996 3% Excess (Deficiency) of revenues over
expenditures before transfers (288,920) (11,302) (300,222) 1,222,095 535,053 1,757,148 (2,057,370) -117% Transfers - - - - - - - 0%
Change in net position (288,920) (11,302) (300,222) 1,222,095 535,053 1,757,148 (2,057,370) -117% Net position: 0%
Beginning of year 5,055,249 924,769 5,980,018 3,833,154 389,716 4,222,870 1,757,148 42% End of year $ 4,766,329 $ 913,467 $ 5,679,796 $ 5,055,249 $ 924,769 $ 5,980,018 $ (300,222) -5% 2023 2022
Variance
Changes in Net Position
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City of Point Arena, California
Basic Financial Statements
For the year ended June 30, 2023
Management’s Discussion and Analysis, Continued
9 GOVERNMENT-WIDE FINANCIAL ANALYSIS, Continued
Governmental Activities
The cost of all governmental activities this year was $1,634,065. However, as shown in the Statement of Activities on page 20 and 21, the amount that taxpayers ultimately financed for governmental activities was $514,018. Those who directly benefited from City programs paid $7,004. Other governments and organizations subsidized certain programs with grants and contributions in the amount of $524,510 for operations and $299,613 for capital. The City paid the remaining "public benefit" portion of government activities with $61,499 in property taxes, $433,669 in other general revenues, and $18,850 in use of money and property.

Referring to the Changes in Net Position statement above, total resources available during the year to finance governmental operations were $1,345,145. This consisted of $831,127 in program revenues and $514,018 in general revenues. Total governmental activities operating expenses during the year were $1,634,065 thus net position at July 1, 2022, of $5,055,249 decreased by $288,920 to $4,766,329 primarily because of an increase in operating expenses with commensurate reductions in revenues both general and program.

The following table shows the cost of each of the City’s major programs and the net cost of the programs. Net cost is the total cost less fees and other direct revenue generated by the activities. The net cost reflects the financial burden that was placed on the City’s taxpayers by each of the programs. The total cost of services and the net cost of services for the fiscal years ended June 30, 2023, and 2022, are as follows:
2023 2022 2023 2022 2023 2022
Governmental activities:

General Government $ 67,466 $ 61,354 $ 449,657 $ 395,002 $ (382,191) $ (333,648) Public Safety 234,958 161,285 180,994 113,602 53,964 47,683 Streets and Public Works 336,774 2,220,586 329,266 989,516 7,508 1,231,070 Community Development 138,794 71,560 505,506 221,698 (366,712) (150,138) Culture and Recreation 53,135 39,967 132,072 87,227 (78,937) (47,260) Interest and fiscal charges - - 36,570 6,570 (36,570) (6,570) Total governmental activities $ 831,127 $ 2,554,752 $ 1,634,065 $ 1,813,615 $ (802,938) $ 741,137 Operating Revenue Operating Expenses
Net (Expense)
and Changes
in Net Position
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City of Point Arena, California
Basic Financial Statements
For the year ended June 30, 2023
Management’s Discussion and Analysis, Continued
10 GOVERNMENT-WIDE FINANCIAL ANALYSIS, Continued
Governmental Activities, Continued
Revenues by source for the fiscal years ended June 30, 2023, and 2022, are as follows:

Charges for services,
$7,004 , 0.5%
Operating grants
& contributions,
524,510, 39.0%
Capital grants &
contributions,
299,613, 22.3%
Property taxes,
61,499, 4.6%
Motor Vehicle In-lieu
Tax, 24,331, 1.8%
Sales and use tax,
163,967, 12.2%
Transient occupancy
taxes, 157,635, 11.7%
VLF Swap, 23,859,

1.8%
TOT Measure AC,
31,527 , 2.3% Other taxes, 2,106,

0.2%
Franchises, 6,425,

0.5%
Licenses,permits &
fees, $23,819 , 1.8%
Use of money and
property , $18,850 ,

1.4%
Governmental Activities
Revenues by Source
FY2023
Charges for services,
$11,473 , 0.4%
Operating grants
& contributions,
414,192, 13.6%
Capital grants &
contributions,
2,129,087, 70.1%
Property taxes,
85,260, 2.8%
Sales and use tax,
71,700, 2.4%
Transient occupancy
taxes, 203,211, 6.7%
VLF Swap, 44,819,

1.5%
TOT Measure AC,
30,043, 1.0%
Other taxes,
509, 0.0%
Franchises, 11,088,

0.4%
Licenses,permits &
fees, 22,908, 0.8%
Use of money and
property , $5,100 , 0.2%
Other general
revenues, $6,320 ,

0.2%
Governmental Activities
Revenues by Source
FY2022
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City of Point Arena, California
Basic Financial Statements
For the year ended June 30, 2023
Management’s Discussion and Analysis, Continued
11 GOVERNMENT-WIDE FINANCIAL ANALYSIS, Continued
Business-type Activities
Business-type activities incurred $839,346 in expenses during the fiscal year. The City has two business-type funds, which are the Wastewater and Pier Enterprise Funds. The expenses and program revenues for the businesstype activities for the fiscal year ended June 30, 2023, and 2022, are as follows:
$-
$100,000
$200,000
$300,000
$400,000
$500,000
Wastewater Pier
Business-type Activities
Program Revenues and Expenses
FY2023
Program revenues Expenses
($100,000)
$100,000
$300,000
$500,000
Wastewater Pier
Business-type Activities
Program Revenues and Expenses
FY 2022
Program revenues Expenses
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City of Point Arena, California
Basic Financial Statements
For the year ended June 30, 2023
Management’s Discussion and Analysis, Continued
12 GOVERNMENT-WIDE FINANCIAL ANALYSIS, Continued
Business-type Activities, Continued
Business-type activities total revenue for FY 2023 is $828,044. Expenses for this year exceeded revenues by $11,302. Revenues are received from three sources, Charges for Services $342,047, capital grants of $485,966 and Investment Earnings $31. 84% of the funding received for Pier operations is derived through capital grants and contributions; the balance is service charges for boat storage, hoist rental and launching fees. In FY 2022 revenues exceeded expenses by $535,053, primarily a result of capital contributions to the Pier Fund.

As reported in the Statement of Activities, the net position of the City’s Business-type Activities, as of June 30 2023, decreased $11,302. The following table is a re-statement of the Statement of Business-type Activities outlining the components of this decrease.

Business-type Activities
Two-year Comparison of Change in Net Position
Since the basis of accounting is the same for business-type activities at the government-wide level and enterprise fund level statements, the enterprise funds reported a change in net position: a reduction in the Wastewater Fund $29,782, which was due to $163,926 in contract service costs for the Wastewater Collection System project to redesign the Wastewater plant and mitigate future issues with aging infrastructure. From an operating perspective, Wastewater operations continue to operate in a deficit position reflecting the insufficient rates for the costs incurred.
6/30/2023 6/30/2022 Change
Revenues:

Charges for Services $ 342,047 $ 316,213 $ 25,834
Capital grants and contributions 485,966 800,573 (314,607) Use of money and property (interest) 31 67 (36)
Total $ 828,044 $ 1,116,853 $ (288,809)
Expenses:

Wastewater $ 493,653 $ 393,031 $ 100,622
Pier 345,693 188,769 156,924
Total $ 839,346 $ 581,800 $ 257,546
Excess (Deficiency) of revenues over
expenditures before transfers $ (11,302) $ 535,053 $ (546,355) Transfers - - -
Change in Net Position $ (11,302) $ 535,053 $ (546,355) Draft
City of Point Arena, California
Basic Financial Statements
For the year ended June 30, 2023
Management’s Discussion and Analysis, Continued
13 GOVERNMENT-WIDE FINANCIAL ANALYSIS, Continued
Financial Analysis of the Government’s Funds
The City of Point Arena uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The fund financial statements focus on individual parts of the City government, reporting the City’s operations in more detail than the government-wide financial statements.

Governmental funds. The City’s governmental funds provide information on near-term inflows, outflows, and balances of spending resources. At the fiscal year ended June 30, 2023, the City’s governmental funds reported a combined fund balance of $306,422 (page 24). This is a decrease of $209,352 or 41% from last year. The decrease results primarily from General Fund expenditures exceeding revenues by $196,488 with little beginning fund balance to draw from. Specifically, the City continues to overspend in relationship to revenues collected, which further deteriorates the City’s cash position and threatens its sustainability.

Overall, there is a decrease in assets of $1,286,233 or 57% from last year and a decrease in liabilities of $1,059,193, mostly due to the line of credit that was added in the prior year and was reduced by $444,200 and accounts payable of $353,649 from reduced capital project balances.
♦ The decrease of General Fund Cash and Investments of $19,514 or 27% from FY 2022 is mostly due to expenditures being greater than revenues for the City for the year and borrowing from other funds.

This fiscal year, the overall net expenditures in the General Fund is $223,819 before transfers (page 27) and $3,217 net revenue in FY 2022. The changes in revenues and expenditures were approximately $400,000 higher than last fiscal year, with each department overspending their budget because revenues were increased.

Unfortunately, the overspending was not capped and the expenditures exceeded the amounts of the revenue increases resulting in a continued negative trend.
♦ There was a decrease in the Revolving Loan Fund balance of $17,124, due to loan payments in excess of revenue collections and loan repayments along with excessive contract service costs that were unfunded. ♦ The Gas Tax Fund is dedicated to transportation related projects according to the Streets and Highway Code.

Also, since the Capital Projects Fund was initiated the prior year, the Gas Tax Fund has become a zero based fund since revenues received do not exceed street expenditures. All expenditures are accounted for in the General Fund with the revenue transferred to subsidize Street expenditures as costs continue to exceed the revenues collected throughout the year.
♦ The Capital Projects Fund was a new major fund in the year ended June 30,2022, created because of the need to track capital projects funded by grants and capital contributions and financing. This fund reflects all the expenses for capital projects approved in the budget or appropriated by budgetary adjustment. In the next fiscal year, the City will be preparing a comprehensive capital improvement plan with funding sources and potential financing of major capital improvements. The purpose of the Capital Projects Fund on a year to year basis is to be reduced close to zero at year end, if possible. In the second year of operation, fund balances continued to be in a deficit position because of construction activity exceeding reimbursable activities funded by a short-term line of credit. See page 7 of this report for the specific capital projects from this fiscal year.

Draft
City of Point Arena, California
Basic Financial Statements
For the year ended June 30, 2023
Management’s Discussion and Analysis, Continued
14 GOVERNMENT-WIDE FINANCIAL ANALYSIS, Continued
Capital Assets
The capital assets of the City are those assets which are used in the performance of the City’s functions. At June 30, 2023, net capital assets of the governmental activities totaled $4,387,013 and for business-type activities, $1,269,196. Depreciation on capital assets is recognized in the government-wide financial statements. The following table shows the City’s Capital Assets net of depreciation:
2023 2022 2023 2022
Land and CIP $ 348,995 $ 1,953,531 $ 298,190 $ 340,792
Buildings and improvements 98,491 105,048 59,870 62,425 Machinery and equipment 61,711 14,012 106,358 30,817
Infrastructure & Pier 3,877,816 2,376,302 804,778 651,041 Total $ 4,387,013 $ 4,448,893 $ 1,269,196 $ 1,085,075
Governmental Activities Business-type Activities
Land and Building values are listed as cost when purchased or renovated by the City, depreciation is taken on buildings and improvements, machinery and equipment and infrastructure and pier. Additional information on the City’s capital assets can be found in Note 5 on page 50 of this report.

Additional information on the City’s capital assets can be found in Note 5 on page 51 of this report.

Long Term Liabilities
The City had no long-term debt at June 30, 2023 or 2022. The City anticipates converting the line of credit through Redwood Credit Union to a five year note payable in FY 2023-24 or 2024-25 if cash flows permit. The remaining balance of the line of credit, which is approximately $310,000 will be reclassified as long-term at that time. The City had no additional construction commitments at June 30, 2023 and is attempting to address the cash flow difficulties with reductions to staff, both hours and positions and restructuring the line of credit so an operating line of credit could be used for short-term cash flow needs, coupled with an improvement project for a City-owned property to dedicate rental income derived to the repayment of the debt. This could help stabilize cash flow as operating expenditures are controlled through constant monitoring.

Draft
City of Point Arena, California
Basic Financial Statements
For the year ended June 30, 2023
Management’s Discussion and Analysis, Continued
15 NEXT YEAR’S BUDGETED APPROPRIATIONS
The adopted budget for all City funds (excluding Pier, Wastewater and Capital) for the new fiscal year of 2023- 24 is $750,200 and is summarized as follows:

FY2023-24 FY2022-23 Amount Percentage
(Budget) (Budget) Change Change
General fund:

General Government $ 390,000 $ 363,000 $ 27,000 7.4%
Public Safety 120,000 120,000 - 0.0%
Streets and Public Works 102,000 27,000 75,000 277.8%
Community Development 90,000 50,000 40,000 80.0%
Culture and Recreation 80,000 67,200 12,800 19.0%
Interest and fiscal charges - - - 0.0%
Total general fund: 782,000 627,200 154,800 24.7%
Special revenue funds:

Revolving Loan 20,000 13,000 7,000 53.8%
Gas Tax - 110,000 (110,000) (100.0)%
Total special revenue funds: 20,000 123,000 (103,000) -83.7% Total Budget: $ 802,000 $ 750,200 $ 51,800

1. General Fund – Increases in the General Fund budget include reorganizing Street expenditures from Gas Tax to the General Fund and establishing reasonable offsets in estimated revenues to provide funding.

2. Revolving Loan – The revolving loan programs are projected to decrease due to the increasing interest rate environment and reduction to programs.

3. Gas Tax – The gas tax funding remained relatively the same with expenditures transferred to the General Fund because the revenue source from gas taxes remained flat and relatively nominal.

Requests for Information
This Basic Financial Statements is intended to provide citizens, taxpayers, investors, and creditors with a general overview of the City’s finances. If you have any questions about this report, need additional financial information, or would like to obtain component unit financial statements, contact the City of Point Arena Administrative Offices 451 School Rd Point Arena CA, or visit the City’s web page at www.pointarena.org.

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BASIC FINANCIAL STATEMENTS
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18 Draft
City of Point Arena, California
Statement of Net Position
June 30, 2023
Governmental Business-type
Activities Activities Total
ASSETS
Current assets:

Cash and investments $ 99,948 $ - $ 99,948
Receivables:

Accounts receivable - 44,263 44,263
Intergovernmental receivable 91,018 17,844 108,862
Taxes receivable 158,629 - 158,629
Loans receivable - - -
Notes receivable 72,894 - 72,894
Prepaid items and deposits 12,109 - 12,109
Internal balances 345,913 (345,913) -
Total current assets 780,511 (283,806) 496,705
Noncurrent assets:

Capital assets:

Nondepreciable 348,995 298,190 647,185
Depreciable 4,038,018 971,006 5,009,024
Total noncurrent assets 4,387,013 1,269,196 5,656,209
Total assets $ 5,167,524 $ 985,390 $ 6,152,914

LIABILITIES
Current liabilities:

Accounts payable $ 78,511 $ 63,066 $ 141,577
Accrued payroll and benefits 12,144 8,557 20,701
Line of credit 310,540 - 310,540
Unearned revenue - 300 300
Total current liabilities 401,195 71,923 473,118
Total liabilities 401,195 71,923 473,118

NET POSITION
Net investment in capital assets 4,387,013 1,269,196 5,656,209 Unrestricted (deficit) 379,316 (355,729) 23,587
Total net position 4,766,329 913,467 5,679,796
Total liabilities, deferred inflows of resources and
net position $ 5,167,524 $ 985,390 $ 6,152,914
The accompanying notes are an integral part of these basic financial statements. 19 Draft
City of Point Arena, California
Statement of Activities
For the year ended June 30, 2023
Operating Capital
Charges for Grants and Grants and
Functions/Programs Expenses Services Contributions Contributions Primary government:

Governmental activities:

General Government $ 449,657 $ 3,555 $ 63,911 $ -
Public Safety 180,994 - 234,958 -
Streets and Public Works 329,266 - 37,161 299,613
Community Development 505,506 3,449 135,345 -
Culture and Recreation 132,072 - 53,135 -
Interest and fiscal charges 36,570 - -
Total governmental activities 1,634,065 7,004 524,510 299,613 Business-type activities:

Wastewater 492,335 283,138 - 180,702
Pier 345,693 58,909 - 305,264
Total business-type activities 838,028 342,047 - 485,966 Total primary government $ 2,472,093 $ 349,051 $ 524,510 $ 785,579 General revenues: 84% 364,173
Taxes:

Property taxes, levied for general purposes
Motor Vehicle In-lieu Tax
Sales and use tax
Transient Occupancy Taxes
VLF Swap
TOT Measure AC
Other taxes
Franchises
Licenses, Permits & Fees
Use of money and property
Other general revenues
Total general revenues
Transfers
Total general revenues and transfers
Change in net position
Net position:

Beginning of year
Net position - Ending
Program Revenues
The accompanying notes are an integral part of these basic financial statements. 20 Draft
Governmental Business-Type
Activities Activities Totals
$ (382,191) $ - $ (382,191)
53,964 - 53,964
7,508 - 7,508
(366,712) - (366,712)
(78,937) - (78,937)
(36,570) (1,318) (37,888)
(802,938) (1,318) (804,256)
- (28,495) (28,495)
- 18,480 18,480
- (10,015) (10,015)
(802,938) (11,333) (814,271)
61,499 - 61,499
24,331 - 24,331
163,967 - 163,967
157,635 - 157,635
23,859 - 23,859
31,527 - 31,527
2,106 - 2,106
6,425 - 6,425
23,819 - 23,819
18,850 31 18,881
- - -
514,018 31 514,049
- - -
514,018 31 514,049
(288,920) (11,302) (300,222)
5,055,249 924,769 5,980,018
$ 4,766,329 $ 913,467 $ 5,679,796
Net (Expense) Revenue and
Changes in Net Position
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Fund
Governmental Funds:

General Fund
Revolving Loan Special
Gas Tax Special Revenue
Capital Projects Accounts for multi-year Capital Improvement projects including shared projects for wastewater and pier improvements.

Accounts for revenues and expenditures related to the City's CDBG and Business Loan programs.

FUND FINANCIAL STATEMENTS
Description

MAJOR FUNDS
The Fund Financial Statements present only individual major funds, while non-major funds are combined in a single column. Major funds are defined as having significant activities or balances in the current year.

Primary operating fund of the City; accounts for all activities except those legally or administratively required to be accounted for in other funds.

The City currently has no non-major funds.

Accounts for the City's Gas Tax revenue utilized for Street programs. 23 Draft
City of Point Arena, California
Balance Sheet
Governmental Funds
June 30, 2023
Capital Projects
Fund
General Revolving
Fund Loan Gas Tax Totals
ASSETS
Cash and investments $ 51,581 $ 48,367 $ - $ - $ 99,948 Receivables:

Intergovernmental - 10,680 - 80,338 91,018
Taxes receivable 158,629 - - - 158,629
Notes receivable - 72,894 - - 72,894
Due from other funds 173,410 - - - 173,410
Prepaid items and deposits 12,109 - - 12,109
Advances to other funds - 345,913 - - 345,913
Total assets $ 395,729 $ 477,854 $ - $ 80,338 $ 953,921

LIABILITIES, DEFERRED INFLOWS AND FUND BALANCES
Liabilities:

Accounts payable $ 72,357 $ 2,664 $ - $ 3,490 $ 78,511
Accrued payroll and benefits 12,144 - - - 12,144
Line of credit - - - 310,540 310,540
Due to other funds - - - 173,410 173,410
Deposits payable - - - - -
Total liabilities 84,501 2,664 - 487,440 574,605
Deferred inflows:

Unavailable revenues - 72,894 - - 72,894
Fund balances:

Nonspendable
Prepaid items and deposits 12,109 - - 12,109
Assigned 179,898 402,296 - - 582,194
Unassigned (deficit) 119,221 - - (407,102) (287,881)
Total fund balances 311,228 402,296 - (407,102) 306,422 Total liabilities, deferred inflows and fund balances $ 395,729 $ 477,854 $ - $ 80,338 $ 953,921 Major Funds
Special Revenue Funds
Capital Projects
The accompanying notes are an integral part of these basic financial statements. 24 Draft
City of Point Arena, California
Reconciliation of the Governmental Funds Balance Sheet
to the Statement of Net Position
June 30, 2023
Total fund balances - total governmental funds $ 306,422 72,894
4,387,013
Net position of governmental activities $ 4,766,329
The accompanying notes are an integral part of these basic financial statements.

Amounts reported for governmental activities in the Statement of Net Position are different because:

Long-term receivables are not available to pay current period expenditures and, therefore, are deferred in the governmental funds.

Capital assets used in governmental activities are not current financial resources and, therefore, are not reported in the governmental funds balance sheet.
25 Draft
City of Point Arena, California
Reconciliation of Fund Basis Balance Sheet to Government-wide Statement of Net Position Governmental Activities
June 30, 2023
Governmental
Funds Changes Statement of
Balance Sheet Reclassifications in GAAP Net Position
ASSETS
Current assets:

Cash and investments $ 99,948 $ - $ - $ 99,948
Receivables:

Intergovernmental receivable 91,018 - - 91,018
Taxes receivable 158,629 - - 158,629
Notes receivable 72,894 - - 72,894
Internal balances - 345,913 - 345,913
Due from other funds 173,410 (173,410) - -
Prepaid items and deposits 12,109 - - 12,109
Total current assets 608,008 172,503 - 780,511
Noncurrent assets:

Advances to other funds 345,913 (345,913) - -
Capital assets, net - - 4,387,013 4,387,013
Total noncurrent assets 345,913 (345,913) 4,387,013 4,387,013 Total assets $ 953,921 $ (173,410) $ 4,387,013 $ 5,167,524

LIABILITIES
Current liabilities:

Accounts payable and accrued liabilities $ 78,511 $ - $ - $ 78,511 Accrued payroll and benefits 12,144 - - 12,144
Line of credit 310,540 - 310,540
Due to other funds 173,410 (173,410) -
Deposits payable - - -
Total current liabilities 574,605 (173,410) - 401,195
Total liabilities 574,605 (173,410) - 401,195

DEFERRED INFLOWS OF RESOURCES
Unavailable revenues 72,894 - (72,894) -
Total deferred outflows of resources 72,894 - (72,894) -

FUND BALANCES/NET POSITION
Fund balances:

Nonspendable
Prepaid items and deposits 12,109 (12,109) -
Assigned reported in:

General Fund 179,898 (179,898) - -
Special revenue funds 402,296 (402,296) - -
Unassigned (deficit), reported in:

General Fund 119,221 (119,221) - -
Capital projects fund (407,102) 407,102 -
Net position:

Net investment in capital assets - - 4,387,013 4,387,013 Unrestricted - 306,422 72,894 379,316
Total fund balances/ net position 306,422 - 4,459,907 4,766,329 Total liabilities, deferred inflows and net position $ 953,921 $ (173,410) $ 4,387,013 $ 5,167,524 The accompanying notes are an integral part of these basic financial statements. 26 Draft
City of Point Arena, California
Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds
For the year ended June 30, 2022
Capital
Projects Fund
General Revolving Capital
Fund Loan Gas Tax Projects Totals
REVENUES:

Cannabis Excise Tax $ 10,206 $ - $ - $ - $ 10,206
Property Taxes 61,499 - - - 61,499
Motor Vehicle In-lieu Tax 24,331 - - - 24,331
Gas Taxes - - 27,331 - 27,331
Sales Taxes 163,967 - - - 163,967
Transient Occupancy Taxes 157,635 - - - 157,635
VLF Swap 23,859 - - - 23,859
TOT Measure AC 31,527 - - - 31,527
Other Taxes 2,106 - - - 2,106
Intergovernmental 314,874 136,652 - 299,613 751,139
Licenses, Permits & Fees 23,819 - - - 23,819
Franchise Fees 6,425 - - - 6,425
Use of Money and Property:

Use of Property 3,555 3,449 - 7,004
Interest Income 1,162 17,688 - - 18,850
Other revenues 53,135 - - - 53,135
Total revenues 878,100 157,789 27,331 299,613 1,362,833 EXPENDITURES:

Current:

General Government 445,407 4,250 - - 449,657
Public Safety 180,994 - - - 180,994
Streets and Public Works 110,922 - - 27,983 138,905
Community Development 176,177 170,663 - 158,666 505,506 Culture and Recreation 132,072 - - - 132,072
Capital outlay 56,347 - - 72,134 128,481
Debt service:

Interest and fiscal charges - - - 36,570 36,570
Total expenditures 1,101,919 174,913 - 295,353 1,572,185

REVENUES OVER (UNDER)
EXPENDITURES (223,819) (17,124) 27,331 4,260 (209,352)
OTHER FINANCING SOURCES (USES):

Transfers in 27,331 - - - 27,331
Transfers out - - (27,331) - (27,331)
Total other financing sources (uses) 27,331 - (27,331) - - Net change in fund balances (196,488) (17,124) - 4,260 (209,352) FUND BALANCES:

Beginning of year 507,716 419,420 - (411,362) 515,774
End of year $ 311,228 $ 402,296 $ - $ (407,102) $ 306,422 Special Revenue Funds
Major Funds
The accompanying notes are an integral part of these basic financial statements. 27 Draft
City of Point Arena, California
Reconciliation of Fund Basis Statements to Government-wide Statement of Activities For the year ended June 30, 2022
Capital
Asset
(Additions), GovernmentFund Based Retirements & wide
Functions/Programs Totals Depreciation Adjustments Totals Governmental activities:

General Government $ 449,657 $ - $ - $ 449,657
Public Safety 180,994 - 180,994
Streets and Public Works 138,905 190,361 - 329,266
Community Development 505,506 - 505,506
Culture and Recreation 132,072 - 132,072
Capital outlay 128,481 - (128,481) -
Debt service/Interest 36,570 - - 36,570
Total governmental activities $ 1,572,185 $ 190,361 $ (128,481) $ 1,634,065 The accompanying notes are an integral part of these basic financial statements. 28 Draft
City of Point Arena, California
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the year ended June 30, 2022
Net change in fund balances - total governmental funds $ (209,352) Capital asset purchases capitalized $ 128,481
Depreciation expense (190,361) (61,880)
Some receivables are deferred in the Governmental Funds because the amounts do not represent current financial resources that are recognized under the accrual basis in the Statement of Activities - Unavailable revenue (17,688)
Change in net position of governmental activities $ (288,920) Amounts reported for governmental activities in the Statement of Activities are different because:

Governmental funds report capital outlays as expenditures while governmental activities report depreciation expense to allocate those expenditures over the life of the assets:

The accompanying notes are an integral part of these basic financial statements. 29 Draft
City of Point Arena, California
Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget to Actual - General Fund and Major Special Revenue Funds For the year ended June 30, 2022
Variance w/Final
Positive
Original Final Actual (Negative)
REVENUES:

Cannabis Excise Tax $ 25,000 $ 25,000 $ 10,206 $ (14,794) Property Taxes 57,000 60,000 61,499 1,499
Motor Vehicle In-lieu Tax 45,000 25,000 24,331 (669)
Gas Taxes - - - -
Sales Taxes 50,000 50,000 163,967 113,967
Transient Occupancy Taxes 110,000 175,000 157,635 (17,365) VLF Swap - - 23,859 23,859
TOT Measure AC 25,000 25,000 31,527 6,527
Other Taxes - - 2,106 2,106
Intergovernmental 210,000 350,000 314,874 (35,126)
Licenses, Permits & Fees 21,830 21,830 23,819 1,989
Franchise Fees 11,000 11,000 6,425 (4,575)
Use of Money and Property:

Use of Property - 6,000 3,555 (2,445)
Interest Income 3,000 3,000 1,162 (1,838)
Other revenues 5,000 5,000 53,135 48,135
Total revenues 562,830 756,830 878,100 121,270
EXPENDITURES:

Current:

General Government 363,000 363,000 445,407 (82,407)
Public Safety 120,000 120,000 180,994 (60,994)
Streets and Public Works 137,000 137,000 110,922 26,078 Community Development 50,000 50,000 176,177 (126,177)
Culture and Recreation 67,200 67,200 132,072 (64,872)
Debt service:

Interest and fiscal charges - - - -
Total expenditures 737,200 737,200 1,101,919 (364,719)

REVENUES OVER (UNDER)
EXPENDITURES (174,370) 19,630 (223,819) (243,449)
OTHER FINANCING SOURCES (USES):

Transfers in 45,000 45,000 27,331 (17,669)
Transfers out - - - -
Total other financing sources (uses) 45,000 45,000 27,331 (17,669) Net change in fund balances (129,370) 64,630 (196,488) (261,118) FUND BALANCES:

Beginning of year 507,716 507,716 507,716 -
End of year $ 378,346 $ 572,346 $ 311,228 $ (261,118)
General Fund
Budgeted Amounts
The accompanying notes are an integral part of these basic financial statements. 30 Draft
Variance w/Final Variance w/Final
Positive Positive
Original Final Actual (Negative) Original Final Actual (Negative) $ - $ - $ - $ - $ - # $ - $ -
- - - - - - - -
- - - - - - - -
- - - - 45,000 45,000 27,331 (17,669)
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - 136,652 136,652 - - - -
- - - - - - - -
- - - - - - - -
11,000 11,000 3,449 (7,551) - - -
5,000 5,000 17,688 12,688 - - -
- - - - - - - -
16,000 16,000 157,789 141,789 45,000 45,000 27,331 (17,669) - - 4,250 (4,250) - - - -
- - - - - - - -
- - - - - - - -
13,000 13,000 170,663 (157,663) - - - -
- - - - - - - -
- - - - - - - -
13,000 13,000 174,913 (161,913) - - - -
3,000 3,000 (17,124) (20,124) 45,000 45,000 27,331 (17,669) - - - - - - - -
- - - - (45,000) (45,000) (27,331) 17,669
- - - - (45,000) (45,000) (27,331) 17,669
3,000 3,000 (17,124) (20,124) - - - -
419,420 419,420 419,420 - - - - -
$ 422,420 $ 422,420 $ 402,296 $ (20,124) $ - $ - $ - $ - Revolving Loan Gas Tax
Budgeted Amounts Budgeted Amounts
31 Draft
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32 Draft
Fund
MAJOR FUNDS:

Wastewater
Pier

PROPRIETARY FUNDS
Description
Proprietary funds account for the City's operations financed and 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.

Accounts for revenues and expenses associated with the wastewater plant, including maintenance and capital improvements financed through sewer charges.

Accounts for all activities associated with the operation and maintenance of the pier. Pier operations are financed through boat launching, boat storage, hoist fees and miscellaneous fees for shower and apparel. Additionally, operations and capital improvements are subsidized through grants and General Fund revenues.

All of the City's Enterprise Funds have been identified as major proprietary funds. 33 Draft
City of Point Arena, California
Statement of Net Position
Enterprise Funds
June 30, 2023
Wastewater Pier Totals
ASSETS
Current assets:

Cash and investments $ - $ - $ -
Receivables:

Accounts 5,815 38,448 44,263
Intergovernmental 17,844 - 17,844
Total current assets 23,659 38,448 62,107
Noncurrent assets:

Capital assets, net 241,560 1,027,636 1,269,196
Total assets $ 265,219 $ 1,066,084 $ 1,331,303

LIABILITIES
Current liabilities:

Accounts payable $ 26,668 $ 36,398 $ 63,066
Accrued payroll and benefits 4,251 4,306 8,557
Unearned revenues - 300 300
Total current liabilities 30,919 41,004 71,923
Noncurrent liabilities:

Advance from Revolving Loan Fund 74,364 271,549 345,913 Total liabilities 105,283 312,553 417,836
Net Position:

Net investment in capital assets 241,560 1,027,636 1,269,196 Unrestricted (deficit) (81,624) (274,105) (355,729)
Total Net Position 159,936 753,531 913,467
Total liabilities and net position $ 265,219 $ 1,066,084 $ 1,331,303 The accompanying notes are an integral part of these basic financial statements. 34 Draft
City of Point Arena, California
Statement of Revenues, Expenses, and Changes in Fund Net Position Enterprise Funds
For the year ended June 30, 2023
Wastewater Pier Totals
OPERATING REVENUES:

Charges for services $ 283,138 $ 58,909 $ 342,047
Other - - -
Total operating revenues 283,138 58,909 342,047
OPERATING EXPENSES:

Salaries and benefits 133,379 130,329 263,708
Maintenance and operations 147,730 113,150 260,880
Professional fees 163,926 60,871 224,797
Administration 31,093 5,530 36,623
Depreciation 16,207 35,813 52,020
Total operating expenses 492,335 345,693 838,028
OPERATING INCOME(LOSS) (209,197) (286,784) (495,981)
NONOPERATING REVENUES (EXPENSES):

Intergovernmental revenues 180,237 70,034 250,271
Contributions from external sources - 32,098 32,098
Other nonoperating revenues 465 57,032 57,497
Interest expense (1,318) - (1,318)
Interest revenue 31 - 31
Total non-operating revenues, net 179,415 159,164 338,579

NET INCOME BEFORE CAPITAL
CONTRIBUTIONS AND TRANSFERS (29,782) (127,620) (157,402) Capital contributions - 146,100 146,100
Total transfers - 146,100 146,100
CHANGE IN NET POSITION (29,782) 18,480 (11,302)
NET POSITION:

Beginning of year 189,718 735,051 924,769
End of year $ 159,936 $ 753,531 $ 913,467
The accompanying notes are an integral part of these basic financial statements. 35 Draft
City of Point Arena, California
Statement of Cash Flows
Enterprise Funds
For the year ended June 30, 2023
Wastewater Pier Totals
CASH FLOWS FROM OPERATING ACTIVITIES:

Cash received (refunds paid) from (to) customers/users for services provided $ 279,768 $ 19,849 $ 299,617 Cash payments to suppliers for goods and services (343,722) (148,876) (492,598) Cash payments to employees for services (131,647) (127,928) (259,575) Net cash provided by operating activities (195,601) (256,955) (452,556) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:

Receipts from (payments for) interfund loans (due to-from/advances) 34,497 40,837 75,334 Interest paid on interfund loans and advances (1,318) - (1,318) Net cash used by noncapital financing activities 33,179 40,837 74,016 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:

Proceeds from capital grants 179,090 70,034 249,124
Reimbursements and contributions 465 235,230 235,695
Acquisition and construction of capital assets (90,041) (140,256) (230,297) Net cash (used) by capital and related financing activities 89,514 165,008 254,522 CASH FLOWS FROM INVESTING ACTIVITIES:

Investment income received 31 - 31
Net cash provided by investing activities 31 - 31
Net increase (decrease) in cash and cash equivalents (72,877) (51,110) (123,987) CASH AND CASH EQUIVALENTS:

Beginning of year 72,877 51,110 123,987
End of year $ - $ - $ -
Reconciliation of income from operations to net
cash provided by operating activities:

Operating income (loss) $ (209,197) $ (286,784) $ (495,981) Adjustments to reconcile operating income
to net cash provided by operating activities:

Depreciation 16,207 35,813 52,020
(Increase) decrease in current assets:

Accounts receivable (3,370) (38,448) (41,818)
Increase (decrease) in liabilities:

Accounts payable (973) 30,675 29,702
Accrued payroll and benefits 1,732 2,401 4,133
Unearned revenues - (612) (612)
Net cash provided by operating activities $ (195,601) $ (256,955) $ (452,556) The accompanying notes are an integral part of these basic financial statements.

There were no noncash investing, capital, or financing activities affecting recognized assets and liabilities for the year ended June 30, 2023.
36 Draft
37 NOTES TO BASIC FINANCIAL STATEMENTS
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38 This page intentionally left blank.

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City of Point Arena, California
Basic Financial Statements
For the year ended June 30, 2023
Index to Notes to Basic Financial Statements
39 Page
Note 1 – Summary of Significant Accounting Policies ................................................................................. 40 Financial Reporting Entity .......................................................................................................................... 40 Basis of Presentation .................................................................................................................................. 41 Measurement Focus .................................................................................................................................... 42 Basis of Accounting .................................................................................................................................... 43 Assets, Liabilities, and Equity .................................................................................................................... 43 Revenues, Expenditures, and Expenses ...................................................................................................... 47 Budgetary Accounting ................................................................................................................................ 47 Note 2 – Cash and Investments ...................................................................................................................... 48 Note 3 – Accounts Receivable ......................................................................................................................... 50 Note 4 – Notes Receivable ............................................................................................................................... 51 Note 5 – Capital Assets ................................................................................................................................... 51 Note 6 – Accounts Payable and Accrued Liabilities ..................................................................................... 53 Note 7 – Line of credit ..................................................................................................................................... 53 Note 8 – Net Position/ Fund Balances ............................................................................................................ 53 Note 9 – Interfund Transactions .................................................................................................................... 54 Note 10 – Risk Management ........................................................................................................................... 55 Note 11 – Commitments and Contingencies ................................................................................................. 55 Note 12 – New Accounting Pronouncements ................................................................................................ 56 Note 13 – COVID 19 and Storm Impact ....................................................................................................... 56 Draft
City of Point Arena, California
Notes to Basic Financial Statements
For the year ended June 30, 2023
40 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The City of Point Arena (City) was incorporated 1908, under the laws and regulations of the State of California (State). The City operates under a City Council/Manager form of government and provides the following services:
public works, planning and zoning, building regulation, general administrative services, wastewater, pier and public safety (provided by Mendocino County Sheriff).

The financial statements of the City have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the standard-setting body for governmental accounting and financial reporting. On June 15, 1987, GASB issued a codification of the existing Governmental Accounting and Financial Reporting Standards which, along with subsequent GASB pronouncements (Statements and Interpretations), constitutes GAAP for governmental units. The City applies all GASB pronouncements to its activities.

In addition, the City applies all Financial Accounting Standards Board (FASB) Statements and Interpretations, Accounting Principles Board (APB) Opinions, and Accounting Research Bulletins (ARB) issued after November 30, 1989, unless they conflict with or contradict GASB pronouncements. The more significant of these accounting policies are described below and, where appropriate, subsequent pronouncements will be referenced.

Financial Reporting Entity
The City operates as a self-governing local government unit within the State. It has limited authority to levy taxes and has the authority to determine user fees for the services that it provides. The City’s main funding sources include property taxes, other intergovernmental revenue from state and federal sources, user fees, and sales and transient occupancy taxes.

The financial reporting entity consists of (a) the primary government, the City, (b) organizations for which the primary government is financially accountable, and (c) other organizations for which the primary government is not accountable, but for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity’s financial statements to be misleading or incomplete.

Financial accountability is defined as the appointment of a voting majority of the component unit’s board, and either (a) the City has the ability to impose its will on the organization, or (b) there is a potential for the organization to provide a financial benefit to or impose a financial burden on the City.

There are no component units of the City that meet the criteria for discrete or blended presentation.

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City of Point Arena, California
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2023
41 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Basis of Presentation
Government-Wide Financial Statements
The statement of net position and statement of activities display information about the reporting government as a whole. They include all funds of the reporting entity except for fiduciary funds. The statements distinguish between governmental and business-type activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange revenues.

Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided by a given function or segment, 2) operating grants and contributions, and 3) capital grants and contributions restricted to the operating or capital requirements of a specific function or segment. All taxes and internally dedicated resources are reported as general revenues rather than program revenues.

Fund Financial Statements
Fund financial statements of the reporting entity are organized into funds, each of which is considered to be a separate accounting entity. Each fund is accounted for by providing a separate set of self-balancing accounts, which constitute its assets, liabilities, fund equity, revenues, and expenditures/expenses. Funds are organized into three major categories: governmental, proprietary, and fiduciary. An emphasis is placed on major funds within the governmental and proprietary categories. A fund is considered major if it is the primary operating fund of the City or meets the following criteria:
a. Total assets, liabilities, revenues, or expenditures/expenses of that individual governmental fund are at least ten percent of the corresponding total for all funds of that category or type; and, b. Total assets, liabilities, revenues, or expenditures/expenses of the individual governmental fund are at least five percent of the corresponding total for all governmental funds combined.

The City reports the following major funds:
• General Fund
• Revolving Loan Special Revenue Fund
• Gas Tax Special Revenue Fund
• Capital Projects Fund
• Wastewater Enterprise Fund
• Pier Enterprise Fund
Descriptions of these funds are included on the divider pages preceding the Governmental and Enterprise Funds Balance Sheets.

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City of Point Arena, California
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2023
42 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued The funds of the financial reporting entity are described below:

Governmental Funds
General Fund
The General Fund is used to account for resources traditionally associated with the City which are not required legally or by sound financial management to be accounted for in another fund. From this fund are paid the City’s general operating expenditures, the fixed charges, and the capital costs that are not paid through other funds.

Special Revenue Funds
The Special Revenue Funds are used to account for specific revenues that are legally or otherwise restricted to expenditures for particular purposes.

Capital Projects Fund
The Capital Projects Fund is used to account for specific grant and capital funding expended for various street and capital improvement projects.

Proprietary Funds
Enterprise Funds
Enterprise Funds are used to account for operations that are financed and operated in a manner similar to private business enterprises. Costs are financed or recovered primarily through user charges.

Measurement Focus
Measurement focus is a term used to describe which transactions are recorded within the various financial statements.

On the government-wide Statement of Net Position and the Statement of Activities, governmental and businesstype activities are presented using the economic resources measurement focus. The accounting objectives of this measurement focus are the determination of net income, financial position, and cash flows. All assets and liabilities (whether current or noncurrent) associated with their activities are reported. Fund equity is classified as Net Position, which serves as an indicator of financial position.

In the fund financial statements, the “current financial resources” measurement focus is used for governmental funds. Only current financial assets and liabilities are generally included on their balance sheets. Their operating statements present sources and uses of available spendable financial resources during a given period. These funds use fund balance as their measure of available spendable financial resources at the end of the period.

The enterprise funds utilize an “economic resources” measurement focus. The accounting objectives of this measurement focus are the determination of net income, financial position, and cash flows. Enterprise fund equity is classified as net position.

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City of Point Arena, California
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2023
43 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Basis of Accounting
In the government-wide Statement of Net Position and Statement of Activities, governmental and business-type activities are presented using the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used.

Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place.

Property taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal year. All other revenue items are considered to be measurable and available only when cash is received by the government. Expenditures (including capital outlay) are recorded when the related fund liability is incurred.

The enterprise funds utilize the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used.

Operating revenues in the fund are those revenues that are generated from the primary operations of the fund. All other revenues are reported as non-operating revenues. Operating expenses are those expenses that are essential to the primary operations of the fund. All other expenses are reported as non-operating expenses.

Assets, Liabilities, and Equity
Cash Deposits and Investments
The City’s cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition.

Receivables
In the government-wide statements, receivables consist of all revenues earned at year-end and not yet received.

Major receivable balances for the governmental activities include property taxes, sales and use taxes, intergovernmental subventions, interest earnings, and expense reimbursements.

In the fund financial statements, material receivables in governmental funds include revenue accruals such as property tax, sales tax, and intergovernmental subventions since they are usually both measurable and available.

Non-exchange transactions collectible but not available, such as property tax, are deferred inflows in the fund financial statements in accordance with the modified accrual basis, but not deferred inflows in the governmentwide financial statements in accordance with the accrual basis.

Interest and investment earnings are recorded when earned only if paid within 60 days since they would be considered both measurable and available. The City’s experience is that all accounts receivable are collectible; therefore an allowance for doubtful accounts is unnecessary.

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City of Point Arena, California
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2023
44 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Prepaid Items
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. In the governmental fund financial statements, prepaid items are offset with a nonspendable fund balance for long-term assets to indicate they do not constitute current resources available for appropriation.

Capital Assets
The City's assets are capitalized at historical cost or estimated historical cost, if actual is unavailable, except for donated Capital Assets which are recorded at their estimated fair value at the date of donation. Policy has set the capitalization threshold for reporting at $5,000 for non-infrastructure capital assets and $25,000 for infrastructure capital assets.

Government-Wide Statements
Public domain (infrastructure) capital assets include roads, bridges, streets, drainage systems, and pumps.

The accounting treatment of property, plant and equipment (capital assets) depends on whether the assets are used in governmental fund operations or proprietary fund operations and whether they are reported in the governmentwide or fund financial statements.

Prior to July 1, 2003, governmental funds’ infrastructure assets were not capitalized. Since then these assets have been valued at estimated historical cost.

Depreciation of all exhaustible capital assets is recorded as an allocated expense in the Statement of Activities, with accumulated depreciation reflected in the Statement of Net Position. Depreciation is provided over the assets’ estimated useful lives using the straight-line method of depreciation.

The range of estimated useful lives by type of asset is as follows:

Buildings and improvements 20 - 50 years
Pier and Infrastructure 20- 50 years
Machinery and equipment 5 - 20 years
Computer Software 5 years
Fund Financial Statements
In the fund financial statements, capital assets used in governmental fund operations are accounted for as capital outlay expenditures of the governmental fund upon acquisition. Capital assets used in proprietary fund operations are accounted for the same way as in the government-wide statements.

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City of Point Arena, California
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2023
45 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Compensated Absences
Employees accrue personal leave, holiday, administrative leave, and compensatory time off benefits. City employees have vested interests in the amount of accrued time off and are paid on termination. All personal leave pay is accrued when incurred in the government-wide and proprietary financial statements. A liability for the entire amount is reported in the governmental funds. The general fund is typically used to liquidate compensated absences.

In order to control this future liability, compensatory time off, administrative leave, and floating holidays must be used by staff during the calendar year in which they are earned. At year end, employees will be paid for any comp time, administrative leave, or floating holidays earned, but not used during the year. No comp time, administrative leave, or floating holidays earned may be carried into a new calendar year.

Unearned Revenues
Unearned revenues in governmental funds arise when potential revenue does not meet both the “measurable” and “available” criteria for recognition in the current period. Unearned revenues in enterprise funds and the statement of net position arise when resources are received by the City before it has legal claim to them, (i.e., when grant monies are received prior to the incurrence of qualifying expenses).

Deferred outflows/inflows of resources
In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City has no items reported as a deferred outflow of resources.

In addition to liabilities, the statement of position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The City has one item reported as a deferred inflow of resources in the fund financial statements.

The item is unavailable revenues, which constitutes amounts reported that do not meet the 60 day criteria for accrual in the fund financial statements.

Government-Wide Statements
Equity is classified as net position and is displayed in three components:
a. Net investment in capital assets – consists of capital assets, including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets.
b. Restricted net position – consists of net position with constraints placed on the use by external groups such as creditors, grantors, contributors, or by laws or regulations of other governments or law through constitutional provisions or enabling legislation. c. Unrestricted net position – all other net position that do not meet the definition of “restricted” or “net investment in capital assets.”
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City of Point Arena, California
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2023
46 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Equity Classification
Fund Financial Statements
Governmental fund equity is classified as fund balance. Fund balance is classified as nonspendable, restricted, committed, assigned, or unassigned. Proprietary fund equity is classified the same as in the government-wide statements. The classifications for governmental funds are defined as follows for the City:

Nonspendable Fund Balance –
• Assets that will never convert to cash (prepaid items, inventory). • Assets that will not convert to cash soon enough to affect the current period (long-term notes or loans receivable).
• Resources that must be maintained intact pursuant to legal or contractual requirements (the principal of an endowment).

Restricted Fund Balance –
• Resources that are subject to externally enforceable legal restrictions imposed by parties altogether outside the government (creditors, grantors, contributors and other governments). • Resources that are subject to limitations imposed by law through constitutional provisions or enabling legislation (e.g., Gas Tax).

Committed Fund Balance –
• Self imposed limitations set in place prior to the end of the period (encumbrances, economic contingencies and uncertainties).
• Limitation at the highest level of decision-making (Council) that requires formal action at the same level to remove.
• Council Resolution is required to be taken to establish, modify, or rescind a fund balance commitment.

Assigned Fund Balance –
• Amounts in excess of nonspendable, restricted and committed fund balance in funds other than the general fund automatically are reported as assigned fund balance. • The City Council delegates the authority to the City Manager to assign fund balance amounts to specific purposes when such purposes are enacted by the City Council.

Unassigned Fund Balance –
• Residual net resources.
• Total fund balance in the general fund in excess of nonspendable, restricted, committed and assigned fund balance (surplus).
• Excess of nonspendable, restricted, and committed fund balance over total fund balance (deficit).

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City of Point Arena, California
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2023
47 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Revenues, Expenditures, and Expenses
Property Tax
The County of Mendocino (County) is responsible for the collection and allocation of property taxes. Under California law, property taxes are assessed and collected by the County up to 1% of the full cash value of taxable property, plus other increases approved by the voters and distributed in accordance with statutory formulas. The City recognizes property taxes when the individual installments are due, provided they are collected within 60 days after year-end.

Secured property taxes are levied on or before the first day of September of each year. They become a lien on real property on March 1 preceding the fiscal year for which taxes are levied. These taxes are paid in two equal installments; the first is due November 1 and delinquent with penalties after December 10; the second is due February 1 and delinquent with penalties after April 10. Secured property taxes, which are delinquent and unpaid as of June 30, are declared to be tax defaulted and are subject to redemption penalties, cost, and interest when paid. If the delinquent taxes are not paid at the end of five years, the property is sold at public auction and the proceeds are used to pay the delinquent amounts due. Any excess is remitted, if claimed, to the taxpayer.

Additional tax liens are created when there is a change in ownership of property or upon completion of new construction. Tax bills for these new tax liens are issued throughout the fiscal year and contain various payments and delinquent dates, but are generally due within one year. If the new tax liens are lower, the taxpayer receives a tax refund rather than a tax bill. Unsecured personal property taxes are not a lien against real property. These taxes are due on March 1, and become delinquent, if unpaid on August 31.

The City participates in an alternative method of distribution of property tax levies and assessments known as the “Teeter Plan.” The State Revenue and Taxation Code allow counties to distribute secured real property, assessment, and supplemental property taxes on an accrual basis resulting in full payment to cities each fiscal year. Any subsequent delinquent payments and penalties and interest during a fiscal year will revert to Mendocino County.

Interfund Transfers
Resources are reallocated between funds by reporting them as interfund transfers. For the purposes of the Statement of Activities, all interfund transfers between individual governmental funds have been eliminated.

Budgetary Accounting
The City Council establishes budgets for the General Fund and all Special Revenue Funds. Budgetary control is legally maintained at the fund level for these funds. Department heads submit budget requests to the City Manager.

The City Manager prepares an estimate of revenues and prepares recommendations for the next year’s budget.

The preliminary budget may or may not be amended by the City Council and is adopted by resolution by the City Council on or before June 30 in accordance with the municipal code.

The City Council may amend the budget by motion during the fiscal year. Only the Council can authorize transfers between funds and approve inter-fund loans. The City Manager is authorized to transfer budgeted amounts within a fund without formal council action or approval.

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City of Point Arena, California
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2023
48 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Budgetary Accounting, continued
Expenditures may not legally exceed appropriations at the fund level, which is the legal level of control.

Supplemental appropriations, which increase appropriations, may be made during the fiscal year. There were no material supplemental appropriations made for the fiscal year ended June 30, 2023. Budget information is presented for the General and budgeted Special Revenue Funds in the fund financial statements. The budget information is presented on a basis consistent with generally accepted accounting principles. Appropriations, except open project appropriations, and unexpended grant appropriations, lapse at the end of each fiscal year.

Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. Actual results could differ from those estimates.

Reclassifications
Certain amounts have been reclassified to provide for comparable results on a year to year basis.

2. CASH AND INVESTMENTS
At June 30, 2023, the City’s pooled cash and investments, classified by maturity, consisted of the following stated at fair value:

Fair
Not rated Market Value
Cash equivalents and investments pooled
Pooled cash, at fair value
Cash in bank $ 98,217 $ 98,217
Petty cash 200 200
Total pooled items 98,417 98,417
Pooled investments, at fair value
Interest obligations
State of California Local Agency Investment Fund 1,531 1,531 Total pooled investments - interest obligations 1,531 1,531 Total cash equivalents and investments pooled $ 99,948 $ 99,948 Amounts reported in:

Governmental activities $ 99,948
Business-type activities -
Total $ 99,948
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City of Point Arena, California
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2023
49 2. CASH AND INVESTMENTS, Continued
Weighted Average Average
Investment Type Fair Value Maturity (Years) Annual Yield Local Agency Investment Fund 1,531 0.71 3.010%
Total fair value $ 1,531
Portfolio weighted average maturity 0.71
California statutes authorize cities to invest idle or surplus funds in a variety of credit instruments as provided for in the California Government Code, Section 53600, Chapter 4 – Financial Affairs. The only authorized investment vehicles that address interest rate risk, credit risk, and concentration of credit risk, per the City’s investment policy, are the State of California Local Agency Investment Fund (LAIF) and certificates of deposit in California financial institutions.

Interest Rate Interest Earned FYTD
First Quarter (7/1 - 9/30) 1.29% $ 309 $ 309
Second Quarter (10/1 - 12/31) 1.98% 267 576
Third Quarter (1/1 - 3/31) 2.63% 10 586
Fourth Quarter (4/1 - 6/30) 3.01% 12 598
Concentration of credit risk – The City’s investment policy does not allow for an investment in any one issuer that is in excess of five percent of the government’s total investments. The investments made by the City Treasurer are limited to those allowable under State statutes as incorporated into the City’s Investment Policy, which is accepted annually by the City Council. There were no concentrations in any one issuer for the year.

The City participates in an investment pool managed by the State of California known as the Local Agency Investment Fund (LAIF) which has invested none 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 such as changes in interest rates.

Custodial credit risk – deposits. For deposits, this is the risk that in the event of a bank failure, the City’s deposits may not be returned to it. The City’s Investment Policy addresses custodial credit risk, which follows the Government Code.

Custodial credit risk – investments. For investments, this is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside counterparty. For the investments maintained by the City, no security was uninsured or unregistered or held by a brokerage firm which is also the counterparty for the security.

At June 30, 2023, the carrying amount of the City’s deposits was $98,417 and the balances in financial institutions were $149,615. Of the balance in financial institutions, the amount was within the $250,000 covered by federal depository insurance. Amounts that exceeds the federal depository insurance $250,000 coverage was collateralized as required by State law (Government Code Section 53630), by the pledging financial institution with assets held in a common pool for the City and other governmental agencies, but not in the name of the City.

Investments were held by the custodial agent, and were insured up to specified limits by the Securities Investor Protection Corporation (SPIC) and supplemental private insurance up to a limit of $150 million.

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City of Point Arena, California
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2023
50 2. CASH AND INVESTMENTS, Continued
Investment in LAIF: LAIF is stated at amortized cost, which approximates fair value. The LAIF is a special fund of the California State Treasury through which local governments may pool investments. As of June 30, 2023, the total fair value amount invested by all public agencies in LAIF is $179,898,516,097 of which the City’s fair value amount is $1,531. Of the total invested, none was invested in Structured Notes and Asset-Backed securities.

The Local Investment Advisory Board (Board) has oversight responsibility for LAIF. The Board consists of five members as designated by State Statute. The fair value of the City’s investment in this pool is reported in the accompanying financial statements at amounts based upon the City’s pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis.

3. ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following at June 30, 2023:

Governmental Business-type
Activities Activities Total
Accounts $ - $ 44,263 $ 44,263
Interest - - -
Intergovernmental 91,018 17,844 108,862
Taxes 158,629 - 158,629
Notes 72,894 - 72,894
Total accounts receivable $ 322,541 $ 62,107 $ 384,648
These amounts resulted in the following concentrations in receivables:

Other Governments 69.5%
Individuals / Businesses 30.5%
Amounts indicate a significant concentration (greater than 25%) related to grants and other government agencies.

Reductions in these revenues could result in reductions to services.

4. NOTES RECEIVABLE
The City had the following notes receivable as of June 30, 2023:

Beginning Ending
Description July 1, 2022 Additions (Deletions) June 30, 2023 Housing Rehabilitation Loans:

Residential Loan $ 29,117 $ - $ (3,042) $ 26,075
Residential Loan 29,371 - (6,889) 22,482
Residential Loan 32,094 - (7,757) 24,337
Total Housing Rehabilitation Loans 90,582 - (17,688) 72,894 Total loans receivable $ 90,582 $ - $ (17,688) $ 72,894 Draft
City of Point Arena, California
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2023
51 4. NOTES RECEIVABLE, Continued
Revolving loans are given to the lower income sector of the community for housing improvements, new construction and economic stimulus. Notes receivable are not resources currently available for expenditures and are reported in the governmental funds balance sheet as deferred inflows of resources.

5. CAPITAL ASSETS
Capital asset activity for governmental activities for the year ended June 30, 2023, was as follows:

Balance Balance
July 1, 2022 Additions Deletions June 30, 2023
Governmental activities:

Nondepreciable assets:

Land $ 344,995 -$ -$ $ 344,995
Construction in progress 1,608,536 - (1,604,536) 4,000
Total nondepreciable assets 1,953,531 - (1,604,536) 348,995 Depreciable assets:

Buildings and improvements 229,325 - - 229,325
Machinery & equipment 79,239 56,347 - 135,586
Infrastructure 4,477,976 1,676,670 - 6,154,646
Total depreciable assets 4,786,540 1,733,017 - 6,519,557 Total 6,740,071 1,733,017 (1,604,536) 6,868,552
Accumulated depreciation:

Buildings and improvements (124,277) (6,557) - (130,834) Machinery & equipment (65,227) (8,648) - (73,875)
Infrastructure (2,101,674) (175,156) - (2,276,830)
Total accumulated depreciation (2,291,178) (190,361) - (2,481,539) Net depreciable assets 2,495,362 1,542,656 - 4,038,018
Total net capital assets $ 4,448,893 1,542,656$ $ (1,604,536) $ 4,387,013 Draft
City of Point Arena, California
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2023
52 5. CAPITAL ASSETS, Continued
Capital asset activity for business-type activities for the year ended June 30, 2023, was as follows:

Balance Balance
July 1, 2022 Additions Deletions June 30, 2023
Business-type activities:

Nondepreciable assets:

Land $ 298,190 $ - $ - $ 298,190
Construction in progress 42,602 - (42,602) -
Total nondepreciable assets 340,792 - (42,602) 298,190
Depreciable assets:

Buildings and improvements 1,550,274 - - 1,550,274
Machinery & equipment 347,373 90,041 - 437,414
Infrastructure - Pier 2,801,312 188,702 - 2,990,014
Total depreciable assets 4,698,959 278,743 - 4,977,702
Total 5,039,751 278,743 (42,602) 5,275,892
Accumulated depreciation:

Buildings and improvements (1,487,849) (2,554) - (1,490,403) Machinery & equipment (316,556) (14,501) - (331,057)
Infrastructure - Pier (2,150,271) (34,965) - (2,185,236) Total accumulated depreciation (3,954,676) (52,020) - (4,006,696) Net depreciable assets 744,283 226,723 - 971,006
Total net capital assets $ 1,085,075 $ 226,723 (42,602)$ $ 1,269,196 Depreciation expense for capital assets was charged to functions as follows:

Governmental Activities
Streets and Public Works $ 190,361
Total $ 190,361
Business-Type Activities
Wastewater $ 16,207
Pier 35,813
Total $ 52,020
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City of Point Arena, California
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2023
53 6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consisted of the following at June 30, 2023:

Governmental Business-type
Activities Activities Total
Accounts payable $ 78,511 $ 63,066 $ 141,577
Accrued payroll and benefits 12,144 8,557 20,701
Deposits payable - - -
Total $ 90,655 $ 71,623 $ 162,278
Amounts do not indicate a significant concentration (greater than 25%) with any single vendor or individual.

7. LINE OF CREDIT
In April of 2023, the City entered into a Line of Credit agreement with Redwood Credit Union not to exceed $1,500,000 to act as bridge financing for the Mill Street and Center Street Capital Improvement Projects. The line of credit was to be paid through receipt of California State grant funding specific to the projects. The line of credit bears interest at a rate of the Prime rate plus 1% on outstanding balances. The balance at June 30, 2023 was $310,540.

8. NET POSITION/ FUND BALANCES
Net Position
Governmental Business-type
Activities Activities
Net investment in capital assets $ 4,387,013 $ 1,269,196 Unrestricted (deficit) 379,316 (355,729)
Total $ 4,766,329 $ 913,467
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City of Point Arena, California
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2023
54 8. NET POSITION/ FUND BALANCES, Continued
Fund Balance
Assigned and Unassigned (Deficit) fund balance consisted of the following at June 30, 2023:

Nonspendable:

Major Funds:

General Fund $ 12,109
Assigned:

Major Funds:

General Fund $ 179,898
Revolving Loan Special Revenue 402,296
Total Major Funds- Assigned $ 582,194
Total Assigned $ 582,194
Unassigned (deficit):

Major Funds:

General Fund $ 119,221
Capital Projects (407,102)
Total Major Funds- Unassigned (deficit) $ (287,881)
Total Fund Balance (Deficit) $ 306,422
The following describes the purpose of each assigned account used by the City:

Assigned
• General Fund – represents amounts assigned for the Skate Board Park and an insurance set aside. • Revolving Loan Special Revenue – represents amounts assigned for residential and business loan programs.

Deficit fund balances consisted of the following at June 30, 2023:

The Capital Projects Fund had a deficit fund balance in the amount of $407,102 to be resolved through future grant revenues.

Excess of Expenditures and Transfers Over Appropriations: Expenditures and transfers exceeded appropriations for the year ended June 30, 2023, for the following funds:

Total Excess
Expenditures Expenditures
Final Budget and Transfers Over Appropriations
Governmental Activities
Major Funds
General Fund 737,200$ $ 1,101,919 $ (364,719)
Revolving Loan Special Revenue Fund 13,000 174,913 (161,913) Draft
City of Point Arena, California
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2023
55 9. INTERFUND TRANSACTIONS
Transfers are used to (1) move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them, and (2) use unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations.

Due to/from balances consisted of the following:

Due from the Capital Projects Fund in the amount of $173,410, which was due to the General Fund in the same amount.

Advances to/from balances consisted of the following:

Advance from the Revolving Loan Special Revenue Fund in the amount of $345,913, which was advanced to the Wastewater Enterprise Fund in the amount of $74,364 and the Pier Enterprise Fund in the amount of $271,549.

Transfers to/from
Transfers consisted of the following at June 30, 2023:

Transfers In Transfers Out
Governmental Activities
Major Funds:

General Fund $ 27,331 $ -
Gas Tax Special Revenue - 27,331
Total Major Funds 27,331 27,331
Total Governmental Activities 27,331 27,331
Total Transfers $ 27,331 $ 27,331

10. RISK MANAGEMENT
The City is currently a member of the California Intergovernmental Risk Authority (CIRA). Under CIRA, the City is provided the following insurance coverage: Worker compensation and employers' liability coverage for bodily injury by accident or by disease, including resulting death, arising out of or in the course of the employee’s employment, with the City. Liability coverage for bodily injury, property damage, personal injury or public official's errors and omissions.

The City does not have an equity interest in CIRA. CIRA exercises full powers and authority within the scope of the related agreements including the preparation of annual budgets, accountability for all funds, the power to make and execute contracts and the right to sue and be sued. Obligations and liabilities of CIRA are not those of the City, although the City retains an ongoing financial interest or an ongoing financial responsibility.

Audited financial information of CIRA can be found at http://www.cira-jpa.org/ or by contacting CIRA:
2330 East Bidwell, Suite 150, Folsom, CA 95630.

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City of Point Arena, California
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2023
56 11. COMMITMENTS AND CONTINGENCIES
The City is a party to claims and lawsuits arising in the ordinary course of business. The City’s management and legal counsel are of the opinion that the ultimate liability, if any, arising from these claims will not have material adverse impact on the financial position of the City. The City participates in a number of federal and state assisted grant programs. These programs are subject to program compliance audits by the grantors. The amount, if any, of expenditures which may be disallowed by the granting agencies cannot be determined at this time although the City expects such amounts, if any, to be immaterial.

12. NEW ACCOUNTING PRONOUNCEMENTS
The GASB has issued Statement No. 94, “Public-Private and Public-Public Partnerships and Availability Payment Arrangements”. The objective of this Statement is to better meet the information needs of financial statement users by improving the comparability of financial statements among governments that enter into PPPs and APAs and by enhancing the understandability, reliability, relevance, and consistency of information about PPPs and APAs. The implementation of this statement did not have an effect on the financial statements.

The GASB has issued statement No. 96, “Subscription-Based Information Technology Arrangements”. The objective of this Statement is to better meet the information needs of financial statement users by (a) establishing uniform accounting and financial reporting requirements for SBITAs; (b) improving the comparability of financial statements among governments that have entered into SBITAs; and (c) enhancing the understandability, reliability, relevance, and consistency of information about SBITAs. The implementation of this statement did not have an effect on the financial statements.

The GASB has issued 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 (1) practice issues that have been identified during implementation and application of certain GASB Statements and (2) accounting and financial reporting for financial guarantees. The requirements related to leases, PPPs, and SBITAs will take effect for financial statements starting with the fiscal year that ends June 30, 2023. The requirements related to financial guarantees and the classification and reporting of derivative instruments within the scope of Statement 53 will take effect for financial statements starting with the fiscal year that ends June 30, 2024.

The GASB has issued 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, reliable, relevant, consistent, and comparable information for making decisions or assessing accountability. The requirements of this Statement will take effect for financial statements starting with the fiscal year that ends June 30, 2024.

The GASB has issued 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. The requirements of this Statement will take effect for financial statements starting with the fiscal year that ends December 31, 2024.

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City of Point Arena, California
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2023
57 13. STORM IMPACT
In January 2023, California experienced excessive rain and wind storms causing flooding and storm damage and a Statewide disaster has been issued with Mendocino County included. Financial damages have yet to be assessed or determined and the City has applied for FEMA assistance.

14. GOING CONCERN
For the past five years, the City has not properly monitored capital projects and determined proper funding for those projects. In addition, no reserve or financing component was included in these projects and consultants continually exceeded project budgets without proper authorization. This has resulted in the City’s operating cash reserves to be reduced to nominal levels and temporary line of credit vehicles to be used for permanent cash deficits. Without restructuring of the City’s debt and proper budget monitoring of expenditures, the City’s ability to continue is threatened. In order to cure these deficits and reestablish operating cash reserves, the City may incur additional debt to rehabilitate a City-owned property so the rental income derived from the property can be dedicated to the debt repayment. This will require a market valuation of the property, improvement cost analysis and rental value to determine the feasibility of the plan. The City will also need to acquire a proper fund accounting system to account for all activities and institute purchase orders to manage both vendor purchases and consultant costs. Consultant performance will also need to be measured against full funding requirements before a contract is let. Assuming this plan will be managed and executed in a timely fashion and the debt restructuring succeeds, the City will continue as a viable entity.

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