Redlands City Council
January 21, 2025

Specific delivery instructions, including FOB Inside Delivery, will be noted on the order form or Purchase Order.

Any damage to the building interior, scratched walls, damage to the freight elevator, etc., will be the responsibility of the Contractor. If damage does occur, it is the responsibility of the Contractor to promptly notify the Purchasing Entity placing the Order.

All products must be delivered in the manufacturer’s standard package. Costs shall include all packing and crating charges. Cases shall be of durable construction, good condition, properly labeled and suitable in every respect for storage and handling of contents. Each shipment shall be marked with the Purchasing Entity’s Purchase Order number and other information sufficient for the Purchasing Entity to properly identify the shipment as outlined in the Participating Addendum of the Purchasing Entity.

Inspection and Acceptance.

Where the Master Agreement, a Participating Addendum, or an Order does not otherwise specify a process for inspection and Acceptance, this section governs. This section is not intended to limit rights and remedies under the applicable commercial code.

Acceptance. Purchasing Entity shall determine whether all Products and Services delivered meet the Contractor's published specifications. No payment shall be made for any Products or Services until the Purchasing Entity has accepted the Products or Services. The Purchasing Entity will make every effort to notify the Contractor within thirty (30) calendar days following delivery of non-acceptance of a Product or completion of Service. In the event that the Contractor has not been notified within 30 calendar days from delivery of Product or completion of Service, the Product and Services will be deemed accepted on the 31st day after delivery of Product or completion of Services. Failure to reject upon receipt, however, does not relieve the Contractor of liability for latent or hidden material defects. Acceptance of such goods may be revoked in accordance with the provisions of the applicable commercial code, and the Contractor is liable for any resulting expense incurred by the Purchasing Entity related to the preparation and shipping of Product rejected and returned, or for which Acceptance is revoked. The warranty period shall begin upon Acceptance. If the parties agree to acceptance testing, the terms of subsection (c), below, apply.

Acceptance Testing. The Purchasing Entity and the Contractor shall determine if Acceptance Testing is applicable and required for the purchase. “Acceptance Testing” means the process for ascertaining that the Product meets the standard of performance prior to Acceptance by the Purchasing Entity.

The Acceptance Testing period shall be thirty (30) calendar days starting from the day after the Product is delivered or, if installed, the day after the Product is installed and Contractor certifies that the Product is ready for Acceptance Testing. If the Product does not meet the standard of performance during the initial period of Acceptance Testing, Purchasing Entity may, at its discretion, continue Acceptance Testing on a day-to-day basis until the standard of performance is met. Upon rejection, the Contractor will have fifteen (15) calendar days to cure the standard of performance issue(s). If after the cure period, the Product still has not met the standard of performance, the Purchasing Entity may, at its option: (a) declare Contractor to be in breach and terminate the Order; (b) demand replacement Product from Contractor at no additional cost to Purchasing Entity; or, (c) continue the cure period for an additional time period agreed upon by the Purchasing Entity and the Contractor.

No Product shall be deemed Accepted and no charges shall be paid until the standard of performance is met. Products that do not meet specifications may be rejected. Failure to reject upon receipt, however, does not relieve the Contractor of liability for material (nonconformity that substantially impairs value) latent or hidden defects subsequently revealed when goods are put to use. Acceptance of such goods may be revoked in accordance with the provisions of the applicable commercial code, and the Contractor is liable for any resulting expense incurred by the Purchasing Entity related to the preparation and shipping of Product rejected and returned, or for which Acceptance is revoked. The warranty period shall begin upon Acceptance.

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If any services do not conform to contract requirements, the Purchasing Entity may require the Contractor to perform the services again in conformity with contract requirements, at no increase in Order amount. When defects cannot be corrected by re-performance, the Purchasing Entity may require the Contractor to take necessary action to ensure that future performance conforms to contract requirements; and reduce the contract price to reflect the reduced value of services performed.

Title of Product.

Definitions. For purposes of this section, the following terms are defined as follows:
“Deliverables” means any reports, analyses, scripts, code, or other work results that Contractor delivers to Purchasing Entity within the framework of fulfilling Contractor’s obligations to Purchasing Entity. "Equipment” means Contractor-branded hardware products. “Proprietary Rights” means all patents, copyrights, trademarks, trade secrets, and other intellectual property rights of a party.

Upon Acceptance by the Purchasing Entity, Contractor shall convey to Purchasing Entity title to the Equipment free and clear of all liens, encumbrances, or other security interests. Purchasing Entity’s rights to use the software delivered by Contractor are governed by the terms of the applicable end-user license agreement. Unless different terms have been agreed between the parties, the terms posted on www.dell.com/eula (the “EULA”) shall apply.

Contractor’s EULA must be made available to Purchasing Entities for review prior to negotiating a Participating Addendum or the issuance of an Order and shall meet or exceed the terms set forth in this Master Agreement.

Unless expressly otherwise agreed, microcode, firmware or operating system software required to enable the Equipment with which it is shipped to perform its basic or enhanced functions, is licensed for use solely on such Equipment.

Contractor grants Purchasing Entity a non-exclusive, non-transferable, irrevocable license to use (without the right to sublicense) the Deliverables provided by Contractor for Purchasing Entity’s internal business and governmental purposes, only and solely in accordance with the applicable service specification and subject to this Master Agreement. The grant of this license is subject to Purchasing Entity’s compliance with the terms of this Master Agreement and Purchasing Entity’s payment of applicable amounts due. Such license shall be perpetual unless granted pursuant to the purchase of a subscription, in which case the license shall be for the term of the subscription. Purchasing Entity may authorize its service providers to use the Deliverables, but solely on Purchasing Entity’s behalf, solely for Purchasing Entity’s internal business or governmental purposes, and Purchasing Entity shall be responsible for service provider’s compliance with these restrictions. This section shall not affect a Purchasing Entity’s right to transfer ownership of a product, and transfer, if permitted by Contractor or its licensors, licenses associated with such product, to another individual or entity as part of the Purchasing Entity’s surplus program or sale of used products to employees or former employees.

Contractor reserves for itself all Proprietary Rights that it has not expressly granted to Purchasing Entity herein.

The license granted in this clause 20(c) does not apply to: (i) Equipment; (ii) Contractor-branded generally available software; or (ii) items licensed or otherwise provided under a separate agreement. Contractor is not limited in developing, using, or marketing services or products that are similar to the Deliverables or Professional Services provided hereunder, any service, specification, or, subject to Contractor’s confidentiality obligations to Purchasing Entity, in using the Deliverables or performing similar Professional Services for any other projects. Notwithstanding the previous, Contractor’s use of Deliverables created specifically for and paid for by a Purchasing Entity is subject to Purchasing Entity approval.

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Any and all licensing, maintenance, cloud services, or order specific agreements referenced within the terms and conditions of this Master Agreement are agreed to only to the extent that the terms do not conflict with the terms of the Participating Addendum or the terms of the Master Agreement as incorporated into the Participating Addendum, and to the extent the terms are not in conflict with the Participating Entity’s applicable laws. In the event of a conflict in the terms and conditions, the conflict shall be resolved as detailed in the Order of Precedence defined herein. Notwithstanding the foregoing, licensing, maintenance, cloud services agreements, or order specific agreements may be further negotiated by the Contractor or, if applicable, the Licensor, and the potential Purchasing Entity, provided the contractual documents are duly executed in writing.

If (i) Contractor is or becomes aware of any infringement claim made against a third-party branded product offered by Contractor through this Master Agreement, (ii) the third-party branded product is determined to infringe upon the intellectual property rights of another third party, and (iii) such infringement is not remedied by the third party so that the product is no longer infringing, Contractor shall immediately cease offering the product under this Master Agreement and notify the Lead State, NASPO, Participating Entities, and purchasers of the product.

Warranty.

The Contractor must ensure warranty service and maintenance for all equipment, including third party products provided. The Contractor must facilitate the Manufacturer or Publisher warranty and maintenance of third party products furnished through the Master Agreement. The Contractor shall provide the warranty service and maintenance for equipment and all peripherals on the Master Agreement.

System Failure or Damage.

In the event of system failure or damage caused by the Contractor or its Product, the Contractor shall use reasonable efforts to restore or assist in restoring the system to operational capacity. The Contractor shall be responsible under this provision to the extent a 'system' is defined at the time of the Order; otherwise the rights of the Purchasing Entity shall be governed by the Warranty.

Payment.

Payment after Acceptance is normally made within 30 days following the date the entire order is delivered or the date a correct invoice is received, whichever is later. After 45 days the Contractor may assess overdue account charges up to a maximum rate of one percent per month on the outstanding balance, unless a different late payment amount is specified in a Participating Addendum, Order, or otherwise prescribed by applicable law.

Payments will be remitted by mail or electronically. Payments may be made via a State or political subdivision “Purchasing Card” with no additional charge.

Prices are exclusive of taxes, duties, and fees, unless otherwise quoted. If a withholding tax is required by law, the tax will be added and identified on the applicable invoice. All applicable taxes, duties, and fees must be identified on the quote.

Leasing or Alternative Financing Methods.

Lease purchase and term leases are allowable only for Purchasing Entities whose rules and regulations permit leasing of software. Individual Purchasing Entities may enter into a lease agreement for the products covered in this Master Agreement, if they have the legal authority to enter into these types of agreements without going through a competitive process and if the applicable PAs permit leasing. No lease agreements will be reviewed or evaluated as part of the RFP evaluation process.

Contract Provisions for Orders Utilizing Federal Funds.

Pursuant to Appendix II to 2 Code of Federal Regulations (CFR) Part 200, Contract Provisions for Non-Federal Entity Contracts Under Federal Awards, Orders funded with federal funds may have additional contractual requirements or certifications that must be satisfied at the time the Order is placed or upon delivery. These federal requirements may be DocuSign Envelope ID: 22C62BA3-AFF9-40A4-8FA3-F4D018802CC5 DocuSign Envelope ID: F019BE07-AEF0-4A14-B979-8BB85953FE52

proposed by Participating Entities in Participating Addenda and Purchasing Entities for incorporation in Orders placed under this Master Agreement.

Self Audit.

The Contractor must conduct at a minimum a quarterly self-audit, unless approved by the Lead State. The audit will sample a minimum of one tenth of one percent (.001) of orders with a maximum of 100 audits per quarter conducted.

For example: Up to 1,000 sales = 1 audit; 10,000 sales = 10 audits; Up to 100,000 sales = 100 audits. This will be a random sample of orders and invoices and must include documentation of pricing. Summary findings must be reported to Lead State with actions to correct documented findings.

Assignment/Subcontracts.

Contractor shall not assign, sell or otherwise transfer all or any part of this Master Agreement without prior written consent from the Lead State, such consent not to be unreasonably withheld.

The Lead State, or Participating Entity, shall not assign, delegate or otherwise transfer all or any part of this Master Agreement without prior written consent from Contractor, except for assignment or delegation to a Participating Entity State agency or eligible Purchasing Entity. The Lead State reserves the right to assign any rights or duties, including written assignment of contract administration duties to NASPO ValuePoint and other third parties.

Insurance.

Contractor shall, during the term of this Master Agreement, maintain in full force and effect, the insurance described in this section. Contractor shall acquire such insurance from an insurance carrier or carriers legally authorized to conduct business in the Lead State and in each Participating Entity’s state and having a rating of A-, Class VII or better, in the most recently published edition of A.M. Best’s Insurance Reports. Failure to buy and maintain the required insurance may result in this Master Agreement’s termination or, at a Participating Entity’s option, result in termination of its Participating Addendum.

Coverage shall be written on an occurrence basis. The minimum acceptable limits shall be as indicated below:

Commercial General Liability covering premises operations, independent contractors, products and completed operations, blanket contractual liability, personal injury (including death), advertising liability, and property damage, with a limit of not less than $1 million per occurrence/$2 million general aggregate; Contractor must comply with any applicable State Workers Compensation or Employers Liability Insurance requirements.

Contractor shall pay premiums on all insurance policies. Contractor will use reasonable efforts to give thirty (30) days prior written notice to State prior to cancellation or non-renewal of any of the policies providing such coverage; provided, however that Contractor shall not be obligated to provide such notice if, concurrently with such cancellation or non-renewal, Contractor obtains coverage from different insurer(s) meeting the requirements described herein.

Prior to commencement of performance, Contractor shall provide to the Participating Entity a certificate of insurance showing the Contractor’s general liability insurance policy or other documentary evidence acceptable to the Lead State that (1) names the Participating Entity as an additional insured, (2) provides that written notice of cancellation shall be delivered in accordance with the policy provisions, and (3) provides that the Contractor’s liability insurance policy shall be primary, with any liability insurance of any Participating Entity as secondary and noncontributory. Unless otherwise agreed in any Participating Addendum, other state Participating Entities’ rights DocuSign Envelope ID: 22C62BA3-AFF9-40A4-8FA3-F4D018802CC5 DocuSign Envelope ID: F019BE07-AEF0-4A14-B979-8BB85953FE52

and Contractor’s obligations are the same as those specified in the first sentence of this subsection except the endorsement is provided to the applicable state.

During the term of this Master Agreement, Contractor shall upon request provide to the Lead State and Participating Entities evidence of coverage that meets the requirements of this Section and the applicable Participating Addendum. Failure to provide evidence of coverage, within thirty (30) calendar days of receipt of request may, at the sole option of the Lead State, or any Participating Entity, result in this Master Agreement’s termination or the termination of any Participating Addendum.

Coverage and limits shall not limit Contractor’s liability and obligations under this Master Agreement, any Participating Addendum, or any Purchase Order.

Administrative Fees.

The Contractor shall pay to NASPO ValuePoint, or its assignee, a NASPO ValuePoint Administrative Fee of one- quarter of one percent (0.25% or 0.0025) no later than sixty (60) days following the end of each calendar quarter.

The NASPO ValuePoint Administrative Fee shall be submitted quarterly and is based on all sales of products and services under the Master Agreement (less any charges for taxes or shipping). The NASPO ValuePoint Administrative Fee is not negotiable.

The NASPO ValuePoint Administrative Fee in this section shall be based on the gross amount of all sales (less any charges for taxes or shipping) at the adjusted prices (if any) in Participating Addenda.

Additionally, some states may require an additional fee be paid directly to the state only on purchases made by Purchasing Entities within that state. For all such requests, the fee level, payment method and schedule for such reports and payments will be incorporated into the Participating Addendum that is made a part of the Master Agreement. The Purchasing Entity may allow the Contractor to adjust the Master Agreement pricing to account for these additional fees for purchases made by Purchasing Entities within the jurisdiction of the Participating Entity. All such agreements shall not affect the NASPO ValuePoint Administrative Fee percentage or the prices paid by the Purchasing Entities outside the jurisdiction of the state requesting the additional fee.

NASPO ValuePoint Reports
Sales Data Reporting. In accordance with this section, Contractor shall report to NASPO ValuePoint all Orders under this Master Agreement for which Contractor has invoiced the ordering entity or individual, including Orders invoiced to Participating Entity or Purchasing Entity employees for personal use if such use is permitted by this Master Agreement and the applicable Participating Addendum (“Sales Data”). Timely and complete reporting of Sales Data is a material requirement of this Master Agreement. Reporting requirements, including those related to the format, contents, frequency, or delivery of reports, may be updated by NASPO ValuePoint with reasonable notice to Contractor and without amendment to this Master Agreement. NASPO ValuePoint shall have exclusive ownership of any media on which reports are submitted and shall have a perpetual, irrevocable, non-exclusive, royalty free, and transferable right to display, modify, copy, and otherwise use reports, data, and information provided under this section.

Summary Sales Data. “Summary Sales Data” is Sales Data reported as cumulative totals by state. Contractor shall, using the reporting tool or template provided by NASPO ValuePoint, report Summary Sales Data to NASPO ValuePoint for each calendar quarter no later than thirty (30) days following the end of the quarter. If Contractor has no reportable Sales Data for the quarter, Contractor shall submit a zero-sales report.

Detailed Sales Data. “Detailed Sales Data” is Sales Data that includes for each Order all information required by the Solicitation or by NASPO ValuePoint, including customer information, Order information, and line-item details.

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Contractor shall, using the reporting tool or template provided by NASPO ValuePoint, report Detailed Sales Data to NASPO ValuePoint for each calendar quarter no later than thirty (30) days following the end of the quarter. Detailed Sales Data shall be reported in the format provided in the Solicitation or provided by NASPO ValuePoint. The total sales volume of reported Detailed Sales Data shall be consistent with the total sales volume of reported Summary Sales Data.

Sales Data Crosswalks. Reserved.

Executive Summary. Contractor shall, upon request by NASPO ValuePoint, provide NASPO ValuePoint with an executive summary that includes but is not limited to a list of states with an active Participating Addendum, states with which Contractor is in negotiations, and any Participating Addendum roll-out or implementation activities and issues. NASPO ValuePoint and Contractor will determine the format and content of the executive summary.

NASPO ValuePoint Cooperative Program Marketing, Training, and Performance Review.

Contractor agrees to work cooperatively with NASPO ValuePoint personnel. Contractor agrees to present plans to NASPO ValuePoint for the education of Contractor’s contract administrator(s) and sales/marketing workforce regarding the Master Agreement contract, including the competitive nature of NASPO ValuePoint procurements, the Master agreement and participating addendum process, and the manner in which qualifying entities can participate in the Master Agreement.

Contractor agrees, as Participating Addendums become executed, if requested by ValuePoint personnel to provide plans to launch the program within the Participating Entity. Plans will include time frames to launch the agreement and confirmation that the Contractor’s website has been updated to properly reflect the contract offer as available in the Participating Entity.

Contractor agrees, absent anything to the contrary outlined in a Participating Addendum, to consider customer proposed terms and conditions, as deemed important to the customer, for possible inclusion into the customer agreement. Contractor will ensure that their sales force is aware of this contracting option.

Contractor agrees to participate in an annual contract performance review at a location selected by the Lead State and NASPO ValuePoint, which may include a discussion of marketing action plans, target strategies, marketing materials, as well as Contractor reporting and timeliness of payment of administration fees.

Contractor acknowledges that the NASPO ValuePoint logos may not be used by Contractor in sales and marketing until a logo use agreement is executed with NASPO ValuePoint.

The Lead State expects to evaluate the utilization of the Master Agreement at the annual performance review.

Lead State may, in its discretion, cancel the Master Agreement pursuant to Paragraph 42 of Exhibit A, or not exercise an option to renew, when Contractor utilization does not warrant further administration of the Master Agreement.

The Lead State may exercise its right to not renew the Master Agreement if contractor fails to record or report revenue for three consecutive quarters, upon 60-calendar day written notice to the Contractor. Cancellation based on nonuse or under-utilization will not occur sooner than two years after award of the Master Agreement. This subsection does not limit the discretionary right of either the Lead State or Contractor to cancel the Master Agreement pursuant to Paragraph 42 of Exhibit A or to terminate for default pursuant to Paragraph 44 of Exhibit A.

Contractor agrees to notify the Lead State and NASPO ValuePoint of any contractual most-favored-customer provisions in any Cooperative Purchasing Agreements that may affect the promotion of this Master Agreements or whose terms provide for adjustments to future rates or pricing based on rates, pricing in, or Orders from this master agreement. Upon request of the Lead State or NASPO ValuePoint, Contractor shall provide a copy of any such provisions. For the purposes of this paragraph, Cooperative Purchasing Agreement shall mean a cooperative DocuSign Envelope ID: 22C62BA3-AFF9-40A4-8FA3-F4D018802CC5 DocuSign Envelope ID: F019BE07-AEF0-4A14-B979-8BB85953FE52

purchasing program facilitating public procurement solicitations and agreements using a lead agency model. This does not include contracts with any federal agency or any federal contract.

Right to Publish.

Throughout the duration of this Master Agreement, Contractor must secure from the Lead State prior approval for the public release of information that pertains to the potential work or activities covered by the Master Agreement. This limitation does not preclude publication about the award of the Master Agreement or marketing activities consistent with any proposed and accepted marketing plan. The Contractor shall not make any representations of NASPO ValuePoint’s opinion or position as to the quality or effectiveness of the services that are the subject of this Master Agreement without prior written consent. Failure to adhere to this requirement may result in termination of the Master Agreement for cause.

Records Administration and Audit.

The Contractor shall maintain books, records, documents, and other evidence pertaining to this Master Agreement and Orders placed by Purchasing Entities under it to the extent and in such detail as shall adequately reflect performance and administration of payments and fees. Contractor shall permit the Lead State, a Participating Entity, a Purchasing Entity, the federal government (including its grant awarding entities and the U.S. Comptroller General), and any other duly authorized agent of a governmental agency, to audit, inspect, examine, copy and transcribe Contractor's books, documents, papers and records directly pertinent to this Master Agreement or orders placed by a Purchasing Entity under it for the purpose of making audits, examinations, excerpts, and transcriptions.

This right shall survive for a period of six (6) years following termination of this Agreement or final payment for any order placed by a Purchasing Entity against this Agreement, whichever is later, or such longer period as is required by the Purchasing Entity’s state statutes, to assure compliance with the terms hereof or to evaluate performance hereunder.

Without limiting any other remedy available to any governmental entity, the Contractor shall reimburse the applicable Lead State, Participating Entity, or Purchasing Entity for any overpayments inconsistent with the terms of the Master Agreement or Orders or underpayment of fees found as a result of the examination of the Contractor’s records.

The rights and obligations herein exist in addition to any quality assurance obligation in the Master Agreement requiring the Contractor to self-audit contract obligations and that permits the Lead State to review compliance with those obligations.

Indemnification
General Indemnity. Contractor shall indemnify, defend (to the extent permitted by a state’s Attorney General), and hold harmless an Indemnified Party from any claims or causes of action, including attorney’s fees, to the extent arising from Contractor’s intentional, willful, or negligent acts or omissions; actions that give rise to strict liability; and actions arising from breach of contract or warranty. “Indemnified Party” means NASPO, NASPO ValuePoint, the Lead State, Participating Entities, and Purchasing Entities, along with their officers and employees.

The indemnification obligations of this section do not apply in the event the claim or cause of action is the result of the Indemnified Party’s sole negligence. This clause will not be construed to bar any legal remedies the Contractor may have for the Indemnified Party’s failure to fulfill its obligation under this Contract.

Intellectual Property Indemnification.

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In the event of any such claim by any third party against the Indemnified Party that Products, Software, Services or Deliverables prepared, produced, or branded by Contractor and delivered pursuant to this Master Agreement infringe or misappropriate that third party's U.S. patent, copyright, trade secret, or other intellectual property rights ("Indemnified Claims"), the Indemnified Party shall promptly notify the Contractor. The Contractor, at its own expense, shall indemnify, defend to the extent permitted by the Indemnified Party’s laws, and hold harmless the Indemnified Party against any loss, cost, expense, or liability (including legal fees) arising out of such a claim, whether or not such claim is successful against the Indemnified Party.

If Contractor receives prompt notice of such a claim that in the Contractor's opinion is likely to result in an adverse ruling, the Contractor shall at its option (1) obtain a right for the Indemnified Party to continue using such Products, Deliverables, or Software or allow Contractor to continue performing the Services; (2) modify such Products, Software, Services, or Deliverables to make them non-infringing without materially affecting their utility or functionality; (3) replace such Products, Software, Services, or Deliverables with a non-infringing equivalent; or (4) refund any pre-paid fees for the allegedly infringing Services that have not been performed or provide a reasonable depreciated or pro rata refund for the allegedly infringing Product, Deliverables, or Software.

Notwithstanding the foregoing, Contractor shall have no obligation under this Section for any claim resulting or arising from (1) modifications of the Products, Software, Services, or Deliverables that were not performed by, on behalf of, or at the direction of Contractor; (2) the combination, operation, or use of the Products, Software, Services, or Deliverables in connection with a third-party product, software or service (the combination of which causes the claimed infringement); or (3) Contractor's compliance with Indemnified Party’s written specifications or directions, including the incorporation of any software or other materials or processes provided by or requested by Indemnified Party. Contractor's duty to indemnify and defend under this Section is contingent upon: (a) Contractor receiving prompt written notice of the third-party claim or action for which Contractor must indemnify Indemnified Party, (b) Contractor having the right to solely control the defense and resolution of such claim or action, unless the Indemnified Party’s law requires approval for a third party to defend the Indemnified Party and such approval is not received, and (c) Indemnified Party’s cooperation with Contractor in defending and resolving such claim or action. This Section states Indemnified Party’s exclusive remedies for any third-party intellectual property claim or action and nothing in this Master Agreement or elsewhere will obligate Contractor to provide any greater indemnity to Indemnified Party.

Limitations of Liability
The Parties agree that neither Contractor nor the indemnified party shall be liable to each other, regardless of the form of action, for consequential, incidental, indirect, or special damages except any claim related to bodily injury or death; an unauthorized release or breach of not public data as set forth more fully in Minn. Ch. 13; or a claim or demand based on patent, copyright, or other intellectual property infringement.

Contractor’s liability is limited to 2 times the amount paid by Purchasing Entity to Contractor during the 12 months preceding the date of the dispute concerning any products and services, or $5,000,000, whichever is greater. This limit on liability does not apply to claims for bodily injury or death or for intellectual property infringement.

Contractor’s obligations under this section shall not extend to any combination of the Product with any other product, system or method, unless the Product, system or method is:
provided by the Contractor or the Contractor’s subsidiaries or affiliates; specified by the Contractor to work with the Product; or DocuSign Envelope ID: 22C62BA3-AFF9-40A4-8FA3-F4D018802CC5 DocuSign Envelope ID: F019BE07-AEF0-4A14-B979-8BB85953FE52

reasonably required, in order to use the Product in its intended manner, and the infringement could not have been avoided by substituting another reasonably available product, system or method capable of performing the same function; or
It would be reasonably expected to use the Product in combination with such product, system or method.

License of Pre-Existing Intellectual Property.

Intentionally deleted.

Assignment of Antitrust Rights.

Contractor irrevocably assigns to a Participating Entity who is a state any claim for relief or cause of action which the Contractor now has or which may accrue to the Contractor in the future by reason of any violation of state or federal antitrust laws (15 U.S.C. § 1-15 or a Participating Entity’s state antitrust provisions), as now in effect and as may be amended from time to time, in connection with any goods or services provided in that state for the purpose of carrying out the Contractor's obligations under this Master Agreement or Participating Addendum, including, at the Participating Entity's option, the right to control any such litigation on such claim for relief or cause of action.

Debarment.

The Contractor certifies that neither it nor its principals are presently debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from participation in this transaction (contract) by any governmental department or agency. This certification represents a recurring certification made at the time any Order is placed under this Master Agreement. If the Contractor cannot certify this statement, attach a written explanation for review by the Lead State.

Governing Law and Venue.

The construction and effect of the Master Agreement after award shall be governed by the law of the state serving as Lead State. The construction and effect of any Participating Addendum or Order against the Master Agreement shall be governed by and construed in accordance with the laws of the Participating Entity’s or Purchasing Entity’s State.

Venue for any claim, dispute or action concerning the terms of the Master Agreement shall be in the state serving as Lead State. Venue for any claim, dispute, or action concerning any Order placed against the Master Agreement or the effect of a Participating Addendum shall be in the Purchasing Entity’s State.

If a claim is brought in a federal forum, then it must be brought and adjudicated solely and exclusively within the United States District Court for (in decreasing order of priority): the Lead State for claims relating to contract performance or administration if the Lead State is a party; a Participating State if a named party; the state where the Participating Entity or Purchasing Entity is located if either is a named party.

Confidentiality, Non-Disclosure, and Injunctive Relief.

Confidentiality. Contractor acknowledges that it and its employees or agents may, in the course of providing a Product under this Master Agreement, be exposed to or acquire information that is confidential to Purchasing Entity or Purchasing Entity’s clients.

Any and all information of any form that is marked as confidential by one party (the “originating party”) and is or would by its nature be deemed confidential obtained by the other party or its employees or agents (the “receiving party”) in the performance of this Master Agreement, including, but not necessarily limited to (1) any Purchasing Entity’s records, (2) personnel records, and (3) information concerning individuals, is confidential information of the originating party (“Confidential Information”).

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Any reports or other documents or items (including software) that result from the use of the Confidential Information by the receiving party shall be treated in the same manner as the Confidential Information.

Confidential Information does not include information that (1) is or becomes (other than by disclosure by the receiving party) publicly known; (2) is furnished by the originating party to others without restrictions similar to those imposed by this Master Agreement; (3) is rightfully in the receiving party’s possession without the obligation of nondisclosure prior to the time of its disclosure under this Master Agreement; (4) is obtained from a source other than the originating party without the obligation of confidentiality, (5) is disclosed with the written consent of the originating party or; (6) is independently developed by employees, agents or subcontractors of the receiving party who can be shown to have had no access to the Confidential Information.

Non-Disclosure. The receiving party shall hold Confidential Information in confidence, using at least the industry standard of confidentiality, and shall not copy, reproduce, sell, assign, license, market, transfer or otherwise dispose of, give, or disclose Confidential Information to third parties or use Confidential Information for any purposes whatsoever other than what is necessary to the performance of Orders placed under this Master Agreement.

Each party shall advise each of its employees and agents of their obligations to keep Confidential Information confidential. Contractor shall use commercially reasonable efforts to assist Purchasing Entity in identifying and preventing any unauthorized use or disclosure of any Confidential Information.

Without limiting the generality of the foregoing, the receiving party shall advise the originating party, and the applicable Participating Entity, and the Lead State if the originating party is a Purchasing Entity, and the Lead State if the originating party is a Participating Entity, immediately if the receiving party learns or has reason to believe that any person who has had access to Confidential Information has violated or intends to violate the terms of this Master Agreement, and the receiving party shall at its expense cooperate with advise the originating party in seeking injunctive or other equitable relief in the name of either party against any such person.

Except as directed by the originating party, the receiving party will not at any time during or after the term of this Master Agreement disclose, directly or indirectly, any Confidential Information to any person, except in accordance with this Master Agreement, and that upon termination of this Master Agreement or at the originating party’s request, the receiving party shall turn over to the originating party all documents, papers, and other matter in the receiving party’s possession that embody Confidential Information.

Notwithstanding the foregoing, Contractor may keep one copy of such Confidential Information necessary for quality assurance, audits and evidence of the performance of this Master Agreement, and Purchasing Entity may retain Confidential Information to the extent and for the duration required by applicable law.

Injunctive Relief. Each party acknowledges that the other party’s breach of this section, including disclosure of any Confidential Information, will cause irreparable injury to originating party that is inadequately compensable in damages. Accordingly, the originating party may seek and obtain injunctive relief against the breach or threatened breach of the foregoing undertakings, in addition to any other legal remedies that may be available. Contractor acknowledges and agrees that the covenants contained herein are necessary for the protection of the legitimate business interests of Purchasing Entity and are reasonable in scope and content.

Purchasing Entity Law. These provisions shall be applicable only to extent they are not in conflict with the applicable public disclosure laws of any Purchasing Entity.

The rights granted Purchasing Entities and Contractor obligations under this section shall also extend to the cooperative’s Confidential Information, defined to include Participating Addenda, as well as Orders or transaction data relating to Orders under this Master Agreement that identify the entity/customer, Order dates, line item DocuSign Envelope ID: 22C62BA3-AFF9-40A4-8FA3-F4D018802CC5 DocuSign Envelope ID: F019BE07-AEF0-4A14-B979-8BB85953FE52

descriptions and volumes, and prices/rates. This provision does not apply to disclosure to the Lead State, a Participating State, or any governmental entity exercising an audit, inspection, or examination pursuant to Paragraph 33 of Exhibit A. To the extent permitted by law, Contractor shall notify the Lead State of the identity of any entity seeking access to the Confidential Information described in this subsection.

Public Information.

This Master Agreement and all related documents are subject to disclosure pursuant to the Lead State’s public information laws.

Cancellation.

Unless otherwise set forth in this Master Agreement, this Master Agreement may be canceled by either party upon 60 days written notice prior to the effective date of the cancellation. Further, any Participating Entity may cancel its participation upon 30 days written notice, unless otherwise stated in the Participating Addendum. Cancellation may be in whole or in part. Any cancellation under this provision shall not affect the rights and obligations attending orders outstanding at the time of cancellation, including any right of a Purchasing Entity to indemnification by the Contractor, rights of payment for Products delivered and accepted, rights attending any warranty or default in performance in association with any Order, and requirements for records administration and audit. Cancellation of the Master Agreement due to Contractor default may be immediate as set forth in Paragraph 44 of Exhibit A.

Force Majeure.

Neither party to this Master Agreement shall be held responsible for delay or default caused by fire, riot, unusually severe weather, other acts of God, or war which are beyond that party’s reasonable control. The Lead State may terminate this Master Agreement after determining such delay or default will reasonably prevent successful performance of the Master Agreement.

Defaults and Remedies.

The occurrence of any of the following events shall be an event of default under this Master Agreement:

Nonperformance of contractual requirements; or
A material breach of this Master Agreement; or
Any certification, representation or warranty by Contractor in response to the RFP or in this Master Agreement that proves to be untrue or materially misleading; or Institution of proceedings under any bankruptcy, insolvency, court-ordered reorganization or similar law, by or against Contractor, or the appointment of a receiver or similar officer for Contractor or any of its property, which is not vacated or fully stayed within thirty (30) calendar days after the institution or occurrence thereof; or
Any default specified in another section of this Master Agreement.

Upon the occurrence of an event of default, except for material breach, the Lead State shall issue a written notice of default, identifying the nature of the default, and providing a period of 30 calendar days in which Contractor shall have an opportunity to cure the default. The Lead State shall not be required to provide advance written notice or a cure period and may immediately terminate this Master Agreement in whole or in part if the Lead State, in its sole discretion, determines that it is reasonably necessary to preserve public safety or prevent immediate public crisis. Time allowed for cure shall not diminish or eliminate Contractor’s liability for damages, including liquidated damages to the extent provided for under this Master Agreement. The Lead State may immediately terminate this Master Agreement upon material breach of the Master Agreement by Contractor.

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If Contractor is afforded an opportunity to cure and fails to cure the default within the period specified in the written notice of default, Contractor shall be in breach of its obligations under this Master Agreement and the Lead State shall have the right to exercise any or all of the following remedies:

Exercise any remedy provided by law; and
Terminate this Master Agreement and any related contracts or portions thereof; and Impose liquidated damages as provided in this Master Agreement; and Suspend Contractor from being able to respond to future bid solicitations; and Suspend Contractor’s performance; and
Withhold payment until the default is remedied.

Unless otherwise specified in the Participating Addendum, in the event of a default under a Participating Addendum, a Participating Entity shall provide a written notice of default as described in this section and shall have all of the rights and remedies under this paragraph regarding its participation in the Master Agreement, in addition to those set forth in its Participating Addendum. Unless otherwise specified in a Purchase Order, a Purchasing Entity shall provide written notice of default as described in this section and have all of the rights and remedies under this paragraph and any applicable Participating Addendum with respect to an Order placed by the Purchasing Entity.

Nothing in these Master Agreement Terms and Conditions shall be construed to limit the rights and remedies available to a Purchasing Entity under the applicable commercial code.

Waiver of Breach.

Failure of the Lead State, Participating Entity, or Purchasing Entity to declare a default or enforce any rights and remedies shall not operate as a waiver under this Master Agreement or Participating Addendum. Any waiver by the Lead State, Participating Entity, or Purchasing Entity must be in writing. Waiver by the Lead State or Participating Entity of any default, right or remedy under this Master Agreement or Participating Addendum, or by Purchasing Entity with respect to any Purchase Order, or breach of any terms or requirements of this Master Agreement, a Participating Addendum, or Purchase Order shall not be construed or operate as a waiver of any subsequent default or breach of such term or requirement, or of any other term or requirement under this Master Agreement, Participating Addendum, or Purchase Order.

Notices.

If one party is required to give notice to the other under the Master Agreement, such notice shall be in writing and shall be effective upon receipt. Delivery may be by certified United States mail or by hand, in which case a signed receipt shall be obtained. A facsimile or electronic transmission shall constitute sufficient notice, provided the receipt of the transmission is confirmed by the receiving party. Either party must notify the other of a change in address for notification purposes. All notices to the Lead State shall be addressed as follows:

Elizabeth Randa, Acquisition Management Specialist
112 Administration Bldg.
50 Sherburne Avenue
St. Paul, MN 55155
[email protected]
No Waiver of Sovereign Immunity.

In no event shall this Master Agreement, any Participating Addendum or any contract or any Purchase Order issued thereunder, or any act of the Lead State, a Participating Entity, or a Purchasing Entity be a waiver of any form of defense DocuSign Envelope ID: 22C62BA3-AFF9-40A4-8FA3-F4D018802CC5 DocuSign Envelope ID: F019BE07-AEF0-4A14-B979-8BB85953FE52

or immunity, whether sovereign immunity, governmental immunity, immunity based on the Eleventh Amendment to the Constitution of the United States or otherwise, from any claim or from the jurisdiction of any court.

This section applies to a claim brought against the Participating Entities who are states only to the extent Congress has appropriately abrogated the state’s sovereign immunity and is not consent by the state to be sued in federal court. This section is also not a waiver by the state of any form of immunity, including but not limited to sovereign immunity and immunity based on the Eleventh Amendment to the Constitution of the United States.

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Exhibit B: Minnesota Terms and Conditions
Change Requests.

The Lead State reserves the right to request, during the term of the Master Agreement, changes to the products offered within the Band(s). Products introduced during the term of the Master Agreement shall go through a formal review process. The process for updating the products offered within a Band is outlined in Paragraph 2 of Exhibit B. The Contractor shall evaluate and recommend products for which agencies have an expressed need. The Lead State shall require the Contractor to provide a summary of its research of those products being recommended for inclusion in the Master Agreement as well as defining how adding the product will enhance the Master Agreement. The Lead State may request that products, other than those recommended, are added to the Master Agreement.

In the event that the Lead State desires to add new products and services that are not included in the original Master Agreement, the Lead State requires that independent manufacturers and resellers cooperate with the already established Contractor in order to meet the Lead State’s requirements. Evidence of the need to add products or services should be demonstrated to the Lead State. The Master Agreement shall be modified via supplement or amendment. The Lead State will negotiate the inclusion of the products and services with the Contractor. No products or services will be added to the Master Agreement without the Lead State’s prior approval.

Product and Service Schedule (PSS).

Creating the Product and Service Schedule (PSS). Contractor will use the attached sample PSS to create and maintain a complete listing of all products and services offered under the Master Agreement. The PSS must conform to the contracted minimum discounts. Contractor may create and maintain a separate PSS for a Participating Entity based on the requirements and restrictions of the Participating Entity.

Contractors are encouraged to provide remote learning bundles for K-12 Education. These bundles can be included in the response to the PSS.

Maintaining the PSS.

In General. Throughout the term of the Master Agreement, on a quarterly basis, Contractor may update the PSS to make model changes, add new products or services, or remove obsolete or discontinued products or services. Any updates to the PSS must conform to the Master Agreement requirements, including the scope of the Master Agreement and contracted minimum discounts.

Process. Contractor must provide notification to the Lead State of any changes to their PSS using the attached Action Request Form (ARF).
a) The Lead State does not need to approve Contractor’s request to make model changes, add their own manufactured products, or remove discontinued or obsolete products or services, and Contractor does not need the Lead State’s approval prior to posting an updated PSS. b) The Lead State must approve Contractor’s request to add new third party manufacturers to Contractor’s PSS. If the proposed third-party manufacturer holds a NASPO Master Agreement for Computer Equipment, Contractor must obtain written authorization from that manufacturer. Contractor must have the Lead State’s approval prior to posting the updated PSS.
c) Contractor must maintain a historic record of all past PSSs on their dedicated NASPO ValuePoint website.

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d) Pursuant to the audit provisions of the Master Agreement, upon the request of NASPO ValuePoint, the Lead State, or a Participating Entity, Contractor must provide an historic version of any Baseline Price List.

Purchase Orders.

There will be no minimum order requirements or charges to process an individual purchase order. The Participating Addendum number and the PO number must appear on all documents (e.g., invoices, packing slips, etc.). The Ordering Entity’s purchase order constitutes a binding contract.

Risk of Loss or Damage.

The Purchasing Entity is relieved of all risks of loss or damage to the goods or equipment during periods of transportation, and installation by the Contractor and in the possession of the Contractor or their authorized agent.

Payment Card Industry Data Security Standard and Cardholder Information Security.

Contractor assures all of its Network Components, Applications, Servers, and Subcontractors (if any) comply with the Payment Card Industry Data Security Standard (“PCIDSS”). “Network Components” shall include, but are not limited to, Contractor’s firewalls, switches, routers, wireless access points, network appliances, and other security appliances; “Applications” shall include, but are not limited to, all purchased and custom external (web) applications. “Servers” shall include, but are not limited to, all of Contractor’s web, database, authentication, DNS, mail, proxy, and NTP servers. “Cardholder Data” shall mean any personally identifiable data associated with a cardholder, including, by way of example and without limitation, a cardholder’s account number, expiration date, name, address, social security number, or telephone number.

Subcontractors (if any) must be responsible for the security of all Cardholder Data in its possession; and will only use Cardholder Data for assisting cardholders in completing a transaction, providing fraud control services, or for other uses specifically required by law. Contractor must have a business continuity program which conforms to PCIDSS to protect Cardholder Data in the event of a major disruption in its operations or in the event of any other disaster or system failure which may occur to operations; will continue to safeguard Cardholder Data in the event this Agreement terminates or expires; and ensure that a representative or agent of the payment card industry and a representative or agent of the Purchasing Entity shall be provided with full cooperation and access to conduct a thorough security review of Contractor’s operations, systems, records, procedures, rules, and practices in the event of a security intrusion in order to validate compliance with PCIDSS.

Foreign Outsourcing of Work.

Upon request, the Contractor is required to provide information regarding the location of where services, data storage, and location of data processing under the Master Agreement will be performed.

State Audits (Minn. Stat. § 16C.05, subd. 5).

The books, records, documents, and accounting procedures and practices of the Contractor or other party, that are relevant to the Master Agreement or transaction are subject to examination by the contracting agency and either the Lead State’s Legislative Auditor or State Auditor as appropriate for a minimum of six years after the end of the Master Agreement or transaction. The Lead State reserves the right to authorize delegate(s) to audit this Master Agreement and transactions.

Certification of Nondiscrimination (in accordance with Minn. Stat. § 16C.053).

If the value of this Contract, including all extensions, is $50,000 or more, Contractor certifies it does not engage in and has no present plans to engage in discrimination against Israel, or against persons or entities doing business in Israel, when making decisions related to the operation of the contractor's business. For purposes of this section, "discrimination" includes but is not limited to engaging in refusals to deal, terminating business activities, or other actions that are intended to limit commercial relations with Israel, or persons or entities doing business in Israel, when such actions are taken in a manner that in any way discriminates on the basis of nationality or national origin and is not based on a valid business reason.

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Human Rights/Affirmative Action.

The Lead State requires affirmative action compliance by its Contractors in accordance with Minn. Stat. § 363A.36 and Minn. R. 5000.3400 to 5000.3600.

Covered Contracts and Contractors. If the Contract exceeds $100,000 and the Contractor employed more than 40 full-time employees on a single working day during the previous 12 months in Minnesota or in the state where it has its principal place of business, then the Contractor must comply with the requirements of Minn. Stat. § 363A.36 and Minn. R. 5000.3400-5000.3600.

Minn. R. 5000.3400-5000.3600 implement Minn. Stat. § 363A.36. These rules include, but are not limited to, criteria for contents, approval, and implementation of affirmative action plans; procedures for issuing certificates of compliance and criteria for determining a contractor’s compliance status; procedures for addressing deficiencies, sanctions, and notice and hearing; annual compliance reports; procedures for compliance review; and contract consequences for noncompliance. The specific criteria for approval or rejection of an affirmative action plan are contained in various provisions of Minn. R. 5000.3400 5000.3600 including, but not limited to, parts 5000.3420- 5000.3500 and parts 5000.3552 5000.3559.

Disabled Workers. Minn. R. 5000.3550 provides the Contractor must comply with the following affirmative action requirements for disabled workers.

AFFIRMATIVE ACTION FOR DISABLED WORKERS
(a) The Contractor must not discriminate against any employee or applicant for employment because of physical or mental disability in regard to any position for which the employee or applicant for employment is qualified. The Contractor agrees to take affirmative action to employ, advance in employment, and otherwise treat qualified disabled persons without discrimination based upon their physical or mental disability in all employment practices such as the following: employment, upgrading, demotion or transfer, recruitment, advertising, layoff or termination, rates of pay or other forms of compensation, and selection for training, including apprenticeship. (b) The Contractor agrees to comply with the rules and relevant orders of the Minnesota Department of Human Rights issued pursuant to the Minnesota Human Rights Act. (c) In the event of the Contractor’s noncompliance with the requirements of this clause, actions for noncompliance may be taken in accordance with Minn. Stat. § 363A.36 and the rules and relevant orders of the Minnesota Department of Human Rights issued pursuant to the Minnesota Human Rights Act.
(d) The Contractor agrees to post in conspicuous places, available to employees and applicants for employment, notices in a form to be prescribed by the commissioner of the Minnesota Department of Human Rights. Such notices must state the Contractor’s obligation under the law to take affirmative action to employ and advance in employment qualified disabled employees and applicants for employment, and the rights of applicants and employees. (e) The Contractor must notify each labor union or representative of workers with which it has a collective bargaining agreement or other contract understanding, that the Contractor is bound by the terms of Minn. Stat. § 363A.36 of the Minnesota Human Rights Act and is committed to take affirmative action to employ and advance in employment physically and mentally disabled persons.

Consequences. The consequences of a Contractor’s failure to implement its affirmative action plan or make a good faith effort to do so include, but are not limited to, suspension or revocation of a certificate of compliance by DocuSign Envelope ID: 22C62BA3-AFF9-40A4-8FA3-F4D018802CC5 DocuSign Envelope ID: F019BE07-AEF0-4A14-B979-8BB85953FE52

the commissioner, refusal by the commissioner to approve subsequent plans, and termination of all or part of the Contract by the commissioner or the State.

Certification. The Contractor hereby certifies that it is in compliance with the requirements of Minn. Stat. § 363A.36, subd. 1 and Minn. R. 5000.3400-5000.3600 and is aware of the consequences for noncompliance. It is agreed between the parties that Minn. Stat. 363.36 and Minn. R. 5000.3400 to 5000.3600 are incorporated into any contract between these parties based upon this specification or any modification of it. A copy of Minn. Stat. § 363A.36 and Minn. R. 5000.3400 to 5000.3600 are available upon request from the contracting agency.

Equal Pay Certification.

If required by Minn. Stat. §363A.44, the Contractor must have a current Equal Pay Certificate prior to Contract execution. If Contractor's Equal Pay Certificate expires during the term of this Contract, Contractor must promptly re- apply for an Equal Pay Certificate with the Minnesota Department of Human Rights and notify the State's Authorized Representative once the Contractor has received the renewed Equal Pay Certificate. If Contractor claims to be exempt, the Lead State may require Contractor to verify its exempt status.

Americans with Disabilities Act (ADA).

Products provided under the Master Agreement must comply with the requirements of the Americans with Disabilities Act (ADA). The Contractor’s catalog and other marketing materials utilized to offer products under the Master Agreement must state when a product is not in compliance. If any descriptive marketing materials are silent as to these requirements, the Contractor agrees that the customer can assume the product meets or exceeds the ADA requirements.

Nonvisual Access Standards.

Pursuant to Minn. Stat. § 16C.145, the Contractor shall comply with the following nonvisual technology access standards:

That the effective interactive control and use of the technology, including the operating system applications programs, prompts, and format of the data presented, are readily achievable by nonvisual means; That the nonvisual access technology must be compatible with information technology used by other individuals with whom the blind or visually impaired individual must interact; That nonvisual access technology must be integrated into networks used to share communications among employees, program participants, and the public; and
That the nonvisual access technology must have the capability of providing equivalent access by nonvisual means to telecommunications or other interconnected network services used by persons who are not blind or visually impaired.

These standards do not require the installation of software or peripheral devices used for nonvisual access when the information technology is being used by individuals who are not blind or visually impaired.

Accessibility Standards.

Contractor acknowledges and is fully aware that the Lead State (Executive branch state agencies) has developed IT Accessibility Standard effective September 1, 2010. The standard entails, in part, the Web Content Accessibility Guidelines (WCAG) and Section 508 which can be viewed at: https://mn.gov/mnit/government/policies/accessibility/.

The Standards apply to web sites, software applications, electronic reports and output documentation, training delivered in electronic formats (including, but not limited to, documents, videos, and webinars), among others. As upgrades are made to the software, products, or subscriptions available through this Contract, the Contractor agrees to DocuSign Envelope ID: 22C62BA3-AFF9-40A4-8FA3-F4D018802CC5 DocuSign Envelope ID: F019BE07-AEF0-4A14-B979-8BB85953FE52

develop functionality which supports accessibility. If any issues arise due to nonconformance with the above-mentioned accessibility Standards, the Contractor agrees to provide alternative solutions upon request at no additional charge to the State.

When updates or upgrades are made to the products or services available through this Contract, the Contractor agrees to document how the changes will impact or improve the product’s or service’s accessibility and usability. This documentation, upon request, must be provided to the Lead State in advance of the change, occurring within an agreed upon timeframe sufficient for the state to review the changes and either approve them or request a remediation plan from the Contractor. Contractor warrants that its Products comply with the above-mentioned accessibility Standards and agrees to indemnify, defend, and hold harmless the Lead State against any claims related to non-compliance of Contractor’s Product with the above-mentioned accessibility Standards. If agreed-upon updates fail to improve the product or service’s accessibility or usability as planned, the failure to comply with this requirement may be cause for contract cancellation or for the Lead State to consider the Contractor in default.

Conflict Minerals.

Contractor agrees to provide information upon request regarding adherence to the Conflict Minerals section of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Section 1502).

See: http://beta.congress.gov/111/bills/hr4173/111hr4173enr.pdf#page=838 http://www.sec.gov/news/press/2012/2012-163.htm
Hazardous Substances.

To the extent that the goods to be supplied by the Contractor contain or may create hazardous substances, harmful physical agents or infectious agents as set forth in applicable state and federal laws and regulations, the Contractor must provide Material Safety Data Sheets regarding those substances. A copy must be included with each delivery.

Copyrighted Material Waiver.

The Lead State reserves the right to use, reproduce and publish proposals in any manner necessary for State agencies and local units of government to access the responses, including but not limited to photocopying, State Intranet/Internet postings, broadcast faxing, and direct mailing. In the event that the response contains copyrighted or trademarked materials, it is the responder’s responsibility to obtain permission for the Lead State to reproduce and publish the information, regardless of whether the responder is the manufacturer or reseller of the products listed in the materials. By signing its response, the responder certifies that it has obtained all necessary approvals for the reproduction and distribution of the contents of its response and agrees to indemnify, protect, save and hold the Lead State, its representatives and employees harmless from any and all claims arising from the violation of this section and agrees to pay all legal fees incurred by the Lead State in the defense of any such action.

Publicity.

The Contractor shall make no representations of the State’s opinion or position as to the quality or effectiveness of the products or services that are the subject of the Master Agreement without the prior written consent of the State’s Assistant Director or designee of Office of State Procurement. Representations include any publicity, including but not limited to advertisements, notices, press releases, reports, signs, and similar public notices.

Performance While Dispute is Pending.

Notwithstanding the existence of a dispute, the parties shall continue without delay to carry out all of their responsibilities under the Master Agreement that are not affected by the dispute. If a party fails to continue without delay to perform its responsibilities under the Master Agreement, in the accomplishment of all undisputed work, any additional cost incurred by the other parties as a result of such failure to proceed shall be borne by the responsible party.

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Organizational Conflicts of Interest.

An organizational conflict of interest exists when, because of existing or planned activities or because of relationships with other persons:
the Contractor is unable or potentially unable to render impartial assistance or advice to the State; the Contractor’s objectivity in performing the work is or might be otherwise impaired; or the Contractor has an unfair competitive advantage.

The Contractor agrees that if an organizational conflict of interest is discovered after award, an immediate and full disclosure in writing shall be made to the Assistant Director of the Lead State’s Department of Administration’s Office of State Procurement that shall include a description of the action the Contractor has taken or proposes to take to avoid or mitigate such conflicts. If an organizational conflict of interest is determined to exist, the Lead State may, at its discretion, cancel the Master Agreement. In the event the Contractor was aware of an organizational conflict of interest prior to the award of the Master Agreement and did not disclose the conflict to the Master Agreement Administrator, the Lead State may terminate the Master Agreement for default. The provisions of this clause shall be included in all subcontracts for work to be performed, and the terms “Contract,” “Contractor,” “Master Agreement”, “Master Agreement Administrator” and “Contract Administrator” modified appropriately to preserve the State’s rights.

Certification Regarding Debarment, Suspension, Ineligibility and Voluntary Exclusion Certification regarding Debarment, Suspension, Ineligibility and Voluntary Exclusion – Lower Tier Covered Transactions. Instructions for certification:

By signing and submitting this proposal, the prospective lower tier participant [responder] is providing the certification set out below.

The certification in this clause is a material representation of fact upon which reliance was placed when this transaction was entered into. If it is later determined that the prospective lower tier participant knowingly rendered an erroneous certification, in addition to other remedies available to the federal government, the department or agency with which this transaction originated may pursue available remedies, including suspension and debarment.

The prospective lower tier participant shall provide immediate written notice to the person to whom this proposal [response] is submitted if at any time the prospective lower tier participant learns that its certification was erroneous when submitted or had become erroneous by reason of changed circumstances.

The terms covered transaction, debarred, suspended, ineligible lower tier covered transaction, participant, person, primary covered transaction, principal, proposal, and voluntarily excluded, as used in this clause, have the meaning set out in the Definitions and Coverages section of rules implementing Executive Order 12549. You may contact the person to which this proposal is submitted for assistance in obtaining a copy of those regulations.

The prospective lower tier participant agrees by submitting this response that, should the proposed covered transaction be entered into, it shall not knowingly enter into any lower tier covered transaction [subcontract equal to or exceeding $25,000] with a person who is proposed for debarment under 48 CFR part 9, subpart 9.4, debarred, suspended, declared ineligible, or voluntarily excluded from participation in this covered transaction, unless authorized by the department or agency with which this transaction originated.

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The prospective lower tier participant further agrees by submitting this proposal that it will include this clause titled, “Certification Regarding Debarment, Suspension, Ineligibility, and Voluntary Exclusion – Lower Tier Covered Transaction,” without modification, in all lower tier covered transactions and in all solicitations for lower tier covered transactions.

A participant in a covered transaction may rely upon a certification of a prospective participant in a lower tier covered transaction that it is not proposed for debarment under 48 CFR part 9, subpart 9.4, debarred, suspended, ineligible, or voluntarily excluded from covered transactions, unless it knows that the certification is erroneous. A participant may decide the method and frequency by which it determines the eligibility of its principals. Each participant may, but is not required to, check the list of parties excluded from federal procurement and nonprocurement programs.

Nothing contained in the foregoing shall be construed to require establishment of a system of records in order to render in good faith the certification required by this clause. The knowledge and information of a participant is not required to exceed that which is normally possessed by a prudent person in the ordinary course of business dealings.

Except for transactions authorized under paragraph 5 of these instructions, if a participant in a covered transaction knowingly enters into a lower tier covered transaction with a person who is proposed for debarment under 48 CFR part 9, subpart 9.4, suspended, debarred, ineligible, or voluntarily excluded from participation in this transaction, in addition to other remedies available to the Federal government, the department or agency with which this transaction originated may pursue available remedies, including suspension and debarment.

Certification Regarding Debarment, Suspension, Ineligibility and Voluntary Exclusion – Lower Tier Covered Transactions.

The prospective lower tier participant certifies, by submission of this proposal, that neither it nor its principals is presently debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from participation in this transaction by any Federal department or agency.

Where the prospective lower tier participant is unable to certify to any of the statements in this certification, such prospective participant shall attach an explanation to this proposal.

Government Data Practices.

The Contractor and the Lead State must comply with the Minnesota Government Data Practices Act, Minn. Stat. Ch. 13, (and where applicable, if the Lead State contracting party is part of the judicial branch, with the Rules of Public Access to Records of the Judicial Branch promulgated by the Minnesota Supreme Court as the same may be amended from time to time) as it applies to all data provided by the Lead State to the Contractor and all data provided to the Lead State by the Contractor. In addition, the Minnesota Government Data Practices Act applies to all data created, collected, received, stored, used, maintained, or disseminated by the Contractor in accordance with the Master Agreement that is private, nonpublic, protected nonpublic, or confidential as defined by the Minnesota Government Data Practices Act, Ch. 13 (and where applicable, that is not accessible to the public under the Rules of Public Access to Records of the Judicial Branch).

In the event the Contractor receives a request to release the data referred to in this article, the Contractor must immediately notify the Lead State. The Lead State will give the Contractor instructions concerning the release of the data to the requesting party before the data is released. The civil remedies of Minn. Stat. § 13.08, apply to the release of the data by either the Contractor or the Lead State.

The Contractor agrees to indemnify, save, and hold the Lead State, its agent and employees, harmless from all claims arising out of, resulting from, or in any manner attributable to any violation of any provision of the Minnesota DocuSign Envelope ID: 22C62BA3-AFF9-40A4-8FA3-F4D018802CC5 DocuSign Envelope ID: F019BE07-AEF0-4A14-B979-8BB85953FE52

Government Data Practices Act (and where applicable, the Rules of Public Access to Records of the Judicial Branch), including legal fees and disbursements paid or incurred to enforce this provision of the Master Agreement. In the event that the Contractor subcontracts any or all of the work to be performed under the Master Agreement, the Contractor shall retain responsibility under the terms of this article for such work.

Survivability.

Certain rights and duties of the Lead State and Contractor will survive the expiration or cancellation of the RFP and resulting Master Agreement. These rights and duties include but are not limited to paragraphs: Indemnification; Limitations of Liability; State Audits; Government Data Practices; Governing Law and Venue; Publicity; and Administrative Fees.

Severability.

If any provision of the Master Agreement, including items incorporated by reference, is found to be illegal, unenforceable, or void, then both the Lead State and the Contractor shall be relieved of all obligations arising under such provisions. If the remainder of the Master Agreement is capable of performance it shall not be affected by such declaration or finding and shall be fully performed.

DocuSign Envelope ID: 22C62BA3-AFF9-40A4-8FA3-F4D018802CC5 DocuSign Envelope ID: F019BE07-AEF0-4A14-B979-8BB85953FE52

Exhibit C: Requirements
Contractor Verification.

Contractor must be a manufacturer of a Product in the Band(s) it is awarded a Master Agreement. “Re-branding” a product that is manufactured by another company does not meet this requirement. If the Contractor ceases production, sells or assigns their manufacturing to another vendor, or otherwise no longer manufactures a product during the life of the Master Agreement the Lead State reserves the right to terminate the Contractor’s Master Agreement.

Warranty and Maintenance.

Contractor must ensure warranty service and maintenance for all equipment, including third party products provided.

The Contractor must facilitate the Manufacturer or Publisher warranty and maintenance of third party products furnished through the Master Agreement. The Contractor shall provide the warranty service and maintenance for equipment and all peripherals on the Master Agreement.

Website.

Contractor must develop and maintain a URL to a web site specific to the awarded Master Agreement. Contractor’s Master Agreement website must offer twenty-four (24) hours per day, seven (7) days per week availability, except for regularly scheduled maintenance times. The website must be separate from the Contractor’s commercially available (i.e., public) on-line catalog and ordering systems. No other items or pricing may be shown on the website without written approval from the Lead State
Mandatory Specifications:
• Designated Baseline Price List(s) (e.g., MSRP, List, or Education) • Product and Service Schedule (PSS)
• Product specifications, pricing, and configuration aids for the major product categories proposed that can be used to obtain an on-line quote,
• Service options and service agreements available on the contract. Please refer to Paragraph 5. • Contact information for order placement, service concerns (warranty and maintenance), problem reporting, and billing concerns
• Sales representatives for participating entities
• Links to environmental certification, including but not limited to take-back/recycling programs, EPEAT, Energy Star, etc.

Desirable Specifications:
• Purchase order tracking
• Information on accessibility and accessible products
• Signed Master Agreement
• Online ordering capability with the ability to remember multiple ship to locations (if applicable to product) • List of approved partners, if applicable
Within 30 calendar days of the notice of intent to award a Master Agreement, Contractor must provide a sample URL of the Master Agreement webpage to the Lead State for review and approval. The Lead State will review and determine acceptability of the website format and data. If the information is determined to be unacceptable or incorrect, the Contractor will have 15 calendar days to provide revisions to the Lead State. After the Lead State approves the website, Contractor may not make material changes to the website without notifying the Lead State through the ARF process and receiving written approval of the changes.

DocuSign Envelope ID: 22C62BA3-AFF9-40A4-8FA3-F4D018802CC5 DocuSign Envelope ID: F019BE07-AEF0-4A14-B979-8BB85953FE52

Environmental Certifications.

Contractor must include environmental or supply chain responsibility certifications and registrations for products sold through this Contract on their website. Contractor must provide these certifications and registrations for specific products to Participating Entities upon request.

EPEAT Registration.

Contractor agrees that applicable products offered that have EPEAT Standards provided under the Master Agreement must have achieved a minimum EPEAT Bronze registration. This requirement does not apply to Band 3.

Contractor may propose the addition of a product that has not yet achieved a minimum EPEAT Bronze registration. The Lead State, in its sole discretion may require Contractor to provide the following documentation to support the addition of the proposed product:
• A letter from the Green Electronics Council (GEC) on GEC’s letterhead confirming that the verification process is underway; or
• A copy of Contractor’s GEC contract, Conformity Assurance Board (CAB) contract, and a letter from Contractor’s CAB stating that the relevant product has been registered with the CAB and that verification is underway.

The Lead State reserves the right to reject the inclusion of such product, or if approved, require Contractor to remove the product at a later date if the product does not achieve a minimum EPEAT Bronze registration. The Contractor must remove any products that subsequently exit the verification process without achieving EPEAT Bronze or greater from the Master Agreement.

Third-Party Products.

Some products offered may be manufactured by a third party. Contractor, however, must provide or facilitate the warranty service and maintenance for all Third-Party Products on the Master Agreement either directly or pass-through from the manufacturer. Contractor may not offer products manufactured by another Contractor holding a Minnesota NASPO ValuePoint Master Agreement for Computer Equipment without approval from the Lead State. Warranty for third-party products must be provided by the Contractor. Warranty documents for products manufactured by a third party are preferred to be delivered to the Participating Entity with the products. Contractor can only offer Third-Party Products in a Band they have been awarded.

Third-Party Products are intended to enhance or supplement a Contractor’s own product line, and are not intended to represent more than a third of Contractor’s total sales under this Master Agreement. The Lead State may limit the sale of Third-Party Products through the Master Agreement during the life of the Master Agreement should Third-Party Product sales be determined to consistently exceed one third of the total sales under this Master Agreement. Such limitation may take the form of any action the Lead State so chooses, up to and including non-renewal or cancellation of the Master Agreement.

Partner Utilization.

If utilizing partners, the Contractor is responsible for the partners providing products and services, as well as warranty service and maintenance for equipment the partner provides. Participating Entities have the option of utilizing partners.

Contractor must provide a Participating Entity a copy of its plan for partner utilization upon request. Contractor must make available a list of approved partners for each Participating Entity. Participating Entities must approve specific Partners as outlined within the relevant Participating Addendum, and only partners approved by the Participating Entity may be deployed. The Participating Entity will define the process to add and remove partners in their Participating Addendum.
2019 National Defense Authorization Act, Section 889(f)(3).

Under the 2019 National Defense Authorization Act, Section 889(f)(3), the US military is prohibited from purchasing video surveillance and telecommunications equipment from certain Chinese-owned technology firms. While US state are DocuSign Envelope ID: 22C62BA3-AFF9-40A4-8FA3-F4D018802CC5 DocuSign Envelope ID: F019BE07-AEF0-4A14-B979-8BB85953FE52

not subject to this act, there is increasing concern for the security of state data. Contractor certifies for the term of this Master Agreement that it is not subject to laws, rules, or policies potentially requiring disclosure of, or provision of access to, customer data to foreign governments or entities controlled by foreign governments, and that Contractor's Products do not contain, include, or utilize components or services supplied by any entity subject to the same.

Contractor also certifies that its Products do not contain, include, or utilize any covered technology prohibited under Section 889 of the National Defense Authorization Act, as amended.

DocuSign Envelope ID: 22C62BA3-AFF9-40A4-8FA3-F4D018802CC5 DocuSign Envelope ID: F019BE07-AEF0-4A14-B979-8BB85953FE52

Exhibit D: Pricing Schedule
Attached and incorporated into this Master Agreement as Exhibit D is the Price Schedule.

DocuSign Envelope ID: 22C62BA3-AFF9-40A4-8FA3-F4D018802CC5 DocuSign Envelope ID: F019BE07-AEF0-4A14-B979-8BB85953FE52 Exhibit D: Price Schedule
NASPO ValuePoint Computer Equipment (2023-2028)

CONTROL SET
Master Agreement: 23004
Contractor Name: Dell Marketing, LP
Awarded Bands:
x Band 1: Personal Computing Devices (Windows)
x Band 2: Personal Computing Devices (Non-Windows)
x Band 3: Servers and Storage
Band Category Code Category Description Discount off
Baseline List
1 1B Band 1 - Minimum Discount 18.0%
1 1T Band 1 - Third Party Product Minimum Discount 5.5% 2 2B Band 2 - Minimum Discount 18.0%
2 2T Band 2 - Third Party Product Minimum Discount 5.5% 3 3B Band 3 - Minimum Discount 18.0%
3 3T Band 3 - Third Party Product Minimum Discount 5.5% S-1 Standalone Services 4.0%
S-2 Warranty Services 4.0%
S-3 Training and Other Professional Services 4.0%
DocuSign Envelope ID: 22C62BA3-AFF9-40A4-8FA3-F4D018802CC5 DocuSign Envelope ID: F019BE07-AEF0-4A14-B979-8BB85953FE52 Exhibit D: Price Schedule Discount Structure
Master Agreement: 23004
Contractor Name: Dell Marketing, LP
Baseline Price List: Posted on Contractor's dedicated NASPO ValuePoint website Band 1: Personal Computer Equipment (Windows OS)
Band Category Code Category Description Discount off
Baseline List
1 1B Band 1 - Minimum Discount 18.0%
1 1B-1 Desktops - Alienware, Inspiron, Vostro, XPS 0.5% 1 1B-2 Notebooks - Alienware, Inspiron, Vostro, XPS 2.5% 1 1B-3 Projectors/Monitors/Other Electronics 2.5%
1 1B-4 Displays 2.5%
1 1B-5 Imaging 2.5%
1 1B-6 Dell Branded - Printer accessories, parts, and toner 1.5% 1 1B-7 Spare Parts related to Band 1 0.5%
1 1B-8 Customer Kits 15.0%
1 1B-9 Ready to Ship configurations 4.0%
1 1T Band 1 - Third Party Product Minimum Discount 5.5% 1 1T-1 Selected Third Party - Software and Peripherals 0.5% Band 2: Personal Computer Equipment (Non-Windows OS)
Band Category Code Category Description Discount off
Baseline List
2 2B Band 2 - Minimum Discount 18.0%
2 2B-1 Commercial Chromebooks 15.0%
2 2B-2 Consumer Chromebooks 15.0%
2 2B-3 Projectors/Monitors/Other Electronics 2.5%
2 2B-4 Displays 2.5%
2 2B-5 Imaging 2.5%
2 2B-6 Dell Branded - Printer accessories, parts, and toner 1.5% 2 2B-7 Spare Parts related to Band 2 0.5%
2 2B-8 Customer Kits 15.0%
2 2B-9 Ready to Ship configurations 4.0%
2 2T Band 2 - Third Party Product Minimum Discount 5.5% 2 2T-1 Selected Third Party - Software and Peripherals (Non-discountable) 0.5% Band 3: Servers and Storage
Band Category Code Category Description Discount off
Baseline List
3 3B Band 3 - Minimum Discount 18.0%
3 3B-1 Spare Parts related to Band 3 0.5%
3 3B-2 Customer Kits 15.0%
3 3T Band 3 - Third Party Product Minimum Discount 5.5% 3 3T-1 Selected Third Party - Software and Peripherals 0.5% DocuSign Envelope ID: 22C62BA3-AFF9-40A4-8FA3-F4D018802CC5 DocuSign Envelope ID: F019BE07-AEF0-4A14-B979-8BB85953FE52 Exhibit D: Price Schedule Volume-Based Discounts
Master Agreement: 23004
Contractor Name: Dell Marketing, LP

Bands 1 & 2

1. Per Transaction Multiple Unit Discount(s)
Min $ Single Transaction Max $ Single Transaction Per Transaction Multiple Unit Discount
$100,000.00 $199,999.99 1.0%
$200,000.00 $399,999.99 2.0%
$400,000.00 $599,999.99 4.0%
$600,000.00 $999,999.99 6.0%
$1,000,000.00 No Maximum 8.0%

2. Cumulative Discount(s)
Threshold Discount Level
Up to 2B 0.0%
$2B to $4B 1.0%
$4B to $6B 2.0%
$6B to $8B 3.0%
$8B to $10B 4.0%
Greater than $10B 5.0%

3. Other Discount(s)
Band 3

1. Per Transaction Multiple Unit Discount(s)
Min $ Single Transaction Max $ Single Transaction Per Transaction Multiple Unit Discount
$250,000.00 $499,999.99 1.0%
$500,000.00 $999,999.99 2.0%
$1,000,000.00 $1,499,999.99 4.0%
$1,500,000.00 $1,999,999.99 6.0%
$2,000,000.00 No Maximum 8.0%
none
Contractor provides a contractual volume discount program as follows based on dollars in a single purchase order or combination of purchase orders submitted at one time by a Purchasing Entity, or multiple entities conducting a cooperative purchase.

Contractor provides a cumulative volume discount as follows based on dollars resulting from the cumulative purchases by all purchases made by Purchasing Entities for the duration of the Master Agreement.

Note: Cumulative Discount does not apply to Category Exceptions, 3rd party products, services, and special promotional offers
Note: Per Transaction Multiple Unit Discount does not apply to Category Exceptions, 3rd party products, services, and special promotional offers
Note: Per Transaction Multiple Unit Discount does not apply to Category Exceptions, 3rd party products, services, and special promotional offers.

Contractor provides a contractual volume discount program as follows based on dollars in a single purchase order or combination of purchase orders submitted at one time by a Purchasing Entity, or multiple entities conducting a cooperative purchase.

DocuSign Envelope ID: 22C62BA3-AFF9-40A4-8FA3-F4D018802CC5 DocuSign Envelope ID: F019BE07-AEF0-4A14-B979-8BB85953FE52 Exhibit D: Price Schedule Volume-Based Discounts

2. Cumulative Discount(s)
Column1 Discount Level
Up to 2B 0.0%
$2B to $4B 1.0%
$4B to $6B 2.0%
$6B to $8B 3.0%
$8B to $10B 4.0%
Greater than $10B 5.0%

3. Other Discount(s)
Additional discount(s) available.

Contractor provides a cumulative volume discount as follows based on dollars resulting from the cumulative purchases by all purchases made by Purchasing Entities for the duration of the Master Agreement. none
Note: Cumulative Discount does not apply to Category Exceptions, 3rd party products, services, and special promotional offers.

DocuSign Envelope ID: 22C62BA3-AFF9-40A4-8FA3-F4D018802CC5 DocuSign Envelope ID: F019BE07-AEF0-4A14-B979-8BB85953FE52 Exhibit D: Price Schedule Services
Master Agreement: 23004
Contractor Name: Dell Marketing, LP
Travel for Services will be negotiated with each Participating Entity in the Participating Addendum.

All Awarded Bands
Category Code Description of Service Percent Discount
S-1 Standalone Services 4.0%
S-2 Warranty Services 4.0%
S-3 Training and Other Professional Services 4.0%
Each Purchasing Entity will determine if and how services will be offered in the Participating DocuSign Envelope ID: 22C62BA3-AFF9-40A4-8FA3-F4D018802CC5 DocuSign Envelope ID: F019BE07-AEF0-4A14-B979-8BB85953FE52 Exhibit D: Price Schedule Lease Rates
Master Agreement: 23004
Contractor Name: Dell Marketing, LP
All Awarded Bands
Optional: Lease Rates
Dell Financial Services (DFS’) payment solutions offer flexible end-of term options designed to suit each entity’s unique needs. Payment terms are generally from 24 through 60 months and are tailored to match the essential useful life of the equipment to the payment term. Payments can be billed monthly, quarterly, semi-annually or annually.

DFS payment solution rates are adjusted quarterly in accordance with a formula based on fluctuations in treasury notes. Our rates are a function of several factors including estimates of future residual values, prevailing interest rates, borrowing costs, general and administrative expenses, and solution structure. Once a payment schedule has commenced, the rate remains constant for the term of the schedule.

DocuSign Envelope ID: 22C62BA3-AFF9-40A4-8FA3-F4D018802CC5 DocuSign Envelope ID: F019BE07-AEF0-4A14-B979-8BB85953FE52 Exhibit D: Price Schedule Prompt Payment Discount
Master Agreement: 23004
Contractor Name: Dell Marketing, LP
in 30
in 15, Net 30
in 10, Net 30
X Net 30
All Awarded Bands
Other (specify):

DocuSign Envelope ID: 22C62BA3-AFF9-40A4-8FA3-F4D018802CC5 DocuSign Envelope ID: F019BE07-AEF0-4A14-B979-8BB85953FE52

Exhibit E: Contractor Terms and Conditions
Attached by reference as Exhibit E are the following Contractor document(s):
• Software Licenses. Customer’s rights to use the Software delivered by Supplier are governed by the terms of the applicable end-user license agreement. Unless different terms have been agreed between the parties, the terms posted on www.dell.com/eula (the “EULA”) shall apply. Supplier will provide a hard copy of the applicable terms upon request. Unless expressly otherwise agreed, microcode, firmware or operating system software required to enable the Equipment with which it is shipped to perform its basic or enhanced functions, is licensed for use solely on such Equipment.

• Dell Return Policy. Customer may return Products to Supplier pursuant to the return policy at www.dell.com/returnspolicy.

• Equipment Warranty. Unless provided otherwise in a Schedule, additional terms governing the limited warranties for Equipment are found at https://www.dell.com/learn/us/en/uscorp1/terms-of-sale-commercial- and-public-sector-warranties?c=us&l=en&s=corp or in the applicable documentation or Product Notice for the specific Equipment.

• Product- and Service-Specific Terms. Scope and details of Services and Product-specific terms are specified in the applicable standard service description that is attached to or referred in a Schedule or Quote, or is made available through the then-current Supplier website for product- or service-specific terms, currently located at www.dell.com/offeringspecificterms. Such standard descriptions are from time to time referred to as “Service Description(s)”, “Product Notices” or “Service Briefs.” The version of the applicable document that is effective as of the date of the applicable Quote, shall be deemed incorporated into the Order. Scope and details of customized Professional Services not covered by such a standard description shall be documented in a mutually agreed Statement of Work (“SOW”).

These Contractor terms and conditions are being provided for informational purposes only. They are intended to be negotiated by Contractor and a Participating Entity as part of a Participating Addendum, or by Contractor and a Purchasing Entity as part of an Order, and shall apply only as agreed to in writing by the parties. Unless such terms are expressly accepted in writing, terms in the following document(s) that derogate the application to a Purchasing Entity of a corresponding term in this Master Agreement or applicable Participating Addendum shall be deemed void.

DocuSign Envelope ID: 22C62BA3-AFF9-40A4-8FA3-F4D018802CC5 DocuSign Envelope ID: F019BE07-AEF0-4A14-B979-8BB85953FE52

City Council/Financing Authority Meeting H. 11.

DATE: 01/21/2025
TO: Honorable Mayor and City Council Members
SUBJECT: Approve the property lease agreement with the South Coast Air Quality Management District and determine that this action is exempt from environmental review pursuant to Section 15601(b)(3) of the State's guidelines implementing the California Environmental Quality Act (Municipal Utilities and Engineering Director Harris) MOTION(S):

If City Council determines the staff recommendation is appropriate, the following motions are provided:

I move that City Council determine that approval of a property lease agreement with the South Coast Air Quality Management District is exempt from environmental review pursuant to Section 15061(b)(3) of the State's guidelines implementing the California Environmental Quality Act; and,

1. I move that City Council approve the property lease agreement with the South Coast Air Quality Management District.

2. RECOMMENDATION:

Staff recommends that the City Council determine that approval of a property lease agreement with the South Coast Air Quality Management District is exempt from environmental review pursuant to Section 15061(b)(3) of the State's guidelines implementing the California Environmental Quality Act; and, Staff recommends City Council approval of a property lease agreement with the South Coast Air Quality Management District.

DISCUSSION:

The City owns property located near 500 North Dearborn Street in Redlands, California comprising approximately 1,500 square feet of APNs 0170-302-06-0000 and 0170-302-18-0000, as more particularly described in Exhibit "A" of the attached Resolution ("the Property"). The City would like to lease the Property to the South Coast Air Quality Management District ("SCAQMD") so that the SCAQMD can use the Property for air quality monitoring.

In an effort to address the housing crisis throughout the state, the State Legislature revamped the Surplus Land Act ("SLA") in 2019 to strengthen the right of first refusal for affordable housing developers to bid on local agency-owned surplus land. The SLA requires public agencies to comply with certain procedures when disposing of real property. The California Department of Housing and Community Development ("HCD") has adopted guidelines to interpret the SLA. The SLA was recently amended by Assembly Bill 480 (Ting) and Senate Bill 229 (Umbert). These changes took effect January 1, 2024.

The SLA requires all local agencies to prioritize affordable housing, as well as parks and open space, when disposing of "surplus land." Before a local agency may dispose of land subject to the SLA, the land must be declared either "surplus land" or "exempt surplus land," as supported by written findings. For "surplus land," the City must go through a formal process to offer the land to qualifying entities and negotiate with responsive parties. However, the SLA contains exemptions for certain types of land ("exempt surplus land") where this formal process does not apply.

One such exemption is for real property that is transferred to another local, state, or federal agency for the receiving agency's use (Government Code Section 54221(f)(1)(D).). Here, this exemption fits because the City desires to lease the property to the SCAQMD, an air quality management district formed under California Health and Safety Code Section 40410 and a local agency under the SLA, so that the SCAQMD can use the Property for air quality monitoring. On September 3, 2024, the City Council adopted Resolution No. 8621 pursuant to the SLA, Government Code Section 54221 et seq., declaring the Property as exempt surplus land. Soon after, staff submitted the Resolution to HCD for review. On October 17, 2024, staff received HCD's concurrence.

The property lease agreement allows the SCAQMD to place and operate a small air quality monitoring trailer on a portion of the site. The agreement also allows minor associated improvements and site access for SCAQMD employees during typical working hours. The initial term of the agreement is ten (10) years, and the agreement may be extended once for an additional ten (10) years. The initial annual lease payment is $650. Each year thereafter, the lease payment increases by three percent (3%) compounded each year.
increases by three percent (3%) compounded each year.

Approval of this property lease agreement is exempt from environmental review pursuant to Section 15061(b)(3) of the State's guidelines implementing the California Environmental Quality Act since it can be seen with reasonable certainty that doing so will have no impact on the environment.

ALTERNATIVES:

City Council may deny the staff recommendation and provide alternate direction.

STRATEGIC PLAN:

N/A
SUBMITTED BY:

John R. Harris, Municipal Utilities and Engineering Director RECOMMENDED BY:

Charles M. Duggan Jr., City Manager
REVIEWED BY:

Yvette M. Abich Garcia, City Attorney
Janice McConnell, Assistant City Manager
Danielle Garcia, Management Services/Finance Director
Paul Mariscal, Water Utility Manager
PREPARED BY:

John R. Harris, Municipal Utilities and Engineering Director Fiscal Impact
Fiscal Year: FY 24/25
Revenue Generating: Y
Appropriation Required Y/N: N
Discussion:

Approval of this property lease agreement will generate $650 in revenue beginning the first year. This annual lease payment will increase by three percent (3%) compounded each year thereafter.

Attachments
SCAQMD Lease Agreement
Conditional Use Permit
Resolution No. 8621
1 I:\cmo\Agreements\SCAQMD Lease Agreement FY24-0066.docx-msv.3

LEASE AGREEMENT

This Lease Agreement (this “Lease”) is made and entered i nto this 21st day of January, 2025, (the “Effective Date ”) by and between the City of Redlands , a municipal corporation (“City”), and the South Coast Air Quality Management District ("Lessee"). City and Lessee are sometimes individually referred to herein as a “Party” and, together, as the “Parties.”

PREAMBLE

A. City, for and in consideration of the rent to be paid by Lessee and for the covenants and provisions to be kept and performed by Lessee under this Lease, hereby leases to Lessee for Lessee’s sole use, and Lessee agrees to lease from City an approximately 1,500 square foot portion (the “Site”) of City’s real property (the “Property”) designated as Assessor's Parcel Nos. 0170- 302-06-0000 and 0170-302-18-0000 and located in the City of Redlands. The Site and Property are more particularly described and depicted in Exhibit “A” attached hereto.

B. The Site is to be used by Lessee for the location of a portable air monitoring trailer and associated equipment, which will be used as an air monitoring station.

AGREEMENT

Section 1. Rent and Term. Lessee hereby agrees to lease the Site from City for the rent of Six Hundred Fifty Dollars ($650.00) per year, with the first rent payment payable within twenty (20) days of the Effective Date of this Lease. Rent shall be increased by three percent (3%) compounded, each year during the term of this Agreement. Thereafter, Lessee shall pay rent on or before the anniversary date of the Effective Date of this Agreement each year until the expiration or earlier termination of this Lease. The “Term” of this Lease shall be for ten (10) years beginning on the Effective Date of this Agreement with the option to extend the Initial term of this agreement for an additional ten (10) year term (the “Extended Term”), on the same terms and conditions by providing written notice to Lessee at least thirty (30) days prior to the expiration of the Initial Term. The Initial Term and the Extended Term are hereby collectively, referred to herein as the “Term” of this Agreement.

Section 2. Use of Site. Subject to the conditions set forth in the Conditional Use Permit attached hereto and incorporated herein by reference as Exhibit “B,” during the Term of this Lease, the Site shall be used by Lessee for the purpose of placing a portable air monitoring trailer and air monitoring equipment on the Site, which shall be used as an air monitoring station. City hereby grants Lessee a license for ingress and egress to and from the Property and access to the Site, during normal business ho urs 7:00 am – 5:30 pm, on foot or by motor vehicle, including trucks, over or along a fifty-foot wide right of way extending from the nearest public right -of-way to the Site. In the event any public utility is unable to use the rights of way, City hereby agrees to grant an additional right of way either to Lessee or to the public utility at no cost to Lessee.

Section 3. “As Is” Condition. Lessee is leasing the Site in “AS IS” condition and City does not represent that the Site is suitable for Lessee’s intended use. Lessee is responsible to undertake such due diligence as it deems necessary to determine the condition and suitability of the Site.
2 I:\cmo\Agreements\SCAQMD Lease Agreement FY24-0066.docx-msv.3

Section 4. Title and Quiet Possession. City represents and agrees that: (a) it is the owner of the Property; (b) it ha s the right to enter into this L ease; (c) the person signing this Lease has the authority to sign on behalf of City; and (d) Lessee is entitled to access to and use of the Site as provided herein throughout the Term of this Lease. Notwithstanding the foregoing, City may enter the Site and take such actions as are required to protect individuals or personal property from such substantial harm or damage, or to otherwise effectively carry out City’s business. In connection with the City’s entry, City will use reasonable efforts to minimize any disruption to Lessee's operations at the Property or use of the Site.

Section 5. Assignment. Lessee may not sublet all or any portion of the Site to any other party without the prior written consent of City.

Section 6. Notices. All notices hereunder must be in writing and shall be deemed validly given if sent by certified mail, return receipt requested or by commercial courier, provided the courier's regular business is delivery service and provided further that it guarantees delivery to the addressee by the end of the next business day following the courier's receipt from the sender, addressed as follows (or any other address that the Party to be notified may have designated to the sender by like notice):

Lessee: City:

Air Quality Management District
Atmospheric Measurements Manager
21865 Copley Drive
Diamond Bar, CA 91765-4178

City of Redlands
Municipal Utilities & Engineering
Department
P.O. Box 3005
Redlands, CA 92373

Notice shall be effective upon actual receipt or refusal as shown on the receipt obtained pursuant to the foregoing.

Section 7. Improvements. Lessee may, at its sole expense, make any improvements on the Site as permitted by the CUP, as the CUP may be amended or renewed. Lessee may make substitutions, replacements, upgrades and modifications to its portable air monitoring trailer and equipment; provided, however, that such improvements remain within the physical parameters of the Site and do not violate the provisions of the CUP.

Section 8. Compliance with Laws. Lessee shall comply with all applicable Laws (as defined below) relating to Lessee’s specific use of the Site and to Lessee’s construction of improvements on the Site pursuant to the CUP. In addition, during the Term, City shall maintain the Property in compliance with all applicable laws, rules, regulations, ordinances, directives, covenants, easements, zoning and land use regulations, and restrictions of record, permits, building codes, now in effect or which may hereafter come into effect (collectively, “Laws”).

Section 9. Interference. Lessee agrees to install air monitoring equipment of the type which will not interfere with any operations or equipment of City. In the event any after-installed Lessee's equipment causes such interference, and after City has notified Lessee in writing of such 3 I:\cmo\Agreements\SCAQMD Lease Agreement FY24-0066.docx-msv.3 interference, Lessee shall correct and eliminate the interference, including but not limited to, causing the removal of such equipment . The Parties acknowledge that there will not be an adequate remedy at law for noncompliance with the provisions of this Section and therefore, either Party shall have the right to equitable remedies, such as, without limitation, injunctive relief and specific performance. City shall have the right to allow other third party providers to install equipment on the Property (other than at the Site), provided that such new provider’s use may not interfere with Lessee’s operations at the Site.

Section 10. Utilities. City grants Lessee the right to obtain electrical and telephone service for the operation of Lessee's portable air monitoring trailer , and Lessee shall have the right to install, operate and maintain such utilities in the location designated in Exhibit “A” and pursuant to the CUP attached as Exhibit “B.” Lessee shall pay for all utilities it uses at the Site. City will cooperate, to the extent allowed by law, with Lessee’s efforts to obtain utilities from any location provided by City or the serving utility, provided, however, that City shall not incur any cost or expense therefore unless such costs are reimbursed therefore by Lessee.

Section 11. Termination.

A. Without limiting any of Lessee's termination rights granted elsewhere in this Lease, Lessee may terminate this Lease at any time upon thirty (30) days prior notice to City without further liability if: (i) Lessee does not obtain all permits, consents, licenses, non - disturbance agreements or other approvals (collectively, “Approvals”) reasonably desired by Lessee or required from any governmental authority or any third party and related to or reasonably necessary to operate the air monitoring trailer and monitoring equipment, or any such Approvals are canceled, expire or are withdrawn or terminated; (ii) City violates or defaults on any of its obligations under this Lease or breaches any of its representations, warranties or covenants in this Lease; or (iii) Lessee, for any reason, in its sole discretion, determines that it will be unable to use the Site. Upon termination, all prepaid rent shall be retained by City.

B. If City, in its reasonable and sole discretion, determines that the use of the Site by Lessee is impairing or hindering City in its use of the Property so that continued use by Lessee is determined not to be in City’s best interest, and City delivers to Lessee written notice of the impairment and provides Lessee a reasonable period, not to exceed forty-five (45) days from the date such notice is delivered, within which to cure said impairment, and such impairment or hindrance is not timely cured or Lessee informs City that it is unable to cure said impairment within such 45-day period, City may, without further liability, immediately terminate this Lease upon ten (10) days prior written notice to Lessee. Lessee shall be allowed to remove all of its personal property and return the Site to its pre-Lease condition.

C. Removal/Restoration. The portable air monitoring trailer and equipment installed on the Property by Lessee will be and remain Lessee’s personal property and, at Lessee's option, may be removed by Lessee at any time during the Term. City agrees that no part of the portable air trailer or air monitoring equipment constructed, erected or placed on the Property by Lessee will become, or be considered as being affixed to or a part of, the Property, it being the specific intention of City that all improvements of every kind and nature constructed, erected or placed by Lessee on the Property will be and remain the property of Lessee and may be removed by Lessee at any time during the Term. Lessee shall restore the Property to its condition on the 4 I:\cmo\Agreements\SCAQMD Lease Agreement FY24-0066.docx-msv.3 Effective Date of this Lease, reasonable wear and tear and loss by casualty or other causes beyond Lessee's control excepted. At the City’s discretion, Lessee may be responsible for the replacement of any trees, shrubs, or other vegetation removed for the placement of the portable air monitoring trailer and equipment installed on the Property by Lessee. Additionally at the City’s dis cretion, Lessee shall remove from the Property any underground utilities installed as part of the portable air monitoring trailer and equipment installed.

Section 12. Default.

A. If either Party is in default under this Lease for a period of: (a) fifteen (15) days following receipt of notice of default from the non-defaulting Party with respect to a default which may be cured solely by the payment of money; or (b) thirty (30) days following receipt of notice of default from the non -defaulting Party with respect to a default which may not be cured solely by the payment of money, then, in either event, the non -defaulting Party may pursue any remedies available to it against the defaulting Party under applicable law, including, but not limited to, the right to terminate this Lease. If the non -monetary default may not reasonably be cured within a thirty (30) day period, this Lease may not be terminated if the defaulting Party commences action to cure the default within such thirty-day period and proceeds with due diligence to fully cure the default, and cures no later than ninety (90) days from the notice of default.

B. Upon a default, the non -defaulting Party may at its option (but without obligation to do so), perform the defaulting Party’s duty or obligation on the defaulting Party’s behalf, including but not limited to the obtaining of reasonably required insurance polici es. The costs and expenses of any such performance by the non-defaulting Party shall be due and payable by the defaulting Party upon invoice therefore. In the event of a default by either Party with respect to a material provision of this Lease, w ithout limiting the non -defaulting Party in the exercise of any right or remedy which the non-defaulting Party may have by reason of such default, the non - defaulting Party may terminate this Lease and/or pursue any remedy now or hereafter available to the non-defaulting Party under the Laws or judicial decisions of the state in which the Site is located; provided, however, City shall use reasonable efforts to mitigate its damages in connection with a default by Lessee. If Lessee so performs any of City’s o bligations hereunder, the full amount of the reasonable and actual cost and expense incurred by Lessee shall immediately be owed by City to Lessee, and City shall pay to Lessee upon demand the full undisput ed amount thereof without interest. Notwithstanding the foregoing, if City does not pay Lessee the full undisputed amount within thirty (30) days of its receipt of an invoice setting forth the amount due from City, Lessee may offset the full undisputed amount.

Section 13. Indemnity. Each Party shall defend, indemnify and hold the other harmless against any claim of liability or loss from personal injury or property damage resulting from or arising out of the negligence or willful misconduct of the indemnifying Party, its employees, contractors or agents, except to the extent such claims or damages may be due to or caused by the negligence or willful misconduct of the other Party, or its employees, contractors or agents.

Further, Lessee shall defend, and indemnify City against, all claims arising out of the installation, operation, use, maintenance, repair, removal or presence of Lessee’s portable air monitoring trailer and air monitoring equipment . The obligations under this section shall survive the expiration or termination of this Lease.
5 I:\cmo\Agreements\SCAQMD Lease Agreement FY24-0066.docx-msv.3

Section 1 4. Hazardous Substances. Lessee shall not introduce or use any Hazardous Substance on the Site in violation of any applicable Law. City and Lessee shall each hold the other harmless and indemnify the other from, and assume all duties, responsibility and liability at its sole cost and expense, for all duties, responsibilities, and liability (for payment of penalties, sanctions, forfeitures, losses, c osts, or damages) and for responding to any action, notice, claim, order, summons, citation, directive, litigation, investigation or proceeding which is in any way related to the indemnifying Party’s failure to comply with any environmental or industrial hygiene Law, including without limitation any regulations, guidelines, standards or policies of any governmental authorities regulating or imposing standards of liability or standards of conduct with regard to any environmental or industrial hygiene concerns or conditions as may now or at any time hereafter be in effect, except to the extent such noncom pliance is caused by the other Party. City shall hold harmless, indemnify and defend Lessee for all claims or losses, including all costs and expenses, relating to any environmental or industrial hygiene conditions arising out of or in any way related to the condition of the Property or activities conducted thereon, unless such environmental conditions are caused solely by Lessee, in which event Lessee shall hold harmless, indemnify and defend City for all costs and expenses, including reasonable attorneys' fees for said sole negligence of Lessee. The obligations under this section shall survive the expiration of termination of the Lease.

Section 15. Taxes. Lessee shall be responsible for any real and personal property taxes assessed directly upon the Site arising from its use of the portable air monitoring trailer on the Site.

Lessee shall have the right, at its sole option and at its sole cost and expense, to appeal, challenge or seek modification of any tax assessment or billing for which Lessee is wholly or partly responsible for payment. In the event that as a result of any appeal or challenge by Lessee, there is a reduction, credit or repayment received by City for any taxes previously paid by Lessee, City agrees to promptly reimburse to Lessee the amount of said reduction, credit or repayment.

Section 16. Insurance.

A. Lessee shall procure and maintain commercial general liability insurance, with limits of not less than Two Million Dollars ($2,000,000) combined single limit per occurrence for bodily injury and property damage liability, with a certificate of insurance to be furnished to City prior to Lessee's occupancy of the Site. Lessee shall also procure and maintain owned, non- owned and hired vehicles with limits of not less than One Million Dollars ($1,000,000) combined single limit for bodily injury liability and property damage liability, with a certificate of insurance and endorsement to be furnished prior to Lessee’s occupancy of the Site. City shall be named as an additional insured under the insurance policies required of Lessee, and such insurance shall be primary with respect to City and non-contributing to any insurance or self -insurance maintained by City as with respect to any liability from Lessee’s negligence or intentional misconduct. Such policy shall provide that cancellation will not occur without at least thirty (30) days prior written notice to City. Lessee shall provide any new certificates of insurance with new limits of liability coverage within thirty (30) days of notice by City to Lessee. Notwithstanding anything to contrary, such limits may be satisfied by a combination of primary and umbrella policies. Lessee may satisfy this requirement by obtaining the appropriate endorsement to any master policy of liability insurance Lessee may maintain, or through its self insurance. 6 I:\cmo\Agreements\SCAQMD Lease Agreement FY24-0066.docx-msv.3

B. Workers’ Compensation and Employer’s Liability. Lessee shall procure and maintain Workers’ Compensation and Employer’s Liability insurance in accordance with statutory coverage limits throughout the Term of this Lease in accordance with the laws of the State of California, with an insurance carrier acceptable to City.

Section 17. Maintenance. Lessee shall be responsible for repairing and maintaining the portable air monitoring trailer and air monitoring equipment and any other improvements installed by Lessee at the Site in a proper operating and safe condition; provided, however, if any such repair or maintenance is required due to acts of City, its agents or employees, City shall reimburse Lessee for the reasonable costs incurred by Lessee to restore the damaged areas to the condition which existed immediately prior thereto. City will maintain and repair all other portions of the Property of which the Site is a part in a proper operating and reasonably safe condition and otherwise in compliance with applicable Law.

Section 18. Possessory Interest. In accordance with California Revenue and Tax Code Section 107.6, City hereby notifies Lessee that the interest created by this Lease may be subject to property taxation and Lessee may be subject to the payment of a property/possessory interest tax levied on such interest. Lessee shall be solely responsible for the payment of such taxes and shall defend, indemnify and hold City harmless from and against any and all claims or actions for payment (or nonpayment) of such taxes.

Section 19. Limitation of Liability . Except for indemnification pursuant to Section 1 3, neither Party shall be liable to the other, or any of their respective agents, representatives, employees for any lost revenue, lost profits, loss of technology, rights or services, incidental, punitive, indirect, special or consequential damages, loss of data, or interruption or loss of use of service, even if advised of the possibility of such damages, whether under theory of contract, tort (including negligence), strict liability or otherwise.

Section 20. Miscellaneous.

A. This Lease applies to and binds the successors and assigns of the Parties to this Lease;
B. This Lease shall be governed by and construed in accordance with the laws of the State of California;

C. This Lease (including the Exhibits) constitutes the entire agreement of the Parties as to the subject matter hereof, and supersedes all prior written and verbal agreements, representations, promises and understandings between the Parties. Any amendments to this Lease shall be in writing and executed by the Parties;

D. If any provision of this Lease is determined by a court of competent jurisdiction invalid or unenforceable, to the remainder of this Lease or the application of such provision to persons other than those as to whom it is held invalid or unenforceable will not be affected and each provision of this Lease will be valid and enforceable to the fullest extent 7 I:\cmo\Agreements\SCAQMD Lease Agreement FY24-0066.docx-msv.3 permitted by law unless such invalidity or unenforceability materially affects the purpose and reasons of the Parties for entering into this Lease; and

E. In the event any action is commenced to enforce or interpret any of the terms or conditions of this Lease the prevailing Party shall, in addition to costs and any other relief, be entitled to recovery of its reasonable attorneys’ fees, including fees for the use of in-house counsel by a Party.

Section 2 1. Annual Termination. Notwithstanding anything to the contrary contained herein, provided Lessee is not in default hereunder beyond applicable notice and cure periods, Lessee shall have the right to terminate this Lease upon the annual anniversary of the Commencement Date provided that three (3) months prior notice is given to City.

Section 22. Destruction of Site. If the Site or Property is destroyed, or damaged so as to hinder Lessee’s effective use of the Site, Lessee shall have the option to attempt to correct the damage, in which event City shall make available to Lessee within five (5) days a temporary site on the Property (or on other property owned or controlled by City) that is mutually agreeable to both City and Lessee and suitable for Lessee’s use. Lessee may construct, operate, and maintain substitute air monitoring facilities thereon until the original portable air monitoring trailer is fully restored and operational on the Site. Rent shall abate in full during any time that Lessee is unable to operate the air monitoring equipment on the Property. Alternatively, Lessee may elect to terminate this Lease as of the date of the damage or destruction by so notifying City no more than thirty (30) days following the date of damage or destruction.

Section 23. Condemnation. If a condemning authority takes all or a portion of the Property, which taking renders the Site unsuitable for Lessee’s use, then Lessee may terminate this Lease as of the date when possession is delivered to the condemning authority. In any condemnation proceeding each Party shall be entitled to make a claim against the condemning authority for just compensation. Sale of all or part of th e Site to a purchaser with the power of eminent domain in the face of exercise of such powe r shall be treated as a taki ng by the condemning authority. In the event of such taking, City shall promptly reimburse Lessee any Rent prepaid by Lessee. Furthermore, City and Lessee shall each be entitled to pursue their own separate awards with respect to such taking, provided that no such award to Lessee shall reduce any award to City.

Section 24. Pre-Construction Testing. Lessee shall have the right (but not the obligation) at any time following the full execution of this Lease, to enter the Site for the purposes of making necessary inspections and engineering surveys (and soil tests where applicable) and other reasonably necessa ry tests (collectively, “ Tests”) to determine the suitability of various Site improvements related to operation and maintenance of the portable air monitoring trailer and equipment. During any Tests or pre-construction work, Lessee will have insurance as set forth in this Lease. Lessee will notify City of any proposed Test or pre -construction work and will coordinate the scheduling of the same with City. If Lessee determines that the Site is unsuitable for Lessee’s contemplated use, then Lessee will notify City and this Lease will terminate.

8 I:\cmo\Agreements\SCAQMD Lease Agreement FY24-0066.docx-msv.3 Section 25. Survival. The provision of this Lease relating to indemnification from one Party to the other Party shall survive any termination or expiration of this Lease. Additionally, any provisions of this Lease which require performance subsequent to the termination or expiration of this Lease shall also survive such termination or expiration.

Section 26. Captions. The captions contained in this Lease are inserted for convenience only and are not intended to be part of the Lease. They shall not affect or be utilized in the construction or interpretation of this Lease.

[SIGNATURE PAGE FOLLOWS]
9 I:\cmo\Agreements\SCAQMD Lease Agreement FY24-0066.docx-msv.3 IN WITNESS WHEREOF, the Parties hereto have set their hands and affixed their seals the day and year first above written.

CITY OF REDLANDS: SOUTH COAST AIR QUALITY
MANAGEMENT DISTRICT:

By:_____________________________ By:_______________________________ Eddie Tejeda, Mayor Jason C. Low, Deputy Executive Officer, Monitoring and Analysis Division

ATTEST:

By:____________________________
Jeanne Donaldson, City Clerk

EXHIBIT A

LAND LEASE AGREEMENT

BETWEEN THE CITY OF REDLANDS AND SOUTH COAST AIR QUALITY

MANAGEMENT DISTRICT

The Real Property situated in the City of Redlands, County of San Bernardino, State of California, as depicted in the attachment:

EXHIBIT B

LESSEE’S CONDITIONAL USE PERMIT

RESOLUTION NO. 8621

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF REDLANDS PURSUANT TO GOVERNMENT CODE SECTION 54221 DECLARING THAT CERTAIN REAL PROPERTY ( LOCATED NEAR 500 NORTH DEARBORN STREET, REDLANDS, CA COMPRISING APPROXIMATELY 1, 500 SQUARE FEET OF APNS 0170- 302- 06- 0000 AND 0170- 302- 18- 0000) IS EXEMPT

SURPLUS LAND, AND FINDING THAT SUCH DECLARATION IS EXEMPT

FROM ENVIRONMENTAL REVIEW UNDER THE CALIFORNIA

ENVIRONMENTAL QUALITY ACT
WHEREAS, the City of Redlands (the " City") owns property located near 500 North Dearborn Streetin Redlands, CA comprising approximately 1,500 squarefeet of APNs 0170-302- 06-0000 and 0170-302-18-0000, asmore particularly describedin Exhibit A, attachedhereto and incorporatedherein by reference (the "Property"); and
WHEREAS, the City is the fee simple owner of that Property; and WHEREAS, the Surplus Land Act, Government Code sections54220 et seq. (the "Act") applieswhen alocal agencydisposesof "surplus land," which is defined in the Act as "land owned in fee simple by any local agencyfor which the local agency's governingbody takesformal action in aregular public meeting declaring that the land is surplus and is not necessaryfor the agency's use." ( Government Code section 54221( b)( 1)); and
WHEREAS, the Act expressly does " not apply to the disposal of exempt surplus land." Government Code section 54222. 3.)
WHEREAS, under the Act, " exempt surplus land" includes land that a local agency is transferring to anotherlocal, state, or federal agencyfor the transfereeagency'suse. (Government Code section 54221( f)( 1)( D)); and
WHEREAS, theAct requireslocalagenciessuchastheCityto declarecertainrealproperty they own aseither "surplus land" or " exemptsurplus land," assupportedby written findings, prior to any disposition of the real property; and
WHEREAS, theCity desiresto leaseor otherwisetransferan interestin the Propertyto SouthCoastAir Quality ManagementDistrict (" SCAQMD"), which is an air quality management district formed under California Health and Safety Code Section40410 andis anotherlocal agency under the Act, andupon acquiring of the Property, SCAQMD intends to use the Property for air quality monitoring purposes; and
WHEREAS, none of the characteristics listed under Government Code section 54221( f)( 2) apply to the Property; and
WHEREAS, the City Council hasreviewed this Resolution andnow desiresto declarethe Property as exempt surplus land under the Act, basedon the findings andjustifications contained in this Resolution.

NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF REDLANDS AS FOLLOWS:
1 Aesolutions\ Res 8600-8699\8621 Declaring Real Properly Near 500 North Dearbom Exempt Surplus Land.doex-ms

SECTION 1: The above recitals are true and correct and are a substantive part of this Resolution and findings of the City Council.

SECTION 2: The City Council hereby declaresthat the Property is exempt from the Act as exempt surplus land pursuant to Govermnent Code section 54221(f)( 1)(D), based on the findings contained in this Resolution for the Property, namely that the City intends to lease the Property to the SCAQMD, another local agency, for the SCAQMD' s use of the Property for air quality monitoring purposes, and none of the characteristics listed under Government Code Section 54221( f)( 2) apply to the Property.

SECTION 3: This Resolution hasbeen reviewed with respectto the applicability of the California Environmental Quality Act ( Public Resources Code Section 21000 et seq.) (" CEQA").

City staff hasdetermined that the designationof the Property asexempt surplus doesnot have the potential for creating a significant effect on the environment and is therefore exempt from further review under CEQA pursuant to State CEQA Guidelines Section 15060( c)( 3), because it is not a project asdefined by the CEQA Guidelines, Section 15378. Adoption of the Resolution, in and of itself, doesnot havethepotential for resulting in either a direct physical changein the environment or areasonablyforeseeableindirect physical changein the environment.

SECTION 4: The City Manager or designeeis hereby authorized and directed to send a copy of this Resolution to the California Department of Housing and Community Development in accordance with the requirements of Section 400( e) of the SLA Guidelines.

SECTION 5: If any section, subsection, paragraph, sentence, clause or phrase of this Resolution is declaredby a court of competentjurisdiction to be unconstitutional or otherwise invalid, suchdecision shall not affect the validity of the remaining portions of this Resolution.

SECTION 6: The City Clerk shall certify to the adoption of this Resolution.

ADOPTED, SIGNEDAND APPROVEDthis Yd dayof
Tejeda, Mayor
ATTEST:

KarIneDonaldson, CityClerk
2 IAResolutionslRes 8600-8699\8621 Declaring Real Property Near 500 North Dearborn Exempt Surplus Land.docx- ms

I, JeanneDonaldson, City Clerk of the City of Redlands, do hereby certify that the foregoing ResolutionwasdulyadoptedbytheCityCouncilataregularmeetingthereofheldonthe3rdday of September, 2024.

AYES: CouncilmembersBarich, Davis, Guzman -Lowery, Saucedo; Mayor Tejeda NOES: None
ABSENT: None
ABSTAIN: None
ge44::,' —
JKnu4dDonaldson, CityClerk
AResolutionsTes 8600-8699\8621 Declaring Real Property Near 500 North Dearborn Exempt surplus [. and.docx- ms

EXHIBIT A
Description and Depiction of Property
The Property comprises an approximately 1,500 squarefoot portion of APNs 0170-302-06-000 and0170- 302-18-0000 as shown below within the boundaries labeled "Property Line" andmore specifically within the bubbled callout near the west property boundary line. 4 11Resoludons\Res 8600-8699\8621 Declaring Real Property Near 500 North Dearborn Exempt Surplus Land.docx- ms

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5 BResolutions\ Res 8600-8699\8621 Declaring Real Properly Near 500 North Dearborn Exempt Surplus Land.docx-ms

City Council/Financing Authority Meeting H. 12.

DATE: 01/21/2025
TO: Honorable Mayor and City Council Members
SUBJECT: Approve a Professional Services Agreement with Public Sector Personnel Consultants Inc. for Citywide Classification and Compensation Study Services for an amount not-to-exceed $192,000; and approve an additional appropriation in the same amount (Human Resources/Risk Management Director Meteau) MOTION(S):

If the City Council determines that staff’s recommendation is appropriate, the following motion is provided:

I move to approve a Professional Services Agreement with Public Sector Personnel Consultants Inc. for Citywide classification and compensation study services for an amount not-to-exceed $192,000.

1. I further move to approve an additional appropriation from the General Fund unassigned fund balance in the amount of $192,000.

2. RECOMMENDATION:

Staff recommends that the City Council approve a Professional Services Agreement with Public Sector Personnel Consultants Inc. for Citywide Classification and Compensation Study services for an amount of not to exceed $192,000; and an additional appropriation from the General Fund unassigned fund balance in the amount of $192,000.

DISCUSSION:

A thorough compensation and classification study will be conducted to assess and refine the existing classification structure for all full-time and part-time positions; make recommendations on appropriate updates; draft classification specifications to meet standards; conduct compensation and position analysis; assess operational efficiency to make recommendations to enhance the usage of existing personnel; and report findings.

On September 26, 2024, the Purchasing Office issued a Request for Proposal (RFP) for Classification and Compensation Study Services. Nineteen (19) vendors were notified utilizing the City's online bid system and staff received proposals from the following six (6) firms:

1. Ewing Consulting, Inc.

2. Public Sector Personnel Consultants

3. Evergreen Solutions, LLC

4. MGT Impact Solutions, LLC

5. Gallagher

6. Salary.com
In accordance with Chapter 2.16.180 of the City's Municipal Code, a selection committee reviewed the proposals based on each firm's demonstrated competence and professional qualifications in accordance with specific evaluation criteria identified in the RFP. The committee selected Public Sector Personnel Consultants Inc. as the most qualified to conduct the City's classification and compensation study. Public Sector Personnel Consultants Inc. has successfully undertaken projects of similar scope and scale for municipalities. The firm’s methodology, proven expertise, professional qualifications, and strong references from recent studies and services provided to other municipal agencies make it the most qualified firm to conduct the City’s classification and compensation study.

ALTERNATIVES:

N/A
STRATEGIC PLAN:

N/A
SUBMITTED BY:

Robert Meteau, Director, Human Resources/Risk Management RECOMMENDED BY:

Charles M. Duggan Jr., City Manager
REVIEWED BY:

Janice McConnell, Assistant City Manager
Danielle Garcia, Management Services/Finance Director
Dana Abramovitz-Daniel, Procurement Manager
PREPARED BY:

Kisha McDonald, Human Resources Manager
Fiscal Impact
Fiscal Year: 2024-25
Amount: 192,000
Budgeted Y/N: N
Discussion:

Funding for this item was not included in the FY 25-26 Biennial Budget. Staff is requesting an additional appropriation from the General Fund unassigned fund balance in the amount of $192,000.

Attachments
Public Sector Personnel Consultants
Additional Appropriation

1 I:\cmo\Agreements\Public Sector Personnel Consultants PSA-FY25-0002.docx-jm

AGREEMENT TO PERFORM PROFESSIONAL SERVICES

This agreement for the provision of a classification and compensation study (“Agreement”) is made and entered in this 21st day of January 2025 (“Effective Date”), by and between the City of Redlands, a mun icipal corporation (“City ”) and Public Sector Personnel Consultant s Inc. an Arizona Corporation (“Consultant”). City and Consultant are sometimes individually referred to herein as a “Party” and, together, as the “Parties.” In consideration of the mutual promises contained herein, City and Consultant agree as follows:

ARTICLE 1 – ENGAGEMENT OF CONSULTANT

1.1 City hereby engages Consultant to provid e classification and compensation services for City (the “Services”).

1.2 The Services shall be performed by Consultant in a professional manner, and Consultant represents that it has the skill and the professional expertise necessary to provide the Services to City at a level of competency presently maintained by other practicing professional consultants in the industry providing like and similar types of Services.

ARTICLE 2 – SERVICES OF CONSULTANT

2.1 The Services that Consultant shall perform are more particularly described in Exhibit “A,” titled “Scope of Servi ces,” which is attached hereto and incorporated herein by this reference.

2.2 Consultant shall comply with applicable federal, state and local laws and regulations in the performance of this A greement including, but not limited to , any applicable State prevailing wage laws.

ARTICLE 3 – RESPONSIBILITIES OF CITY

3.1 City designates Robert J. Meteau, Jr., Director of Human Resources/Risk Management, as City’s representative with respect to performance of the Services, and such person shall have the authority to transmit instructions, receive information, interpret and define City’s policies and decisions with respect to performance of the Services.

ARTICLE 4 – PERFORMANCE OF SERVICES

4.1 Consultant shall perform and complete the Services in a prompt and diligent manner in accordance with the schedule set forth in Exhibit “B,” titled “Project Schedule,” which is attached hereto and incorporated herein by reference.

4.2 The term of this Agreement shall be for a period of one (1) year commencing as of the Effective Date, unless terminated earlier as provided herein.

2 I:\cmo\Agreements\Public Sector Personnel Consultants PSA-FY25-0002.docx-jm

4.3 If Consultant’s Services include deliverable electronic visual presentation materials, such materials shall be delivered in a form, and made available to Cit y, consistent with City Council-adopted policy for the same. It shall be the obligation of Consultant to obtain a copy of such policy from City staff.

ARTICLE 5 – PAYMENTS TO CONSULTANT

5.1 Total compensation for Consultant’s performance of the Services shall not exceed the amount of One Hundred Ninety -Two Thousand Dollars ($192,000). City shall pay Consultant on a time and materials basis up to the not to exceed amount in accordance with Exhibit “C ,” titled (“ Project Rates by Major Task ”) which is attached hereto and incorporated herein by reference.

5.2 Consultant shall submit monthly invoices to City describing the Services performed during the preceding month. Consultant’s invoices shall include a brief description of the Services performed, the dates the Services were performed, the number of hours spent and by whom, and a description of reimbursable expenses related to the Services. City shall pay Consultant no later than thirty (30) days after receipt and approval by City of Consultant’s invoice.

5.3 Any n otice or other communication required, or which may be given, pursuant to this Agreement, shall be in writing. Any such notice shall be deemed delivered (i) on the date of delivery in person; (ii) five (5) days after deposit in first class registered mail, with return receipt requested; (iii) on the actual delivery date if deposited with an overnight courier; or (iv) on the date sent by facsimile or electronic mail transmission (including PDF) , if confirmed with a copy sent contemporaneously by first class, certified, registered or express mail; in each case properly posted and fully prepaid to the appropriate address set forth below, or such other address as a Party may provide notice in accor dance with this section:

CITY: CONSULTANT:

City Clerk Matthew Weatherly, President
City of Redlands Public Sector Personnel Consultants Inc. 35 Cajon Street 2824 N. Power Rd. #113-486
P.O. Box 3005 (mailing) Mesa, AZ 85215
Redlands, CA 92373 [email protected]
[email protected] Phone: (888)522-7772
Phone: (909) 798-7531

ARTICLE 6 – INSURANCE AND INDEMNIFICATION

6.1 The following insurance coverage required by this Agreement shall be maintained by Consultant for the duration of its performance of the Services. Consultant shall not perform any Services unless and until the required insurance listed below is obtained by Consultant.

Consultant shall provide City with certificates of insurance and endorsements evidencing such insurance prior to commencement of the Services. Insurance policies shall include a

3 I:\cmo\Agreements\Public Sector Personnel Consultants PSA-FY25-0002.docx-jm provision prohibiting cancellation or modification of the policy except upon thirty (30) days prior written notice to City.

A. Workers’ Compensation and Employer’s Liability insurance in the amount that meets statutory requirements with an insurance carrier acceptable to City, or certification to City that Consultant is self-insured or exempt from the workers’ compensation laws of the State of California. Consultant shall execute and provide City with Exhibit “ D ,” titled “Workers’ Compensation Insurance Certification,” which is attached hereto and incorporated herein by this reference, prior to performance of the Services.

B. Comprehensive General L iability insurance with carriers acceptable to City in the minimum amount of One Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) aggregate , for public liability, property damage and personal injury is required. City shall be named as an additional insured and such insurance shall be primary and non-contributing to any insurance or self-insurance maintained by City.

C. Consultant shall secure and maintain professional liability insurance throughout the term of this Agreement in the amount of One Million Dollars ($1,000,000) per claim made.

D. Business Auto L iability coverage, with minimum limits of One Million Dollars ($1,000,000) per occurrence, combined single limit bodily injury liability and property damage liability. This coverage shall include all Consultant owned vehicles used in connection with Consultant’s provision of the Services, hired and non-owned vehicles, and employee non -ownership vehicles. City shall be named as an additional insured and such insurance shall be primary and non -contributing to any insurance or self - insurance maintained by City.

E. Consultant is expressly prohibited from assigning or subcontracting any of the Services without the prior written consent of City. In the event of mutual agreement by the Parties to assign or subcontract a portion of the Services, Consultant shall add su ch assignee or subcontractor as an additional insured to the insurance policies req uired hereby and provide City with the insurance endorsements prior to any Services being performed by the assignee or subcontractor.

6.2 Consultant shall defend, indemnify and hold harmless City and its elected and appointed officials, employees and agents from and against any and all claims, losses or liability, including attorneys’ fees, arising from injury or death to persons or damage to property occasioned by any negligent act or omission by, or the willful misconduct of, Consultant, or its officers, employees and agents in performing the Services.

ARTICLE 7 – CONFLICTS OF INTEREST

7.1 Consultant covenants and represents that it does not have any investment or interest in any real property that may be the subject of this Agreement or any other source of income, interest in real property or investment that would be affected in any manner or degree by

4 I:\cmo\Agreements\Public Sector Personnel Consultants PSA-FY25-0002.docx-jm the performance of Consultant’s Services. Consultant further covenants and represents that in the performance of its duties hereunder, no person having any such interest shall perform any Services under this Agreement.

7.2 Consultant agrees it is not a designated employee within the meaning of the Political Reform Act because Consultant:

A. Does not make a governmental decision whether to:

(i) approve a rate, rule or regulation, or adopt or enforce a City law; (ii) issue, deny, suspend or revoke any City permit, license, application, certification, approval, order or similar authorization or entitlement; (iii) authorize City to enter into, modify or renew a contract; (iv) grant City approval to a contract that requires City approval and to which City is a party, or to the specifications for such a contract; (v) grant City approval to a plan, design, report, study or similar item; (vi) adopt, or grant City approval of, policies, standards or guidelines for City or for any subdivision thereof.

B. Does not serve in a staff capacity with City and in that capacity, participate in making a governmental decision or otherwise perform the same or substantially the same duties for City that would otherwise be performed by an individual holding a position s pecified in City’s Conflict of Interest Code under Government Code section 87302.

7.3 In the event City determines that Consultant must disclose its financial interests, Consultant shall complete and file a Fair Political Practices Commission Form 700, State ment of Economic Interests , with the City Clerk’s office pursuant to the written instructions provided by the City Clerk.

ARTICLE 8 – GENERAL CONSIDERATIONS

8.1 In the event any action is commenced to enforce or interpret any of the terms or conditions of this Agreement the prevailing Party shall, in addition to any costs and other relief, be entitled to the recovery of its reasonable attorneys’ fees, including fe es for the use of in - house counsel by a Party.

8.2 Consultant shall not assign any of the Services, except with the prior written approval of City and in s trict compliance with the terms and conditions of this Agreement. Any assignment or attempted assignment without such prior written consent may, in the sole discretion of City, result in City’s immediate termination of this Agreement.

8.3 Consultant is for all purposes under this Agreement an independent contractor and shall perform the Services as an independent contractor. Neither City nor any its agents shall have control over the conduct of Consultant or Consultant’s employees, except as herein set forth. Consultant shall supply all necessary tools and instrumentalities required to

5 I:\cmo\Agreements\Public Sector Personnel Consultants PSA-FY25-0002.docx-jm perform the Services. Assigned personnel employed by Consultant are for its account only, and in no event shall Consultant or personnel retained by it be deemed to have been employed by City or engaged by City for the account of, or on behalf of City. Cons ultant shall have no authority, express or implied, to act on behalf of City in any capacity whatsoever as an agent, nor shall Consultant have any authority, express or implied, to bind City to any obligation.

8.4 This Agreement may be terminated by City, in its sole discretion, by providing not less than five (5) days prior written notice to Consultant of City’s intent to terminate. If this Agreement is terminated by City, an adjustment to Consultant’s compensation shall be made, but (1) no amount shall be allowed for anticipated profit or unperformed S ervices, and (2) any payment due Consultant at the time of termination may be adjusted to the extent of any additional costs to City occasioned by any default by Consultant. Upon receipt of a termination notice, Consultant shall immediately discontinue its provision of the Services and, within five (5) days of the date of the termination notice, deliver or otherwise make available to City, copies (in both hard copy and electronic form, where applicable) of project related data, design calculations, drawings, specifications, reports, estimates, summaries and such other information and materials as may have been accumulated by Consultant in performing the Services. Consultant shall be compensated on a pro-rata basis for Services completed up to the date of termination.

8.5 Consultant shall maintain books, ledgers, invoices, accounts and other records and documents evidencing costs and expenses related to the Services for a period of three (3) years, or for any longer period required by law, from the date of final payment to Consultant pursuant to this Agreement. Such books shall be available at reasonable times for examination by City at the office of Consultant.

8.6 This Agreement, including the Exhibits incorporated herein by reference, represents the entire agreement and understanding between the Parties as to the matters contained herein, and any prior negotiations, written proposals or verbal agreements relating to such matters are superseded by this Agreement. Except as otherwise provided for herein , an y amendment to this Agreement shall be in writing, approved by City and signed by City and Consultant.

8.7 This Agreement shall be governed by and construed in accordance with the laws of the State of California, without regard to its conflicts of laws provisions. The Parties agree that all actions or proceedings arising in connection with this Agreement shall be tried and litigated only in the state courts located in San Bernardino County, California, and the federal courts located in Riverside County, California.

8.8 If one or more of the sentences, clauses, paragraphs or sections contained in this Agreement is declared invalid, void or unenforceable by a court of competent jurisdiction, the same shall be deemed severable from the remainder of this Agreement and shall not affect, impair or invalidate the remaining sentences, clauses, paragraphs or sections contained herein, unless to do so would deprive a Party of a material benefit of its bargain under this Agreement.

6 I:\cmo\Agreements\Public Sector Personnel Consultants PSA-FY25-0002.docx-jm

IN WITNESS WHEREOF, duly authorized representatives of City and Consultant have signed in confirmation of this Agreement.

CITY OF REDLANDS Public Sector Personnel Consultants Inc.

By: ___________________________ By: _________________________ Mario Saucedo, Mayor Matthew Weatherly, President

ATTEST:

___________________________
Jeanne Donaldson, City Clerk

7 I:\cmo\Agreements\Public Sector Personnel Consultants PSA-FY25-0002.docx-jm EXHIBIT "A"

SCOPE OF SERVICES

8 I:\cmo\Agreements\Public Sector Personnel Consultants PSA-FY25-0002.docx-jm

EXECUTIVE SUMMARY OF SERVICES FOR THE CITY OF REDLANDS

Project Planning and Communication

1. Project planning and scheduling meetings with the City’s Human Resources Staff, project designee(s)

2. Policy input and project direction meeting and briefing with Council, Human Resources and designee(s)

3. Project briefing presentation for all employees, Council, City officials, City’s project leaders

4. Management and employee communication, progress reports throughout all project phases

5. Assistance with development and communication with a committee of employee representatives

Classification Project Tasks

6. Occupational familiarization by review of City’s current class specifications and compensation plans

7. Organizational familiarization by review of City organization charts, budgets, and annual reports

8. Position Analysis Questionnaire (PAQ) customized for gathering City employee occupation data

9. Meetings to distribute and explain the PAQ and the project for all City officials and employees

10. Job interviews, desk audits / field observations with representatives of each class (flex options)

11. Recommended title modifications and reclassifications for consideration by department heads

12. Review of position classification recommendations with City’s project staff and respective departments

13. Facilitation of employee participation and feedback process on any proposed classification changes

14. Preparation of updated or “track changes” class specifications for each included job classification

Compensation Surveys

15. Confirmation of survey cities to include in external total compensation comparisons

16. Identification of City occupations to utilize as survey benchmark job classifications

17. Solicitation of comparator employers and agencies for participation in external compensation surveys

18. Extraction of data from public employer compensation plans, questionnaires, reliable published surveys

19. Total compensation and benefits survey by bargaining unit for external competitiveness comparisons

20. Consolidation of data from all sources and calculation of prevailing rates for benchmark jobs

21. Computation of extent City’s compensation offerings vary from external prevailing rates and practices

22. Review of competitiveness analysis with Human Resources, City Officials and City’s project designees

Compensation Plan Development

23. Construction of optional salary range structures for review and selection by City’s project leaders

24. Assignment of job classes to salary ranges by internal equity and external competitiveness

25. Assistance with City Council identification of desired, affordable salary competitiveness policy

26. Fiscal impact estimates at various levels of external prevailing rates competitiveness policies

27. Review and critique of draft salary and implementation plans with Human Resources, project leaders

Communication of Results and Implementation Strategies

28. Preparation and presentation of final project reports for the City Council, staff, and City Officials

29. Development of a plan for the implementation of City’s updated classification and compensation plan

30. Uploading of EZ COMPTM program files on a Human Resources Department computer, staff training

31. Development and provision of process for ongoing plan maintenance and subsequent plan updates

32. Assistance with communicating the City’s updated plans for all City officials and employees

9 I:\cmo\Agreements\Public Sector Personnel Consultants PSA-FY25-0002.docx-jm

EXHIBIT "B"

PROJECT SCHEDULE

10 I:\cmo\Agreements\Public Sector Personnel Consultants PSA-FY25-0002.docx-jm EXHIBIT "C"

PROJECT RATES BY MAJOR TASK

A. PROJECT COST ESTIMATE

We estimate that the project's total cost, including all fees for professional services and reimbursement for out-of-pocket expenses, will not exceed the indicated amounts.

Major Project Components
- Project Planning, Stakeholder Meetings, Project Briefing Meetings for Employees $ 7,000 - Desk Audit Interviews (200) $ 25,000
- Position Classification, Titling, Career Ladders, Job Families $ 15,000 - Updated Classification Specifications (200) $ 15,000
- Total Compensation Survey – Up to 15 Comparators $ 100,000 - Reserve – Employee Communication, Stakeholder Meetings, Presentations $ 10,000 - From Surveys, Compensation Plan, Draft Reviews, Final Presentations $ 20,000 Base Cost: $ 192,000

Standard Hourly Rate all Staff $150

B. FLEXIBLE WORK PLAN, NEGOTIABLE TOTAL COST, TERMS

Our work plan is flexible and total project cost negotiable, and we will discuss, modify, add or delete, any work task to increase the project's responsiveness to the City’s needs and financial resources. We will provide the City with monthly invoices for the professional services provided and out-of-pocket expenses incurred during the month. We request that the City pay the invoices within thirty (30) days of their receipt.

11 I:\cmo\Agreements\Public Sector Personnel Consultants PSA-FY25-0002.docx-jm EXHIBIT " D "

WORKERS’ COMPENSATION INSURANCE CERTIFICATION

Every employer, except the State, shall secure the payment of compensation in one or more of the following ways:

(a) By being insured against liability to pay compensation by one or more insurers duly authorized to write compensation insurance in this State. (b) By securing from the Director of Industrial Relations, a certificate of consent to self-insure, either as an individual employer , or as one employer in a group of employers, which may be given upon furnishing proof satisfactory to the Director of Industrial Relations of ability to self -insure and to pay any compensation that may become due to his or her employees.

CHECK ONE

_____I am aware of the provisions of Section 3700 of the Labor Code which requires every employer to be insured against liability for Workers’ Compensation or to undertake self-insurance in accordance with the provisions of that Code, and I will comply with such provisions before commencing the performance of the work and activities required or permitted under this Agreement. (Labor Code §1861).

_____I affirm that at all times, in performing the work and activities required or permitted under this Agreement, I shall not employ any person in any manner such that I become subject to the workers’ compensation laws of California. However, at any time, if I employ any person such that I become subject to the workers’ compensation laws of California, immediately I shall provide the City with a certificate of consent to self -insure, or a certification of workers’ compensation insurance.

I certify under penalty of perjury under the laws of the State of California that the information and representations made in this certificate are true and correct.

PUBLIC SECTOR PERSONNEL CONSULTANTS INC.

By: Date: ___________________
Mattew Weatherly, President
DATE OF REQUEST:

An additional appropriation is hereby requested as follows:

Department:

JUSTIFICATION:

Requested By:

Recommended By Finance Director:

Recommended:

Yes
No
Signed
Comments:

Approved by City Council:

Date:

Signed:

City Clerk
REVENUE APPROPRIATION INCREASE (if applicable)
EXPENDITURE APPROPRIATION INCREASE (if applicable)
$ -
$ -
TRANSACTION NO:

ACCOUNTING PERIOD:

Account Description
Orgkey
Object Code
Job Ledger (If
applicable)
Amount
Job Ledger (If
applicable)
Amount
Account Description
Orgkey
Object Code
Department Head
City Manager

CITY OF REDLANDS

REQUEST FOR ADDITIONAL APPROPRIATION

FINANCE USE ONLY

City Council/Financing Authority Meeting I. 1.

DATE: 01/21/2025
TO: Honorable Mayor and City Council Members
SUBJECT: Presentation and acceptance of the Fiscal Year 2024 City of Redlands Annual Comprehensive Financial Report, and the Independent Accountants’ Report on Applying Agreed-Upon Procedures Related to the Article XIII-B Appropriations Limit Calculation (Management Services/Finance Director Garcia) MOTION(S):

I move to accept the City of Redlands Comprehensive Annual Financial Report and the Independent Accountants’ Report on Applying Agreed-Upon Procedures Related to the Article XIII-B Appropriations Limit Calculation for the fiscal year ending June 30, 2024.

RECOMMENDATION:

N/A
DISCUSSION:

The Annual Comprehensive Financial Report (ACFR) communicates the City’s financial condition and activity for the fiscal year ending June 30, 2024. It is an audited summary report of the financial position and transactions of the City for the fiscal year. The Pun Group LLP, a certified public accounting firm, audited these documents and has provided an unmodified opinion of the City’s financial statements. An unmodified opinion communicates to users that the financial statements are fairly presented and that the information used in the report is consistent with generally accepted accounting principles. This is the best opinion that the City can receive from its auditors.

State statute and federal funding requirements stipulate the need for an annual audit to be conducted by independent certified public accountants. The Pun Group LLP was selected through a competitive selection process to perform these services for the City. The audit engagement was also designed to meet these services for the City. The audit engagement was also designed to meet the requirements of the Federal Single Audit Act of 1984 and related OMB Circular A-133, as well as the requirements of Statement on Auditing Standards 115 (SAS 115) and Statement on Auditing Standards 114 (SAS 114).

Accounting and reporting requirements adopted by the Governmental Accounting Standards Board (GASB) for annual financial statements of state and local governments have been implemented as required.

Pursuant to GASB guidelines, the City’s ACFR is divided into three sections:

Introductory, Financial and Statistical. The Introductory section contains a Letter of Transmittal. This letter includes a brief overview of the City, economic outlook, operational controls, and major initiatives. It also includes the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association (GFOA) for the prior fiscal year ended June 30, 2023. The GFOA's Certificate is the highest form of recognition in governmental accounting and financial reporting, and its attainment represents a significant accomplishment. The City has consistently received this award for the last twenty-one years.

The ACFR presents the City’s financial condition and activity in a transparent and structured manner, which is explained in more detail in the section for Management’s Discussion and Analysis. The report also provides historical and comparative information that can be useful to City staff, elected officials, and external users such as debt rating agencies, businesses, other public agencies, and the City’s residents. The 2024 Annual Comprehensive Financial Report and several prior year reports are available on the City’s website at cityofredlands.org/ACFR.

Article XIII-B of the California Constitution places limits on the amount of revenue that can be spent by the state and each local government entity. It is the responsibility of the City to calculate the annual appropriations limit. The City’s auditors are required to review and approve the appropriations calculation as part of their audit to the City. The auditor found no exceptions to the City’s calculation of the appropriations limit. The Independent Accountants’ Report on Agreed-Upon Procedures Applies to Appropriations Limit Worksheet is included as an attachment to this report.

ALTERNATIVES:

Not Applicable
STRATEGIC PLAN:

Not Applicable
SUBMITTED BY:

Danielle Garcia, Management Services/Finance Director
RECOMMENDED BY:

Charles M. Duggan, Jr., City Manager
REVIEWED BY:

Yvette M. Abich Garcia, City Attorney
Janice McConnell, Assistant City Manager
Fiscal Impact
Discussion:

There is no fiscal impact associated with the motion provided.

Attachments
FY 2024 Annual Comprehensive Financial Report
AU-C 260 Letter (Conclusion of the Audit)
Agreed-Upon Procedures Related to the Article XIII-B Appropriations Limit Calculation

City of Redlands

Redlands, California

Annual Comprehensive Financial Report

For the Fiscal Year Ended June 30, 2024

Prepared by
Management Services/Finance Department

City of Redlands
Annual Comprehensive Financial Report
For the Year Ended June 30, 2024

Table of Contents

i
Page
INTRODUCTORY SECTION (Unaudited)

Table of Contents ........................................................................................................................................................ i Letter of Transmittal ................................................................................................................................................... v Principal Officers ...................................................................................................................................................... xv Organization Chart ............................................................................................................ ..................................... xvi GFOA Certificate of Achievement ........................................................................................................................ xvii

FINANCIAL SECTION

Independent Auditors’ Report ................................................................................................................................ 1

Management’s Discussion and Analysis (Unaudited)............................................................................................ 5

Basic Financial Statements:

Government-Wide Financial Statements:

Statement of Net Position ..................................................................................................... ....................... 32 Statement of Activities ..................................................................................................... ........................... 34

Fund Financial Statements:

Governmental Funds Financial Statements:

Balance Sheet .............................................................................................................. .......................... 41 Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Position ...................................................................... 42 Statement of Revenues, Expenditures, and Changes in Fund Balances ................................................ 43 Reconciliation of the Government al Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-Wide Statement of Activities a nd Changes in Net Position ..................................................................... 44 Proprietary Funds Financial Statements:

Statement of Net Position .................................................................................................. ................... 46 Statement of Revenues, Expen ses and Changes in Net Position .......................................................... 50 Statement of Cash Flows .................................................................................................... ................... 52 Fiduciary Funds Financial Statements:

Statement of Fiduciary Net Position ........................................................................................ ............. 59 Statement of Changes in Fiduciary Net Position .................................................................................. 60

Notes to the Basic Financial Statements ......................................................................................................... 65

City of Redlands
Annual Comprehensive Financial Report
For the Year Ended June 30, 2024

Table of Contents (Continued)

ii

Page
FINANCIAL SECTION (Continued)

Required Supplementary Information (Unaudited):

Budgetary Information ..................................................................................................................................... 127 Budgetary Comparison Schedules:

General Fund ................................................................................................................ ............................. 128 Governmental Grants Special Revenue Fund ............................................................................................ 131 Schedule of Changes in the Net Pe nsion Liability and Related Ratios ............................................................ 132 Schedules of Contributions - Pension ......................................................................................... ..................... 136 Schedule of Changes in Total O PEB Liability and Related Ratios ................................................................. 138

Supplementary Information:

Non-Major Governmental Funds:

Combining Balance Sheet ..................................................................................................... .................... 143 Combining Statement of Reve nues, Expenditures and Changes in Fund Balances ........................................................................................................... ...................... 149

Budgetary Comparison Schedules:

Emergency Service Special Revenue Fund ......................................................................................... 155 Household Hazardous Wast e Special Revenue Fund ......................................................................... 156 State Gas Tax Sp ecial Revenue Fund ................................................................................................. 157 Air Quality Improveme nt Special Revenue Fund ............................................................................... 158 Traffic Safety Special Revenue Fund ................................................................................................. 159 Measure I Speci al Revenue Fund ........................................................................................................ 160 Open Space Special Revenue Fund ............................................................................................ ......... 161 Downtown Redlands Business Area Special Revenue Fund .............................................................. 162 Parking Authority Special Revenue Fund ..................................................................................... ...... 163 Asset Forfeiture Special Revenue Fund ...................................................................................... ........ 164 Supplemental Law Enforcement Grant ......................................................................................... ...... 165 Park and Open Space Special Revenue Fund ................................................................................... .. 166 Arterial Street Constr uction Special Revenue Fund ........................................................................... 167 Traffic Signals Special Revenue Fund ....................................................................................... ......... 168 Freeway Interchanges Special Revenue Fund ..................................................................................... 169 Street Lighting Distri ct #1 Special Revenue Fund .............................................................................. 170 CFD 2004-1 Assessment Special Revenue Fund ................................................................................ 171 Landscape Maintenance Distri ct Special Revenue Fund .................................................................... 172 Local Transportation Special Revenue Fund .................................................................................. .... 173 PARIS Special Revenue Fund ................................................................................................. ........... 174 Public Art Special Revenue Fund ............................................................................................ ........... 175 City of Redlands
Annual Comprehensive Financial Report
For the Year Ended June 30, 2024

Table of Contents (Continued)

iii

Page
FINANCIAL SECTION (Continued)

Supplementary Information (Continued):

Budgetary Comparison Schedules (Continued):

Transportation Development Act Special Revenue Fund ................................................................... 176 Public Facilities Developm ent Special Revenue Fund ....................................................................... 177 Storm Drain Capital Projects Fund .......................................................................................... ........... 178 Safety Hall Replacement Capital Projects Fund ................................................................................. 179 General Debt Service Fund ................................................................................................................. 180 Simonds Endowment Permanent Fund ........................................................................................... .... 181 Pauline Stancliff Memo rial Trust Permanent Fund ............................................................................ 182

Non-Major Enterprise Funds:

Combining Statement of Net Position ....................................................................................................... 184 Combining Statement of Revenues, Expe nses, and Changes in Net Position ........................................... 185 Combining Statement of Cash Flows ........................................................................................... ............. 186

Internal Service Funds:

Combining Statement of Net Position ....................................................................................................... 190 Combining Statement of Revenues, Expe nses, and Changes in Net Position ........................................... 192 Combining Statement of Cash Flows ........................................................................................... ............. 194

STATISTICAL SECTION (Unaudited)

Table of Contents .................................................................................................................................................... 201

Financial Trends:

Net Position by Component – Last Ten Fiscal Years ............................................................................ .......... 202 Changes in Net Position – Last Ten Fiscal Years .............................................................................. .............. 204 Fund Balances of Governmental Funds – Last Ten Fiscal Years .................................................................. .. 208 Changes in Fund Balances of Government al Funds – Last Ten Fiscal Years ................................................. 210

Revenue Capacity:

Assessed Value and Estimated Actual Value of Taxable Property – Last Ten Fiscal Years ........................... 213 Assessed Value and Estimated Actual Value of Taxabl e Property by Major Type – Last Ten Fiscal Years .. 214 Direct and Overlapping Property Tax Rates – Last Ten Fiscal Years ............................................................ . 216 Top Ten Principal Property Taxpayers ............................................................................................................ 218 Property Tax Levies and Collecti ons – Last Ten Fiscal Years ........................................................................ 219 City of Redlands
Annual Comprehensive Financial Report
For the Year Ended June 30, 2024

Table of Contents (Continued)

iv

Page
STATISTICAL SECTION (Unaudited) (Continued)

Debt Capacity:

Ratios of Outstanding Debt by Ty pe – Last Ten Fiscal Years ......................................................................... 220 Ratios of General Bonded Debt Outstanding – Last Ten Fiscal Years ............................................................ 222 Direct and Overlapping Governmental Activities Debt .......................................................................... ......... 223 Legal Debt Margin Information – Last Ten Fiscal Years ........................................................................ ........ 224 Pledged Revenue Coverage – Last Ten Fiscal Years ....................................................................................... 226

Demographic and Economic Information:

Demographic and Economic Statis tics – Last Ten Fiscal Years ...................................................................... 227 Principal Employers – Current Year and Ten Years Prior ....................................................................... ........ 228

Operating Information:

Full Time Equivalent City Government Empl oyees by Function – Last Ten Fiscal Years ............................. 229 Operating Indicators by Function/Pr ogram – Last Ten Fiscal Years ............................................................... 230 Capital Asset Statistics by Function/ Program – Last Ten Fiscal Years ........................................................... 232

City of

REDLANDS
Incorporated 1888
35 Cajon Street, Redlands, CA 92373
v

MANAGEMENT SERVICES

DEPARTMENT

FINANCE DIVISION
Danielle Garcia
Management Services/Finance
Director

James Garland
Assistant Finance Director

December 18, 2024

To the Members of the City Council and Citizens of the City of Redlands:

It is the policy of the City of Redlands to a nnually publish a complete set of financial statements presented in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) and audited in accordance wi th auditing standards generally accepted in the United State of America by a firm of certified public accountants. Pursuant to that requirement, we hereby issue the annual comprehensive financial statements of the City of Redlands (the City) for the Fiscal Year ended June 30, 2024.

This report consists of manage ment’s representations concerni ng the finances of the City.

Consequently, management assumes full responsi bility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making these representations, management of the City has established a comprehensive internal control framework that is designed both to protect the Ci ty’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City’s financial statements in c o n f o r m i t y w i t h U . S . G A A P . B e c a u s e t h e c o s t o f internal controls should not outweigh their benefits, the City’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we asse rt that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects.

The City’s financial statements have been audited by The Pun Group, LLP, an independent firm of certified public accountants. The goal of th e independent audit was to provide reasonable assurance that the financial statements of the Ci ty for the Fiscal Year ended June 30, 2024, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosure s in the financial statements; assessing the accounting principles used and significant esti mates made by management; and evaluating the overall financial statement presentation. The independent auditor conc luded, based upon the audit, that there was a reasonable basis for rende ring an unmodified (“clean”) opinion that the City’s financial statements for the Fiscal Year ended June 30, 2024 were fairly presented in conformity with U.S. GAAP. The independent auditor’s report is presented as the first component of the financial section of this report.

The independent audit of the financial statements of the City is typically part of a broader, federally mandated “Single Audit” designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited City’s internal controls and legal requirements involving the administration of federal awards.

These reports are available in the City’s separately issued Single Audit Report.

U.S. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City’s MD&A can be found immediately following the independent auditor’s report.

vi

PROFILE OF THE CITY OF REDLANDS

The City of Redlands, incorporat ed in 1888, is located 63 miles east of Los Angeles, 110 miles north of San Diego, and 500 miles southeast of San Francisco. It lies within the San Bernardino Valley in the southwestern portio n of San Bernardino County, covering an area of 36 square miles, within the heart of the Inland Empire. It serves a population of 72,692.

The City was incorporated under the general laws of the Stat e of California and enjoys all the rights and privileges applicable to a General Law Ci ty. It is a municipal corporation governed by a five-member city council in which all policy-ma king and legislative authority is vested. The City Council is responsible, am ong other things for passing ordinances, adopting the budget, appointing committees, and hiring both the City Manager and City Attorney. The City Manager is the chief administrative officer of the City and as such is responsible for carrying out the policies and ordinances of the City Council, for overseeing the day-to-day operations of the City, and for appointing department heads. The Council is elected on a non-partisan basis. Council members serve four-year staggered terms, with elections occurring every two years. The mayor is currently elected by a majo rity vote of the Council. Adop ted in 2017, Ordinance No. 2848, amended the Redlands Municipal Co de to change the City’s electoral system for City Council Members from at-large to by-district elections.

The City provides a full range of services, including police and fire protection, animal control, emergency medical aid, building safety regulation and inspection, street lighting, landscaping, sewer and water utilities, solid waste collectio n and disposal, land use planning and zoning, recreation and community serv ices, maintenance and improvem ent of streets and related structures, traffic safety maintenance and impr ovement, and a full range of recreational and cultural programs for citizen participation, as well as being the home of the historic A. K. Smiley Public Library.

Budgets are adopted on a basis consistent with U.S. GAAP. While annual appropriated budgets are adopted for all departments within the gene ral, special revenue, and capital project funds, the City operates on a biennial budget cycle to guide its financial planning and control.

Every two years, during the period from Febr uary through May, department heads prepare estimates of required appropriations for the upcoming two-year budget cy cle. These estimates are compiled into a proposed operating budg et, which includes a summary of projected expenditures, financial resources, and historical data from the preceding budget cycle. The City Manager’s Recommended Budget is then presente d either to the full City Council or to the Budget Subcommittee (comprised of two members of the City Council and the City Treasurer) at a public meeting noticed in accordance with the Brown Act. Following a series of two to three budget presentations during regular and special Council meetings, the biennial budget is formally adopted by the City Council at a regular meeting prior to June 30th of the second year in the current cycle.

The City Manager is legally au thorized to transfer budgeted amounts between divisions and accounts within the same department. Transfer of appropriations between departments or funds and increased appropriations must be auth orized by the City Council. Expenditures may not legally exceed budgeted approp riations within a fund. All appr opriations shall lapse at the end of the fiscal year to the extent they have not been expended or lawfully encumbered, in which case they are automatically carried over in t o t h e f o l l o w i n g f i s c a l y e a r a s p a r t o f t h e biennial budget resolution of City Council.

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The City maintains budgetary contro ls to ensure compliance with provisions embodied in the annual appropriated budget approved by the City Council. Activities of the general fund, special revenue funds, debt servic e funds, capital projects funds, enterprise funds and internal service funds are included in the annual budget . Formal budgets are not employed for debt service funds because debt indenture provisions specify payments. The permanent fund is not budgeted. The level of control (level at whic h expenditures may not exceed budget) is the fund level. The City also maintains an encumbra nce accounting system as one technique of accomplishing budgetary control. Encumbered amounts are carried forward into the next fiscal year of a biennial budget by resolution of the City Council that is adopted at the same time the budget is adopted. Budget-to-actual comparisons are provided in this report for each individual governmental fund for which an appropriated annual budget has been adopted. For the general fund and major special revenue funds, this compar ison is presented as part of the required supplementary information in the accompanying financial statements. For governmental funds that have appropriated annual budgets, other th an the general fund and major special revenue funds, this comparison is presented in the supplementary section of the accompanying financial statements.

ECONOMIC CONDITION AND OUTLOOK

The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the City operates.

Local economy . Throughout fiscal year 2024, econom ic indicators reflected a mixed performance, showcasing both growth and ch allenges. Property tax revenue experienced r o b u s t g r o w t h o f 8 % c o m p a r e d t o t h e p r i o r f i s c a l y e a r , w i t h n e a r l y 1 . 7 % o f t h i s i n c r e a s e attributed the annual adjustment for CPI. Ne w residential and commercial construction contributed 1.7% to this growth, while prior-year property sale s accounted for an additional 3%.

Conversely, sales tax revenue contracted by 2%, driven by a decline in consumer spending.

While inflation has begun to cool, the prolonged pe riod of elevated prices in recent years has left many Americans financially strained, co ntributing to reduced discretionary spending.

Despite these challenges, the City’s economic foundation remains strong, buoyed by continued development and a growing property tax base.

The City of Redlands’ economy is based largely in the service and trade sector s (health care, retail trade, logistics, technology, and education). The region has a varied manufacturing and industrial base that has added to the relative stability of the unemployment rate over the years.

Redlands’ unemployment rate remains lower th an its neighboring communities. Since 2002, the annual unemployment rate for the City has ranged from a low of 2.9% in 2021 to a high of

10.5% in 2010, which surpasses the 2020 pandemic-related peak of 7.4%.

Major industries within the City’s boundaries or in proximity include computer software manufacturers, higher education institutions, light manufacturing, regional distribution centers and several financial and insurance institutions . Major employers in the City, or within the vicinity, include the Redlands Un ified School District, Esri (Environmental Systems Research Institute), Redlands Community Hospital, Amazon Fulfillment Center, Beaver Medical Group, the City of Redlands, the University of Redlan ds, Burlington Coat Factory Distribution Center and Loma Linda University Behavioral Medical Center.

The City reviews a variety of indicators during the fiscal year as a part of the evaluation of the economic conditions impacting the City and to analyze trends and patterns therein.

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Unemployment Rate – The City’s unemployment ra te has experienced significant fluctuations over the past four years, re flecting broader regional and national trends. In 2020, unemployment reached its highest level since the Great Recession, driven by pandemic-induced economic disruptions. By 2021, the rate had recovered to a pre-pa ndemic low of 2.9%, a testament to the resilience of the City’s labor market. However, in 2022, unemployment rose to

5.5% as labor force participation outpaced job creation. In 2023, this trend moderated, with unemployment declining to 3.6%, a near 2% impr ovement from the prior year, signaling that the economy successfully generated jobs to support the expanding workforce.

This recovery aligns with the Inland Empire’s broader economic rebound, where industries such as logistics, healthcare, and professional services have driven job growth. Southern California as a whole has experienced steady hiring, with demand for skilled workers increasing in technology, education, and advanced manufacturing. Redl ands has benefited from these regional trends, leveraging its diverse economic base and strategic lo c a t i o n t o f o s t e r j o b creation and economic stability.

Assessed Value – The City’s assessed property values experienced remarkable growth in FY 2024, increasing by 9% over the prior fiscal year . This significant growth is attributable to a variety of factors that underscore the strength of the local real estate market. Nearly 1.7% of this increase resulted from new residentia l and commercial constr uction, while 3% was attributed to prior-year property sales at prices above assessed value. Another 1.7% of this growth stemmed from the standard 2% Consum er Price Index (CPI) adjustment allowed under California property tax law, further boosting the City’s revenue base.

The sustained rise in assessed value highlights the appeal of Redlands as a destination for both residential and commercial investment. The City's strategic location within the Inland Empire, coupled with state legislation encouraging housing development, has supported ongoing construction and property transa ctions. This growth also reflec ts broader trends in Southern California, where rising demand for housing and commercial spaces continues to push property values higher despite challenges in the broader economy.

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Housing Market - The local real estate market in Redlands demonstrated continued strength in FY 2024, with median home sale prices rema ining well above pre-pandemic levels. Although increased borrowing costs from interest rate hikes beginning in May 2022 eventually slowed housing sales in September 2022, home prices remained resilient, with the median price increasing approximately 4% between 2022 and 2023. This sustained demand for housing, combined with favorable state legislation, ha s spurred ongoing residential development across the City, with several projects currently in the entitlement process.

Assessed property values in Redlands grew by ne arly $1.1 billion in FY 2024, driven largely by prior-year transfers of ownershi p, which contributed 3% of the total increase, higher than the 2% average seen over the past decade. The assessed values for non-single-family residential (non-SFR) properties more than doubled as a result of these sale s, reflecting strong demand for commercial and multifamily properties. These trends underscore th e strength of Redlands’ real estate market as a key component of its fiscal health.

Regional and national economic conditions co ntinue to shape the City’s outlook. While inflationary pressures have eased and unemployment remains low, rising interest rates pose potential challenges for the housing market in the medium term. However, Redlands’ strengthening tax base, fueled by a robust real estate market and investments in multiuse and transit-oriented developments, positions the Ci ty to remain a key participant in the Inland Empire’s long-term housing demand growth.

The budget for fiscal year 2024 was part of the Ci ty’s first biennial budget adopted by the City Council, covering fiscal years 2023 & 2024. This biennial budget builds on the City’s continuing recovery from the pandemic and the significant addition of Measure T sax revenue beginning in April 2021 while investing in enhancements to services, infrastructure and programs that address deferred maintenance, homelessness, and other community priorities. In the General Fund, City revenue from combined sales tax sources increased from roughly $17,510,000 in 2020 to $47,629,600 million in 2024 (a n increase of 172%). Proper ty tax has continued to perform well as home prices re main high and new development that has occurred in years passed is added to the tax rolls. During the sa me time frame from 2020 to 2024, the City’s revenue from property tax gr ew from roughly $32,000,000 to approximately $41,700,000 (an increase of almost 30%).

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In residential construction, th e City has continued to expand its housing stock with several major projects. At the close of FY 2024, there were over 2,400 apartment units and 1,400 single-family dwelling units in various stages of planning, entitlement, and construction. These include:

 The Tennessee Village Project: A mixed- use development featuring 460 apartments (with 5% designated as very low-income units) and 18,000 sq. ft. of commercial space on Tennessee Street.
 Lugonia Village Project: A high-density residential development with 436 apartments, 56 condominium townhomes, and 19 single-f amily residences on 25 acres near Pennsylvania Avenue.
 The State Street Village Project: A transformative transit-oriented development to redevelop the former Redlands Mall site in to a mixed-use district with up to 700 apartments/condominiums and 65,468 sq. ft. of retail and commercial space.

The uptick in residential projects has been supp orted by compliance with the Regional Housing Needs Allocation (RHNA) targets and favorable st ate legislation. These developments continue to meet the growing demand for housing in Redlands and contribute to the City's expanding tax base.

In terms of commercial growth, Redlands saw several new developments completed or underway, including:

 Packing House District Phase 2: Two commerc ial buildings on 3.9 acres for retail and restaurant uses.
 Redlands Railway District: Multiple retail a nd restaurant buildings, including a 7,968 sq. ft. multi-tenant structure and a 3,898 sq. ft. bank facility, alongside historic preservation projects.
 The MOD Packinghouse Food Hall: Adaptive re use of a historic structure into a vibrant multi-tenant retail and dining destination.

These projects illustrate Redlands’ strong co mmitment to mixed-use and transit-oriented developments, ensuring a balanced approach to housing and economic growth. The City remains poised to address the challenges of risi ng interest rates while continuing to attract residential and commercial investment.

Other notable business openings in fiscal year 2023-24 include the following:

 Sojo Industries, founded in 2021, expanded its operations to Redlands, California, in April 2024. Sojo Industries is an industrial automation company that utilizes robotics, mobility, and modularity to deliver efficient packaging and assembly solutions to the food and beverage industry.
 Finney's Crafthouse & Kitchen, a family-owned American tavern known for its globally inspired, made-from-scratch menu, expanded into the Inland Empire with the opening of its Redlands location on September 25, 2023.
 The Three Stags Irish Pub and Restaurant opened in November 2023 in downtown Redlands. They offer a warm and inviting atmo sphere, serving traditional Irish food and live music.
 R Burgers Drive Thru opened in summer 2024. Located at 1280 Alabama Street, the establishment operates seven days a week from 5:00 AM to 11:00 PM.

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 Zoom Room, a dog training, agility and obedie nce facility opened in March 2024. They offer a variety of classes, including obed ience training, agility, puppy classes, and enrichment workshops, all using positive reinforcement methods.  D-BAT Redlands, a premier baseball and softball training facility, opened in spring of 2024 and offers a range of training services, from developmental youth camps to private lessons.
 Cornerstone BBQ, a Texas-style barbeque fast-casual restaurant, opened in November 2023. This is the business’ second location.
 Le Chat Noir Bookstore & Cat Lounge opened its doors in January 2024. This unique establishment combines a bookstore, café , and cat lounge, offering visitors the opportunity to enjoy coffee, browse books, and interact with adoptable cats. Since its opening, Le Chat Noir has facilitated the adoption of over 70 cats.

Successor Agency. The City of Redlands Redevelopmen t Agency – and all redevelopment agencies in California – were dissolved under AB1X 26 (and subs equently AB1484), effective as of February 1, 2012, and the City of Redlands , as “Successor Agency,” assumed responsibilities for winding down the operations of the Successor Agency.

On September 8, 2015, the DOF approved the Successor Agency’s Long-Range Property Management Plan (LRPMP). As of April 2019, the City has disposed of a ll remaining properties not specified for a governmental purpose in accordance with the LRPMP. In addition, all outstanding liabilities of the Successor Agency were satisfied as of the end of Fiscal Year 2023.

In order for the Successor Agency to dissolve, HSC Section 34187(b) requires the following:

A. All enforceable obligations have been retired or paid off; B. All real property has been disposed of pursuant to HSC Section 34181 or 34191.4; and,
C. All outstanding litigation has been resolved

With all enforceable obligations paid in full, all land disposed of, and all litigation settled, there is no need for the Agency to continue to exist and the criter ia to proceed with formally dissolving has been met. On June 10, 2024, the Countywide Oversight Board approved a resolution to formally dissolve the Successor Agency to the Rede velopment Agency of the City of Redlands. July 2, 2024, the state Departme nt of Finance acknowledged the end of the Agency's existence. Final dissolution of the Successor Agency of the Former Redevelopment Agency of the City of Redlands took place in the fiscal year ended June 30, 2024.

Further discussion about the Successor Agency can be found in Note 17 of the Notes to the Basic Financial Statements.

Long-term financial outlook/planning. As the economy transitions into a post-pandemic phase, the City continues to experience stabilit y bolstered by a diversified tax base, growing reserves, and a steady pipeline of residential and commercial develo pments. However, new economic dynamics, shaped by higher interest rates, evolving labor market conditions, and persistent inflation, will influence long-term fi nancial planning. These factors, coupled with global and national economic trends, present both opportunities and challenges for maintaining fiscal resilience.

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Provided the significant growth in assessed va lue seen in FY 2024 of 9%, growth in assessed property values remains a cornerstone of the City 's fiscal health, providing consistent revenues despite broader economic uncer tainties. However, with the Federal Reserve maintaining a higher interest rate environment, the housing market is likely to experience slower price appreciation and reduced transaction volumes in the coming years. Housing affordability and borrowing constraints may temper growth in property tax revenues, necessitating careful monitoring and prudent fiscal forecasting.

The City continues to benefit from a robust labor market, char acterized by low unemployment and steady workforce expansion. However, labor market dynamics are shifting as employers compete for talent in a constr ained labor pool, driving up wa ges. While this has supported consumer spending, a key piece of economic stab ility, it also imposes co st pressures on local businesses. The City's proactive approach to attracting diverse industries and supporting workforce development will play a critical role in sustaining economic growth.

Inflation has been a significant concern nationally , reaching levels not seen in decades. While there are signs of moderation due to monetary policy interventions, inflation remains elevated.

Despite higher interest rates intended to temp er economic activity, consumer spending and business investments have remain ed robust. This resilience suggests that the economy may avoid a severe downturn, aligning with projections of a "soft landing" where growth slows but does not contract sharply.

Global supply chain disruptions and geopolitic al uncertainties have affected economic conditions locally and nationally. While these factors pose challenges, they also present opportunities for local businesse s to adapt and innovate. The Ci ty's diverse economic base positions it to navigate these gl obal headwinds more effectively, leveraging local strengths to maintain economic momentum.

Despite these challenges, the City is well-positioned for long-term financial sustainability. Key strengths include:

 Diversified Revenue Base: Continued grow th in assessed property values and development activities have expanded the City's fiscal foundation.  Business Resilience: New and expanding busin esses provide a reliable source of tax revenue and employment opportunities.
 Infrastructure Investments: Strategic us e of Measure T funding supports critical infrastructure and enhances the City's appeal to residents and businesses alike.  Workforce Adaptability: Efforts to addre ss labor market constraints and support workforce development strengthen the City's economic base.

The long-term financial outlook for the City reflects cautious optimism amid a complex and evolving economic landscape. While external factors such as inflation, interest rates, and global dynamics will continue to pose challenges, the Ci ty's fiscal management and strategic planning provide a foundation for resilience. By investing in infrastructure, supporting workforce growth, and fostering economic development, the City is prepared to navigate uncertainties and secure a sustainable future for its residents.

The graph below provides an at-a-glance view of the City’s ability to prioritize spending and facilitate investment in long-term capital needs. In fiscal yea r 2024, the City’s General Fund reserves for capital projects included: $994,00 0 for parking improvements in the downtown, roughly $6 million in parks, equipment, facilit ies, sidewalks and building capital, $24.6 million for future city facilities, $2.5 million for pub lic safety/homelessne ss, and $2 million for unfunded mandates.

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Notably, the ending unassigned fund balance for the General Fund was approximately $7.2 million higher than the prior yea r and roughly $21 million higher th an FY 2022, increasing from $39.5 million in FY 2022 to $60. 5 million in FY 2023. Further review of the General Fund is included within Management’s Discussion and Analysis which follows the independent auditor’s report.

Relevant Financial Policies

The City has adopted a set of financial policies based on best management practices and GFOA standards. These policies direct the admini stration of the budget, accounting practices, purchasing, debt, capital financing, investments, and capital assets. Cent ral to the management of the budget and reserves are two policies: th e Balanced Budget Policy – Ordinance No. 2660 (2007) and the Fund Balance Policy established by Resolution No. 7346 (2013). The Balanced Budget Policy requires that the City Counc il adopt a balanced budget on an annual basis wherein total financial sources meet or exceed the total fina ncial requirements of the City, excluding one-time capital expenditures. This ensures a structural balance of revenues and expenditures and creates sustainability with re gard to ongoing appropriations. The Fund Balance Policy provides that it i s t h e p o l i c y o f t h e C i t y t o a s s i g n a m i n i m u m o f 4 5 % o f t h e General Fund’s excess of Revenues over Expenses (the surplus – if any) each fiscal year for general fund assigned reserves in the categories of Capital Equipment, Building Purchases and/or Improvements, and Unfunded Mandates in equal proportion and 15% of that excess to the committee reserve for operating contingency. This policy has contributed to the City’s ability to invest in capital replacement of aging infrastructure of parks and public buildings as well as funding adequate reserves to respond to natural disaster s or other disruptions to the City’s critical revenue streams.

In June 2018, the City Counc il adopted Resolution No. 7983 establishing the City’s Debt Management Policy. Among other things, this policy establishes guidelines for the use of various categories of debt; creates procedures and policies that minimize the City’s debt service and issuance costs; and provides for full and comp lete financial disclosure and reporting. The Policy was developed to improve the quality of decision-making, provide justification for how debt issuance is structured, identify goals, a nd to validate the City’s commitment to strategic long-term financial planning. Maintaining complia nce with the Policy should demonstrate to rating agencies and to capital markets that the Ci ty is well managed and will be able to meet its financial obligations on a timely basis.

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Awards and Acknowledgements

The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement of Excellence in Finan cial Reporting to the City of Redlands for its Annual Comprehensive Financial Report for the Fis cal Year Ended June 30, 2023. This was the twenty first consecutive year that the government has achieved this prestigious award. In order to be awarded a Certificate of Achiev ement, a government must publish an easily readable and efficiently organi zed annual comprehensive financia l report. This report must satisfy both generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. We believe that our current annual comprehensive financial report continues to meet th e Certificate of Achievement Program’s requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate.

The preparation of the annual comprehensive financial report was made possible by the dedicated service of the entire staff of the Finance division. Special recognition is due to Assistant Finance Director, James Garland; Finance Manager, Marie Datuin; Principal Accountant Denise Camarillo, Senior Accountants Jannette Mendoza and Justine Wickman, and Budget Analyst, Miriam Valtierra for their efforts in overseeing the compilation of the accounting data and interfacing with our auditors; and to the accounting firm of The Pun Group, LLP, and to the City Manager’s Office. Cr edit is also due to City Manager Charles M.

Duggan, Jr., Assistant City Manager Janice Mc Connell, and the Mayor and the City Council for their consistent support for maintaining the highest standards of professionalism in the management of the City’s finances.

Respectfully submitted,

Danielle Garcia
Management Services / Finance Director
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City of Redlands
Principal Officers
as of June 30, 2024
City Council (Elected) Eddie Tejeda, Mayor
Paul T. Barich, Mayor Pro Tem
Denise Davis, Councilmember
Mario Saucedo, Councilmember
Jenna Guzman-Lowery, Councilmember
City Manager
Assistant City Manager
Assistant City Manager
City Clerk (Elected)
City Treasurer (Elected)
City Attorney
Development Services Director
Fire Chief
Library Director
Management Services/Finance Director
Municipal Utilities & Engineering Director
Facilities & Community Services Director
Police Chief
Charles M. Duggan, Jr.

Janice McConnell
Christopher Boatman
Jeanne Donaldson
Phillip Doolittle
Yvette Abich Garcia
Brian Desatnik
Rich Sessler
Donald McCue
Danielle Garcia
John Harris
Tabitha Crocker
Rachel Tolber
 There are fourteen advisory Boards/Commissions/Committees as follows: Airport Advisory Board, Citrus Preservation Commission, Cultural Arts Commission, Disaster Council, Historic & Scenic Preservation Commission, Human Relations Commission, Measure T Oversi ght Committee, Municipal Utilities & Public Works Commission, Parks & Recreation Advisory Board, Planning Commission, Library Board, Street Tree Committee, Traffic & Parking Commission, and the Utilities Advisory Committee.
https://redlandsca-my.sharepoint.com/personal/jmacias_cityofredlands_org/Documents/Projects/Budget Book Cover/City Org Chart 2024v3.docx LEGEND
Elected:

Advisory to
City C
ouncil:

Advisory to
Appointed
City of Redlands, CA
Organizational Chart
Approved By:

Charles M. Duggan, Jr.

Ci
ty Manager
Effective July 1, 2024
POLICE

MANAGEMENT

SERVICES

MUNICIPAL

UTILITIES &

ENGINEERING
FIRE
CITY
CLERK
CITY

TREASURER

DEVELOPMENT

SERVICES

FACILITIES &

COMMUNITY

SERVICES
HUMAN

RESOURCES

OFFICE OF THE
CITY

MANAGER

ASSISTANT CITY

MANAGER

ASSISTANT CITY

MANAGER
Independent
Auditors
Boards,
Commissions, and
Committees*

CITY MANAGER LIBRARY
CITY

COUNCIL

CITY ATTORNEY
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Government Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Redlands
California
For its Annual Comprehensive
Financial Report
For the Fiscal Year Ended
June 30, 2023
Executive Director/CEO
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200 E. Sandpointe Avenue, Suite 600
Santa Ana, California 92707

INDEPENDENT AUDITORS’ REPORT

To the Honorable Mayor and Members
of the City Council of the City of Redlands
Redlands, California

Report on the Audit of the Financial Statements

Opinions

We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Redlands, California (the “City”), as of and for the year ended June 30, 2024, and the related notes to the basic financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, business-type activities, each major fund, and the aggregate remaining fund information of the City, as of June 30, 2024, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinions

We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City, and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.

To the Honorable Mayor and Members
of the City Council of the City of Redlands
Redlands, California

2 Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinions.

Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with auditing standard s generally accepted in the United States of America and Government Auditing Standards, we:

 Exercise professional judgment and maintain professional skepticism throughout the audit.

 Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

 Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, no such opinion is expressed.

 Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

 Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, Budgetary Comparison Schedules, Schedule of Changes in Net Pension Liability and Related Ratios, Schedules of Contributions – Pension Plans, and Schedule of Changes in Total OPEB Liability and Related Ratios, as listed in the accompanying table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

To the Honorable Mayor and Members
of the City Council of the City of Redlands
Redlands, California

3 Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The Combining and Individual Fund Financial Statements and Budgetary Comparison Schedules are presented for purposes of additional analysis and are not a required part of the basic financial statements.

Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Combining and Individual Fund Financial Statements and Budgetary Comparison Schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole.

Other Information
Management is responsible for the other information included in the annual report. The other information comprises the Introductory and Statistical Sections but does not include the basic financial statements and our auditors’ report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon.

In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated December 18, 2024, on our consideration of City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of City’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering City’s internal control over financial reporting and compliance.

Santa Ana, California
December 18, 2024

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City of Redlands
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2024

5 The information contained in the Management’s Discu ssion and Analysis (MD&A) introduces the basic financial statements and provides an analytical overview of the City of Redlands (the “City”) financial activities and performance for the fiscal year ended June 30, 2024 . Please read the MD&A in conjunction wi th the transmittal letter and financial statements identified in the accompanying table of contents.

Using the Accompanying Financial Statements

This annual ACFR consists of a series of financial statements. The Statemen t of Net Position and the Statement of Activities provide information about the activities of the City as a whole and present a longer-term view of the City’s finances. Also included in the accompanying report are fund financial statements. For governmental activities, the fund financial statements tell how these services were financed in the short term as well as what remains for future spending.

Fund financial statements also report the City’s operati ons in more detail than the government-wide statements by providing information about the City’s most significant funds. The remaining statements provide financial information about activities for which the City acts solely as a trustee or agent for the benefit of those outside of the government.

OVERVIEW OF THE FINANCIAL STATEMENTS

The annual report consists of four parts – management’s discussion and analysis (this section), the basic financial statements, required supplementary information, and an optional section that presents combining statements for non- major governmental funds and internal service funds. The basi c financial statements include two kinds of statements that present different views of the City:

 The first two statements are government-wide financial statements that provide both long-term and short-term information about the City’s overall financial status.
 The remaining statements are fund financial statements that focus on individual parts of the City government, reporting the City’s operations in more detail than the government-wide statements.

 The governmental funds statements tell how general government services like public safety were financed in the short-term as well as what remains for future spending.  Proprietary fund statements offer short- and long-term financial information about the activities the government operates like businesses, such as the water system.  Fiduciary fund statements provide information about fiduciary relationships – like the custodial funds of the City – in which the City acts solely as agent or trustee for the benefit of others, to whom the resources in question belong.

The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. The statements are followed by a section of required supplementary information that provides additional financial and budgetary information.

Figure A-1 summarizes the major features of the City’s fi nancial statements, including the portion of the City government they cover and the types of information they contain. The remainder of this overview section of management’s discussion and analysis explains the structure and contents of each of the statements.

City of Redlands
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2024

6 Figure A-1

Major Features of the City’s Government-wide and Fund Financial Statements

Fund Statements

Government-wide
Statements

Governmental Funds

Proprietary Funds

Fiduciary Funds

Scope Entire City
government (except
fiduciary funds) and
the City’s component
units
The activities of the
City that are not
proprietary or fiduciary
Activities the City
operates similar to
private businesses
Instances in which the
City is the trustee or
agent for someone
else’s resources

Required financial
statements
 Statement of net
position
 Statement of
activities
 Balance sheet
 Statement of
revenues,
expenditures and
changes in fund
balances
 Statement of net
position
 Statement of
revenues,
expenses and
changes in net
position
 Statement of cash
flows
 Statement of
fiduciary net
position
 Statement of
changes in
fiduciary net
position

Accounting basis and
measurement focus
Accrual accounting
and economic
resources focus
Modified accrual
accounting and current
financial resources
focus
Accrual accounting
and economic
resources focus
Accrual accounting
and economic
resources focus

Type of asset, deferred
outflow of resources,
deferred inflow of
resources, and liability
information
All assets and
liabilities, both
financial and capital,
and short-term and
long-term
Only assets and
deferred outflows of
resources expected to
be used up and
liabilities and deferred
inflows of resources
that come due during
the year or soon
thereafter; no capital
assets or long-term
debt included
All assets and
liabilities, both
financial and capital,
and short-term and
long-term
All assets and
liabilities, both short-
term and long-term

Type of financial
inflow and outflow
information
All revenues and
expenses during the
year, regardless of
when cash is received
or paid
Revenues for which
cash is received during
or soon after the end of
the year; expenditures
when goods or services
have been received and
payment is due during
the year or soon
thereafte
r
All revenues and
expenses during the
year, regardless of
when cash is received
or paid
All revenues and
expenses during the
year, regardless of
when cash is received
or paid
City of Redlands
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2024

7 Reporting the City as a Whole

The accompanying government-wide financial statements include two statements that present financial data for the City as a whole. One of the most important questions asked about the City’s finances is, “Is the City, as a whole, better off or worse off as a result of the year’s activities?” The Statement of Net Position and the Statement of Activities report information about the City as a whole and about its activities in a way that helps answer this question. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year’s revenues and expenses are taken into account regardless of when cash is received or paid.

These two statements report the City’s net position and its changes. You can think of the City’s net position – the difference between assets, deferred outflows of resources, deferred inflows of resources and liabilities – as one way to measure the City’s financial health, or financial position. Over time, increases and decreases in the City’s net position may be one indicator of whether its financial health is improving or deteriorating. You will need to consider other nonfinancial factors, however, such as changes in the City’s property tax base and the condition of the City’s roads, to assess the overall health of the City.

In the Statement of Net Position and the Statement of Activities, City services are divided into two kinds of activities:

 Governmental activities – Most of the City’s basic services are reported here. Sales taxes, property taxes, state subventions, and other revenues finance most of these activities.  Business-type activities – The City charges a fee to customers to help it cover all or most of the cost of the services accounted for in these funds.

Reporting the City’s Most Significant Funds

The fund financial statements provide detailed information about the City’s most significant funds – not the City as a whole. Some funds are required to be established by State law or by bond covenants. However, City Council establishes many other funds to help it control and manage money for particular purposes or to show that it is meeting administrative responsibilities for using certain taxes, grants or other money. The City’s two kinds of funds – governmental and proprietary – use different accounting approaches.

 Governmental funds – Most of the City’s basic services are repor ted in governmental funds, which focus on how money flows into and out of those funds and the balances left at year end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other current financial assets that can readily be converted to cash. The governmental fund statements provide a detailed current-term view of the City’s general government opera tions and the basic services it provides.

Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to fina nce the City’s programs. We describe the relationship or differences between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds in a reconciliation on the page following the fund financial statements.

 Proprietary funds – When the City charges cust omers for the services it provides – whether to outside customers or to other units of the City – th ese services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the Statement of Net Position and the Statement of Activities. In fact, the City’s enterprise funds (a component of proprietary funds) are part of the business-type activities we report in the government-wide statements but provide more detail and additional information for proprietary funds, such as statement of cash flows. The City’s internal service funds (the other component of proprietary funds) reports activities that provide supplies and services internally to other City departments and programs.

City of Redlands
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2024

8 Reporting the City’s Fiduciary Responsibilities

The City is an agent for certain assets held for, and under the control of, other organizations and individuals. All of the City’s fiduciary activities are reported in a separate Statem ent of Fiduciary Net Position. We exclude these activities from the City’s other financial statements because the City cannot use these assets to finance its operations. The City is responsible for ensuring that the assets reported in these funds are used for their intended purposes.

Statement of Net Position

The following is a condensed Statement of Net Position as of June 30, 2024 and June 30, 2023, which allows for analysis of the City’s net position as a whole.

Table 1
2024 2023 2024 2023 2024 2023
Current and other Assets 187,645,957$ 171,147,279$ 117,588,266$ 118,298,267$ 305,234,223$ 289,445,546$ Capital Assets 637,176,157 595,664,117 209,622,726 205,597,161 846,798,883 801,261,278 Total Assets 824,822,114 766,811,396 327,210,992 323,895,428 1,152,033,106 1,090,706,824 Deferred Outflows of Resources
Pension & OPEB 82,986,820 91,969,372 17,689,993 20,066,931 100,676,813 112,036,303 Long-Term Liabilities Outstanding 265,587,300 268,208,274 94,590,929 94,801,822 360,178,229 363,010,096 Other Liabilities 22,887,043 20,507,492 8,200,221 8,489,325 31,087,264 28,996,817 Total Liabilities 288,474,343 288,715,766 102,791,150 103,291,147 391,265,493 392,006,913 Deferred Inflows of Resources
Leases & Pension & OPEB 61,402,646 54,513,053 18,168,957 15,230,825 79,571,603 69,743,878 Net Position
Net Investment in Capital Assets 629,390,358 590,288,015 196,064,177 190,475,232 825,454,535 780,763,247 Restricted 26,403,823 13,385,123 19,763,252 16,677,323 46,167,075 30,062,446 Unrestricted (Deficit) (97,862,236) (88,121,189) 8,113,449 18,287,832 (89,748,787) (69,833,357) Total Net Position 557,931,945$ 515,551,949 $ 223,940,878 $ 225,440,387 $ 781,872,823 $ 740,992,336 $ Gove rnme ntal Acti vi ti e s Busi ne ss-Type Acti vi ti e s Total Pri mary Gove rnme nt

Net position over time may serve as a useful indicator of a government’s financial position, however it may change dramatically year-to-year as a result of changes in accounting practices and assumptions. Table 1 shows that the net position of government-wide activities increased by approximately $40.9 million or 5.5%, from $740,992,336 in 2023 to $781,872,823 in 2024.

Governmental activities net position increased by 8.2%, fro m $515,551,949 at June 30 , 2023 to $557,931,945 at June 30, 2024. The City’s net position for business-type activities decreased by 0.7% from $225,440,387 in 2023 to $223,940,878 in 2024. For governmental activities, the increase of roughly $42. 4 million in net position is mostly attributable to the change in total asse ts less the change in total liability of $52.3 million, combin ed with the total changes in deferred inflows and outflows related to leases, pension and OPEB. For the business type activities, the slight decrease in total net position of 0. 7% (or $1.5 million) is attributable to an increase in total net assets of $3.8 million combined with changes in deferred outflows and deferred inflows of $5.3 million. Further detail on comparisons to the prior year is provided be
City of Redlands
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2024

9 Statement of Net Position - Total Primary Government

 Again, this year, the largest portion of total assets c onsists of capital assets (e.g., land, infrastructure and equipment), totaling $847 million or 73.5% of total assets. These are detailed in Note 6 of the financial statements.  Net investment in capital assets of approximately $825 million represents the City’s investment in infrastructure and other capital assets, less accumulated depreciation and outstanding balances on borrowings used to construct or acquire those assets.
 Cash and investments comprised $270.9 million in the City treasury and $933,000 of cash and investments held with fiscal agents. These assets are detailed in Note 2 of the financial statements.  Deferred outflow of resources related to pension and O PEB decreased notably by $ 11.4 million, roughly 10%.

This change was primarily due to pe nsion contributions made after the m easurement date, the amortization of prior differences between expected and actual experience, and changes in assumptions. Deferred outflows related to OPEB were impacted by the recognition of prior changes in assumptions and differences in expected and actual experience.
 Receivables, totaling $24.1 million, co nsist of accounts, taxes, interest and leases receivable. While most receivables consist of taxes and accounts payable, it is noted here that leases receivable recognizes agreements with third parties for the right-to-use of City property that is leased for special purposes. More information on leases receivable is found in Note 3 to the financial statements.  Noncurrent long-term liabilities totaled $344 million, approximately, and represent the City’s obligations on debt, pensions, and other post-employment benefits. More information is presented in Notes 7 and 9-13 of the financial statements.
 Other liabilities increased by 7%, from $29 million to $31.1 million. Aside from fluctuations in several other accounts in this category, the main cause of this incr ease is related to a significant increase in accounts payable, accrued payroll and unearned revenue.
 Lease-related deferred inflows of resources decreased by $2.1 million for spaces and land leased out by the City.

As well, deferred inflows related to pension & OPEB increased by a net amount $11.9 million, roughly 19%.

These fluctuations are based on actuarial assumptions that are made during the measurement of each corresponding deferred inflow. More will be discussed regarding these categories below.  Overall investment in capital assets, net of related debt, increased by $44.7 million, or 5.7%. This steady increase over the prior year is reflective of additions to right-o f-way assets, higher amounts of construction in progress, and additions to infrastructure assets, machinery, equipment & vehicles and lease assets.  Restricted net position, totaling $46.1 m illion, represents resources that are subject to restrictions on how they may be used. Some funds are restricted for the purposes of funding specific capital projects, funding specific debt service obligations, to hold in trust as an endowment, or for other specific uses.  The unrestricted net position amount of -$89.8 million represents an unrestri cted net position deficit, mainly resulting from the recognition of the net pension liability in fiscal year 2015, in accordance with GASB 68, and the recognition of total OPEB liability in fiscal year 2018, in accordance with GASB 75. Also, beginning in FY 2022, the City also recognized the deferred inflows related to leases in accordance with GASB 87. Additionally, starting in FY 2023, the City implemented GASB 96, which required the recognition of subscription liabilities and related intangible assets for subscription-based information technology arrangements. These accounting standards collectively contribute to the City’s negative unrestricted net position. Additional details can be found in Note 11 for the net pension liability, in Note 12 for the total OPEB liability , in Note 3 for leases, and in Note 1- J for subscription-based IT arrangements.

City of Redlands
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2024

10 Governmental Activities

 Receivables, totaling roughly $14.4 million, consist mainly of taxes receivable at $11.1 million, $2.2 million in accounts receivable, $677,000 in interest receivable and $376,600 in leases receivable. Recognition of leases receivable, in accordance with GASB 87 reflects the City’s portion of property leased to others for their right-of- use of a particular underlying asset.
 The net position of governmental activities increased si gnificantly by 8.2% (or $42.4 million), attributable to a variety of factors. Cash and other assets increased by $16.5 million, capital assets increased by $41.5 million.

These increases were offset by deferred outflows rela ted to pension & OPEB decreasing by roughly $9 million and by increases in deferred inflows related to leases, pension & OPEB of roughly $7 million.  Deferred outflows of resources related to pensions and OPEB decreased by $9 million, or approximately 10%, in FY 2024. OPEB deferred outflows decr eased by $6.1 million, primarily due to the amortization of prior-year changes in assumptions used to calculate the City’s Total OPEB liab ility. Also, pension deferred outflows decreased by $2.9 million, or 5%, driven by investment underperformance, primarily with changes in assumptions also contributing to this difference. Additional details on these changes can be found in Notes 11 and 12 of the financial statements.
 This year, there was a net decrease of 0.1%, or $241,400 in total liabilities. While there were many areas within current and noncurrent liabilities that saw somewhat signi ficant fluctuation, the increase in current liabilities of nearly $2.7 million was offset by a decrease in noncurrent liabilities of $2.9 million. o Decreases in OPEB liability were the largest contributor and were influenced by favorable experience variances,
such as lower-than-anticipated healthcare costs and other demographic factors like plan elections and retirements. Changes in aggregate net pension liability were also significant, increasing by nearly $8 million. Key drivers include lower-t han-expected investment returns from CalPERS, which did not meet the assumed 6.8% rate, resultin g in higher unfunded liabilities. Additionally, the amortization of prior-year investment losses and interest on existing unfunded liabilities contributed to the increase. There are more details available in Notes 11 & 12 of the financial statements.  Deferred inflows of resources related to pension d ecreased by $4.4 million. This reduction reflects the amortization of prior differences between projected and actual investment returns and changes in demographic and economic assumptions as part of the annual actuarial analysis performed by CalPERS. In contrast, OPEB deferred inflows increased by $13 million, or 30%, over the prior year. This increase is primarily due to changes in assumptions, including adjustments to the discount rate and updated healthcare cost trends, as well as differences between expected and actual experience for OPEB plan participants.

Business-Type Activities

 The net position of business-type activities decreased by 0. 7%, or $1.5 million. This change is attributed to an increase in total assets of $3.3 million; a decrease in deferred outflows fro m pension and OPEB of $2.4 million; and a decrease in total liabilities of $500,000, and an increase in deferred inflows from leases, pension and OPEB of $3 million for a net increase of $1.5 million overall.  Receivables, totaling $9.7 million, represent an incre ase of approximately $851,000 from the prior year. The majority of accounts receivable relate to the Water, Wastewater and Solid Waste unbilled customer accounts (totaling $9 million). Half of this increase is attributed to the recognition of roughly $433,000 in interest receivable. This represents unapportioned interest earne d on the idle cash within each fund under business type activities.
 Total capital assets of $209.6 million represent 24.8% of total capital assets citywide.

City of Redlands
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2024

11 Business-Type Activities (Continued)

 Deferred outflows of resources related to pension and OPEB decreased by $2.4 million, roughly 12%. o OPEB deferred outflows decreased by approximately $1.7 million, or 13%. This was primarily due to changes in assumptions, such as adjustments to healthcare cost trends and the discount rate, as well as differences between actual and expected experience in the plan’s utilization and demographics. o Pension deferred outflows decreased by $706,000, or 9%. This change was driven by multiple factors including the City’s pension contributions made af ter the measurement date of the actuarial report, updates to actuarial assumptions, differences between projected and actual investment earnings, and variances between expected and actual participant outcomes.  This year, there was a decrease of roughly $500,000 in total liabilities. o In terms of noncurrent liabilities – there was an increase of roughly $1 million.  Two components of noncurrent liabilities had significant changes in opposite directions: the landfill closure liability increased by roughly $3.8 million due to inflationary construction cost projections and the total OPEB liability decreased by roughly $3.7 million due to favorable experience variances, such as lower-than-anticip ated healthcare costs and other demographic factors like plan elections and retirements. Outs ide of these offsetting changes, aggregate net pension liability increased by roughly $1 million due to lower-than-expected investment returns from CalPERS, and the amortization of prior-year investment losses and interest on existing unfunded liabilities contributed to the increase.  Deferred inflows of resources related to leases, pension and OPEB increased by nearly $3 million, roughly 19%. o Deferred inflows related to leases decreased by $270,000 as existing leases of land owned by the Water, Aviation and Cemetery Funds were paid by the current lessees. o Pension deferred inflows decreased by $409,000 to zero. As not ed above under Governmental Activities, this reduction reflects the amortization of prior differences between projected and actual investment returns and changes in demographi c and economic assumptions as part of the annual actuarial analysis performed by CalPERS.
o These decreases were totally offset by an increase in deferred inflows related to OPEB of $3.6 million.

These inflows reflect updated actuarial assumptions for healthcare costs, discount rates, and actual experience being less favorable than projected.

City of Redlands
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2024

12 The Statement of Activities reports increases and decreases in the net position. The following is a condensed Statement of Activities for the fiscal years ending June 30, 2024 and June 30, 2023:

Table 2
2024 2023 2024 2023 2024 2023
Program Revenues
Charges for services: 18,014,068$ 17,451,819$ 63,417,844$ 63,283,866$ 81,431,912$ 80,735,685$ Operating grants and contributions 14,227,777 5,158,328 114,117 385,895 14,341,894 5,544,223 Capital grants and contributions 38,207,775 53,471,990 3,867,244 4,010,635 42,075,019 57,482,625 General Revenues
Property taxes 42,883,738 40,372,312 104,411 96,621 42,988,149 40,468,933 Sales taxes 47,629,644 48,632,853 - - 47,629,644 48,632,853 Franchise taxes 4,471,469 4,487,821 - - 4,471,469 4,487,821 Other taxes 2,676,553 3,109,696 - - 2,676,553 3,109,696 Investment income (loss) 9,235,054 2,757,278 5,841,165 1,123,030 15,076,219 3,880,308 Intergovernmental (unrestricted) 852,762 572,685 - - 852,762 572,685 Other 2,523,968 4,734,390 1,973,183 1,107,435 4,497,151 5,841,825 Total Revenues 180,722,808 180,749,172 75,317,964 70,007,482 256,040,772 250,756,654 Program Expenses
General government 42,250,996 28,913,048 - - 42,250,996 28,913,048 Public safety 70,359,582 48,272,159 - - 70,359,582 48,272,159 Culture and recreation 9,900,700 9,123,333 - - 9,900,700 9,123,333 Highway and streets 13,911,149 12,081,745 - - 13,911,149 12,081,745 Library 4,068,345 3,557,350 - - 4,068,345 3,557,350 Interest on Long-Term Debt 679,186 792,780 - - 679,186 792,780 Water - - 30,614,235 26,729,160 30,614,235 26,729,160 Disposal - - 22,954,172 17,755,193 22,954,172 17,755,193 Sewer - - 16,143,743 13,554,178 16,143,743 13,554,178 Groves - - 1,507,349 1,880,763 1,507,349 1,880,763 NP Water - - 581,877 563,123 581,877 563,123 Cemetery - - 1,399,130 1,441,652 1,399,130 1,441,652 Aviation - - 789,821 819,188 789,821 819,188 Total Expenses 141,169,958 102,740,415 73,990,327 62,743,257 215,160,285 165,483,672 Change in Net Position Before Transfers 39,552,850 78,008,757 1,327,637 7,264,225 40,880,487 85,272,982 Transfers 2,827,146 2,742,192 (2,827,146) (2,742,192) - - Increase (Decrease) in Net Position 42,379,996 80,750,949 (1,499,509) 4,522,033 40,880,487 85,272,982 Beginning Net Position 515,551,949 434,611,881 225,440,387 220,865,136 740,992,336 655,477,017 Restatement of Net Position - 189,119 - 53,218 - 242,337 Beginning Net Position, as Restated 515,551,949 434,801,000 225,440,387 220,918,354 740,992,336 655,719,354 Ending Net Position 557,931,945$ 515,551,949 $ 223,940,878 $ 225,440,387 $ 781,872,823 $ 740,992,336 $ Governmental Activities Business-Type Activities Total Primary Government

Total Primary Government –

 Total Primary Government revenues for fiscal year 2024 decreased slightly by 2%, or roughly $5.3 million. This small decrease belies some significant changes from the previous year. There have been noteworthy fluctuations in both operating grants and contributions (an increase of nearly $9 million) as well as in capital grants and contributions (a decrease of $15.4 million).
 Property tax grew by 6%, or $2.5 million. This growth in revenue is attributed to higher taxable values driven by property transfers of ownership, the annual adjustment fo r inflation (CPI), and new construction within the City from prior years being enrolled by the County’s Recorder.

City of Redlands
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2024

13  Investment income saw significant growth over the prior year of nearly $11.2 million due to a number of factors affecting financial markets that were particularly beneficial for the City’s conservative investment policy.  Total expenses for the City varied si gnificantly in fiscal year 2024, increasing by nearly $49.7 million, or 30%, with the following Program areas that experienced th e highest increases: general government, public safety, water, disposal (solid waste), and sewer. More detail on these fluctuations is presented below.  Transfers between governmental activities and business-type activities decreased slightly by roughly $85,000, or 3%.

Governmental Activities

 Total Governmental Activity revenues for fiscal year 2024 decreased slightly by 0.01%. While this small overall change might seem insignificant, it conceals notable fl uctuations among individual revenue categories. The largest driver of this variation was a $15.3 million decre ase in capital grants and contributions compared to the prior fiscal year. This decrease reflects the unique circum stances of FY 2023, where an unusually high volume of infrastructure projects were completed simultaneously, resulting in a temporary surge in capital grant funding.

In contrast, the FY 2024 amount represents a return to mo re typical levels of grant revenue, aligned with the City’s ongoing pace of infrastructure additions. These fluc tuations underscore the variable nature of capital funding tied to the timing of major project completions.  Operating grants and contributions increased by just over $9 million in FY 2024. This increase is primarily attributable to a large pass-through grant the City received and administered on behalf of the University of Redlands, demonstrating the City’s role as a key partner in securing and managing funding for local institutions.

Additionally, the City was awarded an Encampment Reso lution Fund grant of over $3 million, aimed at addressing and resolving homelessness encampments within the community. While these two grants account for the bulk of the increase, other fluctuations, including the completion of prior-year grant-funded projects, reduced the overall impact on operating grants and contributions. These dynamics reflect the variable nature of grant funding tied to the timing and lifecycle of specific projects.  Investment Income revenue saw a very significant increas e of 235%, or nearly $6.5 million, when compared to the prior year. Much of this is due to was due rising in terest rates providing higher yields on the City’s fixed- income investments, favorable reinvestment rates, and improved economic cond itions post-pandemic also contributed to stable investment retu rns as compared to the previous year when there may have been lingering economic uncertainty.
 Sales Tax
revenue contracted by 2%, driven by a decline in consumer spending. While inflation has begun to cool, the prolonged period of elevated prices in recen t years has left many Americans financially strained, contributing to reduced discretionary spending. Desp ite these challenges, the C ity’s economic base remains resilient, as its diverse industry group mix provides stability through fluctuations in individual sectors of the economy.
 Property taxes increased by 6.2% and were boosted by sales figures in 2022, which were very strong for a majority of the year until interest rate hikes began to have an effect on the market, most notably towards the end of the year for home prices and number of sales. That, coupled w ith new construction being a dded to the property tax rolls lead to a very strong increase in assessed values for the City.  Other General Revenues decreased by roughly $2.2 million, and this is attributable to a prior-year cost recovery received from the San Bernardino Regional Transportati on Authority (SBCTA) for cost sharing related to Interstate-10 / Alabama Street improvements of near ly $2.7 million. The reimbursement this year, which represents some of the final cost-sharing activity for this project, was roughly $450,000.  Total expenses for Governmental Activities increased significantly in fiscal year 2024 by $38.4 million (or

37.4%). This was caused by a variety of factors and one-time fluctuations in spending, most notably grant-related spending, capital outlay and a significant grant transfer agreement with the University of Redlands. The following categories saw the largest fluctuations over the prior year:

City of Redlands
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2024

14 o General Government expenses increased by roughly $13.3 million (or 46.13%). The increase was due to several factors, including higher expenses for staff, including pension & OP EB (net of each other), but more significantly – an $8 million grant transfer agreement between the City of Redlands and the University of Redlands. There were also higher grant-funded expenses in the Governmental Grants Fund of $1.7 million addi tion as a result of the City’s American Rescue Plan Act grant and its Encampment Resolution Funding grant.
o The Public Safety category saw a significant increase over the prior year as well. Spending in this category was up $22 million, or 45.8%. This variance can be understood in the context of a significant reduction in the prior year of expenses related to pensions of nearly $11.4 million. There were other factors, such as higher personnel expenses of nearly $4.5 million, as the City was able to fill vacancies that had persisted since the COVID-19 pandemic and ensuing job market challenges. o Highways & streets also increased by $1.8 million, or 15%, which was due to a variety of factors, including higher depreciation over last year, increases in OPEB & pension expenses (net of each other), higher spending on special contractual and one-time capital projects.

Business-Type Activities

 Overall, the ending net position for the business-type activities decreased by $1.5 million, or 0.7%.  Comparing fiscal year 2023 and fiscal year 2024, total revenues increased by $5.3 million overall, or 7.6%. The increase in revenues is almost exclus ively due to the significant increase of $4.7 million in investment income earned in the current year. There is also additional reve nue in the Water and Citrus funds contributing to these changes.
o Operating grants and contributions, while comprising only 0.15% of total revenues for Business-Type Activities, decreased significantly by 70%, or roughly $270,000. This was due to the prior year draw down of grant funding for one-time projects from th e Federal Aviation Administration and the State Water Resources Water and Wastewater Arrearages funding programs. o Charges for Service remained relatively consistent with the prior year, with a small increase of 0.21%, or $134,000.
o Investment income revenue saw a very significant in crease of 420%, or $4.7 million, when compared to the prior year. As noted above, much of this is due to was due rising interest rates providing higher yields on the City’s fixed-income investments, favorable reinvestment rates, and improved economic conditions post-pandemic also contributed to stable investment returns as compared to the previous year when there may have been lingering economic uncertainty. o Other revenue saw an increase of $865,700, or roughl y 78%. This increase was due to factors such as the one-time sale of water shares owned by the City (from South Maintain Water Company) as well as a large payment from San Bernardino Valley Municipal Water District to reimburse the City for water conservation rebates. There was also additional mi scellaneous revenue in the groves fund of roughly $115,000, mostly related to the refund of revolving funds held with various packinghouses.  Expenses increased overall from fiscal year 2023 levels by nearly $11.3 million, or 18%. The programs with the largest increase in expenses were the Solid Waste (Disposal), Wastewater (Sewer) funds. The largest decrease was in the Groves fund. Over the prior year:
o In the Water Fund, expenses increased by nearly $3 .9 million, or 14.5%. This increase was caused by higher expenses related to pensions, salaries and benefits of roughly $2 million and $1 million in added costs for professional services to support complex ca pital improvement projects, including the sludge press design for the water treatment plant and the redesign of the Joint Utilities Laboratory. There was also a significant increase in spending of $736,0 00 for water meters and fittings as the City makes strides to move all water meters to an automated metering infrastructure (AMI).

City of Redlands
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2024

15 o In the Solid Waste (Disposal) Fund, expenses increased by $5.2 million or roughly 29%. This increase was mainly due to increases in pe nsion, salaries and benefit expenses of $1.5 million; the recognition of a $3 million increase in closure/post closure expe nses for the California Street Landfill; as well as other improvements of nearly $500,000 related to the Landfill Gas Extraction Well Installation Phases 2 & 3 and nearly $131,000 in expenses to rent a replacement D8 dozer for landfill compaction operations.
o In the Wastewater (Sewer) Fund , expenses increased by $2.6 million, also roughly 19%. These increases were due to higher costs for salaries & benefits (mainly due to pension expense recognition) of $1.5 million; chemical and lab supplies, higher costs for building and grounds maintenance and the purchase of machinery and equipment in the amount of $220,000, as well as increased depreciation in the current year of $221,000. There was also roughly $588,000 more in expenses for special contractual services. Most of these expenses related to the SCADA integration project as well as engineering services and field support for the City’s wastewater treatment plant solids facility. o In the Groves Fund, expenses fluctuated among the various categories. Spending decreased most in salary and benefits (by roughly $184,000) as well as for general and administrative expenses (by $249,000), particularly in special contractual services . This is mostly due to reduced farming costs.

These decreased were partially off set by increases in other categori es, notable an increase of $84,000 in parts and supplies. This is due to the added expe nse of extra care related to the Oriental Fruit Fly quarantine and the Huanglongbing Citrus quarantine.

City of Redlands
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2024

16 Expenses by Function of Governmental Activity

General government
30%
Public safety
50%
Culture and
recreation
7%
Highway and streets
10% Library
3%
Interest on Long-
Term Debt
0%
Expenses by Functions of Governmental Activity
General government Public safety
Culture and recreation Highway and streets
Library Interest on Long-Term Debt

 Expenses overall for governmental activities totaled $141 million. This total represents the cumulative effect of increased pension costs, the recognition of OPEB, and de ferred outflows and inflows related to both. Employee compensation is also reflected in this amount.
 Expenses for general government comprise 30% of tota l governmental activities, or $42.2 million. General government includes functions such as human resources, finance administration, engineering and City Council.  Expenses for public safety represent 50% of total governmental activities in the am ount of $70.4 million. The main operations within public safety are the Police and Fire Departments. These departments are service-centric.

As such, personnel costs represent the majority of cost s in these departments. The effect of salary increases, pension cost increases and the recognition of OPEB liability tend to have a larger impact proportionately for public safety activities.
 Expenses for highway and streets are 10% of all governmental activities, or $13.9 million. These expenses include spending on the City’s Pavement Accelerated Reha bilitation Implementation Strategy (PARIS) program, operations, and maintenance as well as other capital repairs to road infrastructure.  Culture and recreation, Library, and interest on long- term debt comprise 7%, 3%, and 0.5% of government activity respectively, or $9.9 million, $4 million, and $679,000.

City of Redlands
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2024

17 Expenses and Program Revenues : Business Type Activities Fiscal Year Comparison

-
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
Water Disposal Sewer NonMajor
Funds
Expenses and Program Revenues:

Business-Type Activities FY 2023
Revenues Expenses
-
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
Water Disposal Sewer NonMajor
Funds
Expenses and Program Revenues:

Business-Type Activities FY 2024
Revenues Expenses
City of Redlands
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2024

18 Major differences between revenues and expenses for business-type activities are show in the two charts above.

o Fiscal year 2024 saw a slight decrease in Water revenues of $310,000, or 1%, and an increase in expenses of $3.9 million, or 14.5%. Decreased revenues are the result the variation of billing cycles and the date the accruals are made for accountin g purposes. While charges for water usage was down slightly by less then 1%, this was offset with hi gher revenue from frontage charges. Overall, revneue in this fund was stable compared to the prior year. Expenses did in crease somewhat significantly this year. This is attributed to higher costs for pensio ns, salary, benefits, professional services related to complex capital projects and the water meter replacement program. o For Solid Waste (Disposal) operations, there was a slight increase in revenues over fiscal year 2023 of $403,000, or almost 2% and an increase in expenses in the amount of $5.2 million, or nearly 30%.

Decreased revenues are the result the variation of billing cycles and the date the accruals are made for accounting purposes. Higher expenses are largely due to a significant adjustment over the prior year to the expense recorded for the closure/post closur e maintenance expense for the California Street Landfill. This year’s expense was $3 million higher than the prior year because the annual inflation factor could not be used to calculate the annual expense, but rather a complete overhaul of the landfill’s permit and closure/post-closure maintenance plan w as required. Those plans were than analyzed to develop a new cost estimate, according to any ch anges. The resulting expe nse reflects the updated closure/post-closure plan. Other expenses related to pension, salary and benefits increased, as well as costs for capital improvements related to landfill gas extraction wells and the costs to rent a D8 dozer while the one in operation was repaired and ultimately replaced. o In the Wastewater (Sewer) Fund, revenues increased by $625,600, or 4.5%, and expenses increased by $2.6 million, or 19%. The increase in revenues a function of the variation of billing cycles which impacts the amount of revenues accrued and reversed during the accounting cycle. Higher expenses reflect the change in pension, salary and benefit costs, higher depreciation costs, additional spending on parts and supplies as well as expenses for special contractual services. Most of these expenses related to the SCADA integration project as well as engin eering services and field support for the City’s wastewater treatment plant solids facility.
o Lastly, for nonmajor business-type funds,
 The Groves Fund experienced a significant decrease in revenue by roughly $836,000, or 97%.

This follows a prior year increase of roughly $818,000 (or 95%). The market for citrus fruit is notably unpredictable and this can cause the marketability of the City’s citrus to vary substantialy from one year to the next.
 The Hillside Memorial Cemetery had a 3.4% d ecrease in revenues of $39,250 due to slight variations in cemetery lot sales and internment services. There was a commensurate reduction in expenses as well ($42,500, or 4%).
 The Aviation fund saw a large decrease in reve nues of $93,700, or 69%. This was due prior year grant revenue that was one-time in nature. Expenses also decreased by roughly $29,000, or 4%. Most of these decreases were in general and administrative expenses.  The Non-Potable Water Fund experienced a decrease in revenues of 4.8%, or $31,000. The decrease in revenue is related to a decrease in charges for nonpotable water service. The City is actively working on a plan to enable mo re consumption of nonpotable water through transmission projects. Expenses were up slightly, by 2%, or $18,800.

City of Redlands
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2024

19 Expenses by Type for Business-Type Activities

Salaries and benefits
29%
General and administrative
40%
Parts and supplies
12%
Utilities
7%
Depreciation/amortizatio
n
12%
Operating Expenses by Type for Business-Type Activities

MAJOR FUNDS

As noted earlier, the City uses fund accounting to provide pr oper financial management of the City’s resources and to demonstrate compliance with finance-related accounting standards and legal pronouncements.

Major Governmental Funds. The General Fund is the chief operating fund of the City. At the end of June 2024, the total fund balance reported for the General Fund was $111,176,689, an increase of $218,848 (0.2%) from the prior year ending fund balance of $110,957,841. While the change in ending fund balance is slight, there were some large variations between this year and the prior year that warrant discussion below.

As a measure of the General Fund’s liquidity, it can be u seful to compare the total fund balance to total fund expenditures. This measure indicates that the fund balance is approximately 98% of general fund expenditures (of $113 million), however, only $60,505,969 of the $111 million fund balance is unassi gned. The unassigned fund balance of $60.5 million, together with the $9.7 million in fund bala nce committed to stabilization arrangement (contingencies), is the only portion of fund balance readily available for spending and represents 62% of general fund expenditures.

Total general fund expenditures this year were $113.4 million, which is $20.9 million higher than the prior year amount of $92.5 million. Total general fund revenues were $122.6 million, or 5.5% higher than the prior year amount of $116.3 million.

Significant changes in revenues for the City’s General Fund over the prior year are as follows:
 Property tax increased again by $3.2 million, or 8%. This significant increase is due to a few factors affecting the prior year’s enrolled values. Since there is a lag between the time a property is assessed in value and the time when the taxes are collected from property owners, th is year’s revenue reflects assessed values in effect during calendar year 2022. In 2022, home prices and home sales reached a peak for most of the calendar year, until the cumulative effect of multiple interest rate hikes by the Federal Reserve began to cool this trend in the housing market. These factors lead to strong growth in the City's total assessed values, which grew by a factor of roughly 9.1% for the fiscal year. Different property use categories grew at different rates. Most of this growth (33%) is due to transfers of ownership, the CPI 2% gr owth factor (18%), and some new construction of both residential and non-residential properties (18.5%).

City of Redlands
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2024

20 MAJOR FUNDS (Continued)

 Overall sales tax decreased by $1 million, or 2%, representing an elastic source of revenue that, unlike property taxes, is more responsive to current economic conditions without the same lag time. This slight decrease is a reflection of the inflationary pressures that consumers have faced and a reduction in spending of discretionary income as a result.
 Other taxes encompass possessory inter est taxes, the City’s hotel tax (referred to as the transient occupancy tax), and the mining tax. This year’s revenues were n early 14% lower than the prior year, roughly $433,000.

Possessory interest and franchise fees were 31% and 12% lower this year, respectively. Decreases in possessory interest are likely due to the termination or non-renewa l of leases of public property. Declines in transient occupancy tax revenue is likely caused by a variety of factors, including competition from short-term rentals, a reduction in available lodging due to the use of hotel vouchers. It could also reflect the reduction in discretionary consumer spending similar to sales tax revenues.  Licenses and permits reflect an increase of $375,800 or 4.2%. This increase is due to an increased collection of business license revenue, offset by reductions in other categories. The vast majority of business license revenue is based on the gross receipts of a business. Healthy grow th in this category is an indication of a strong local economy.
 Intergovernmental revenues increased by $326,700 or 72%, which is primarily the result of a very significant increase in Mutual Aid received in the current fiscal year. This year-to-year amount in this revenue category fluctuates according to wildfires and other extreme conditions where mutual aid assistance has been requested by other cities and fire departments and is then reimbursed after the fact.  Charges for services decreased by $319,000, or 4.3% from prior year. While there are variations over and under in each revenue account, the largest decreases were in the categories of plan check, rental property inspections and application/filling fees.
 Earnings from investment income increased significan tly from FY 2023, by $5.3 million. This dramatic increase was due to rising interest rates providing highe r yields on the City’s fixed-income investments, favorable reinvestment rates, and improved economic conditions post-pandemic also contributed to stable investment returns as compared to the previous year when there may have been lingering economic uncertainty.  For Rents and leases, revenue decreased by $654,000, or 36%. This decrease reflects two major changes: the City’s termination of its agreement with AYSO for the use of the Sports Park and the revenue associated with that agreement as well as the termination of leases (and, hence lease revenue) associated with businesses that formerly occupied 300 East State Street who have ended their leases with the City.  Miscellaneous revenue decreased by roughly $280,000, or 12%. This decrease is attributed to a prior year one- time donation from the Friends of Prospect Park ($363,000) for lighting upgrades to the park, offset by various positive and negative fluctuations among several other revenues in this category.  Transfers in increased in FY 2024 over the prior y ear by approximately $543,000, a 23% increase. This was due higher gas tax revenues collected, as well as higher levels of fixed asset transfers from the business-type activity funds.

City of Redlands
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2024

21 The Public Facilities Fund, previously reported as a Ma jor Fund, accounts for the collection and expenditure of development impact fees designated for constructing new and upgrading existing public facilities. As of June 30, 2023, this fund held advances payable to other funds totaling $7,706,632. Through a combination of City Council action to forgive the amounts owed to the General Fund and repayment made by the fund to satisfy the last remaining amount owed to the Water Fund, this balance has been reduced to $0.

The origin of this advance receivable involves a series of public improvements that were initially debt-financed and subsequently refinanced multiple times, with the final maturity date in 2017. As part of the refinancing, the General Fund assumed responsibility for servicing half of the debt , while the Public Facilities Fund was tasked with the other half. During years when the Public Facilities Fund's re venues were insufficient to meet its share of the debt service, the General Fund covered the shortfall, resulting in the accrual of an advance receivable from the Public Facilities Fund.

As the balance of this advance exceeded $7 million and repayment remained uncertain, the City Council determined that forgiving the loan was appropriate based on two critical factors:

 Timeliness: Development impact fees collected in th e Public Facilities Fund should be directed toward projects and facilities tied to current development. In this case, the fees were being used to repay debt incurred for projects completed in the distant past.
 Nature of Projects Financed: The projects financed by the original borrowing—including the Corporate Yard, Fire Station 263, a public parking structure, and improvements to the A.K. Smiley Public Library— are legitimate obligations of the General Fund. The General Fund is designated to support general government services such as fire protection, public in frastructure, and library services, making it a more appropriate source for these expenses.

The fiscal impact of forgiving the inte rfund loan is primarily limited to adjustments in the assets and liabilities of the respective funds, rather than involving cash transacti ons or expenditures. Specifically, within the Public Facilities Fund, forgiveness eliminated advances payable totaling $7,706,632. The last remaining amount of $16,091 owed to the Water Fund was repaid with interest using revenues from the Public Facilities Fund, fully satisfying the Water Fund’s advance receivable. Within the General Fund, forgiveness eliminated the advance receivable balance of $7,690,541, reducing it to $0. As a result of this action, the Public Facilities Fund no longer meets the criteria for reporting as a Major Fund.

The Governmental Grants Fund was established to account for the receipt and expenditure of grant monies received from various agencies for general government projects and purposes. This fund tracks the City’s allocation of Coronavirus State & Local Fiscal Recovery Funds issued through the American Rescue Plan Act in the amount of $11,508,106, the largest federal grant the City has received to date. It also tracks several other noteworthy grant projects, including the City’s Community Block Development Grant program, engineering grants for transportation projects and equipment and facility grants for the Police and Fi re departments. It is also used to track all grants received in support of the Homelessnes s Solutions Team, including the Consumer Services and Housing Agency for the Encampment Resolution Funding Program (ERF-2-R) grant award in the amount of $4,529,069.

Major Enterprise Funds. The Water Fund has a total net position of $151 million at the end of the fiscal year, $22.8 million of which is unrestricted. The Solid Waste (Disposal) Fund has a total net position deficit of ($4.3 million) at the end of the fiscal year, which marks a $2.8 million reduction over the prior fiscal year; and its unrestricted net position is a deficit of ($21.4 million). This significant fluctuation is due to several factors: an increase in deferred inflows related to OPEB, which was pa rtially offset by deferred inflows related to Pension being reduced to zero, as well as significant increases in the Fund's net investment in capital assets and the Fund's net position restricted for capital assets. The Wastewater Fund has a total net position of $55.8 million at the end of the fiscal year; $4 million of which is unrestricted. These funds account for th e respective utility services provided
by the City. Other factors concerning the finances of these funds have already been addressed in the discussion of the City’s business-type activities.

City of Redlands
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2024

22 GENERAL FUND BUDGET

Differences between the final budget and fiscal year 2024 ac tivity in the General Fund can be briefly summarized as follows:

 Total Revenues – $10.3 million received in excess of budgeted amounts.  General Government – spent $2.7 million less than the final amount appropriated in the budget (savings).  Public Safety – spent $2.8 million less than the final amount appropriated in the budget (savings).  Culture and Recreation – spent $91,300 less than the final amount appropriated in the budget (savings).  Highways and Streets – spent $232,500 less than the final amount appropriated in the budget (savings).  Library – spent roughly $5,000 less than budgeted.
 Transfers – there was a negative variance between the final budget amount a nd the amount expended of $1,091,617.
 Capital Outlay – there was a negative variance betw een the final budget and the amount expended of $2,142,700.
 Debt Service – in this category, there was savings of $1,280,430 when comparing the final budget to the actual amount expended during this fiscal year.

Deviations in major categories between the final budget of the General Fund and its actual operating results were as follows. (Note: budget savings are listed as positive figures.)

Final Budget Actual Amounts + (-) Variance

REVENUES
Taxes 94,194,186 $ 96,491,437 $ 2,297,251 $ License and permits 7,988,380 9,238,592 1,250,212 Fines and forfeitures 79,560 62,969 (16,591) Intergovernm ental 386,000 780,165 394,165 Charges for services 6,855,094 7,101,106 246,012 Investment income (loss) 5,800,100 5,647,723 (152,377) Rents and leases 1,562,925 1,167,604 (395,321) Miscellaneous 2,005,223 2,111,512 106,289 Transfers in 2,468,172 2,850,162 381,990 Inception of finance purchase agreement - 3,668,445 3,668,445 Inception of leas e liability - 2,546,260 2,546,260 Total Revenues 121,339,640 131,665,975 10,326,335 EXPENDITURES*
General Government 26,661,653 23,972,409 2,689,244 Public Safety 57,393,733 54,538,333 2,855,400 Culture & Recreation 8,027,856 7,936,523 91,333 Highways & Streets 5,029,000 4,796,525 232,475 Library 3,585,529 3,580,553 4,976 Transfers 16,983,070 18,074,687 (1,091,617) Capital Outlay 12,362,454 14,505,154 (2,142,700) Debt Service 5,323,373 4,042,943 1,280,430 Total Expenditures 135,366,668$ 131,447,127 $ 3,919,541 $ *Budget savings noted as positive figures

There are some noteworthy variations between the final budget and the actual receipts recorded in Fiscal Year 2024 revenues. This year, taxes comprised 73% of total Ge neral Fund revenues. Actual revenues outperformed budget estimates by $10.3 million.

City of Redlands
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2024

23 Some of this can be attributed to better-than-expected grow th in property tax, as discussed earlier. Strong growth in property tax revenue has been seen over the last several y ears. The total assessed value of property in the City has increased significantly over the last 5 years, but this rate of growth is expected to decline in future years. The higher- than-anticipated revenues from property tax helped to offset underperforming sales tax receipts.

The other significant variation vis-à-vis budget is the inception of finance purchase agreement and the inception of lease liability in the amounts of $3.7 million and $2.5 million, respectively. In compliance with GASB Statement No. 87, the City recognizes lease agreements as part of its financial activities. This year, the inception of lease liability is reported under General Fund revenues to reflect th e financial impact of new lease ag reements for key operational assets, including:

 Police Patrol Vehicles: Essential for maintaining public safety and responding to emergencies.  Public Works Vehicles: Critical for infrastructure maintenance and other city services.  Fire Department Vehicles: Used for non-emergency tasks such as inspections, logistics, and administrative duties.
 3 Type-1 Fire Engines: Used for emergency response.

The “inception of finance purchase agr eement” and "inception of lease liability" represent the initial recognition of these finance purchase and lease agreements, respectively, whic h include the future lease payments that the City is obligated to make. These are offset by the City's right to use the vehicles during the lease term.

All revenue categories had positive variances, except for th e categories of Fines & Forfeitures and Rents & Leases.

While investment income had a slightly negative varian ce with the final budget, it represented a significant increase compared to the original budget of $200,000.

Licenses and permits performed better than expected by ro ughly $1.25 million, or 15.7%, above forecasts. This was mainly due to increased receipts from business licenses and building permits.

Intergovernmental revenue was higher than expected by approximately $394,000, or 102%. This is due mainly to the timing of mutual aid reimbursement revenues, as the reimbur sement process can lag by 60 to 90 days after the City’s request for reimbursement of the related funds. Higher-tha n-anticipated revenue from mandated cost reimbursement also contributed to this increase.

Charges for service were slightly higher by $246,000, or 3.6%. This revenue categor y covers numerous individual revenue objects. While many areas fluctuated between actual amount and the final budget amount, the largest variance was an increase in receipts from Building & Safety plan checks as well as city classes and programs.

Rents and leases were roughly $395,00 0 lower than budgeted amounts. These revenues include lease revenue from a six-story office building located at 300 East State Street in downtown Redlands. The decrease in the revenue from this building reflects the expiration and early move-out dates opt ed for by then-current tenants as the City prepares the building for occupancy by its administrative staff.

Transfers in were higher than budgeted by 15.5%. This can be attributed to higher funding received from the Gas Tax Fund and the Traffic Safety Fund. This is caused by more re venue than anticipated being collected in these funds, as both of them are cleared to zero at the end of the accounting cycle, transferring all of their revenue into other funds, with most of it going to the General Fund.

Miscellaneous revenues were up by $106,300, or 5.3%. This was mainly due to an increase in miscellaneous receipts from the transfer of late fees from the Enterprise Funds to the General Fund.

Total General Fund expenditures ended the year under budget by 2.9%, or $3.9 million. The vast majority of the unspent funds will be carried forward to the subsequent fiscal year (2025) for expenditure.

City of Redlands
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2024

24 General Government expenditures ended the year under budget by 10.1%, or $2.7 milli on. Part of this is attributed to savings in the areas of retiree health insurance premiums, savings on costs associated with lower expenditures on professional services as well as salary savings across most departments.

Public Safety expenditures were under budget by $2.8 million, or 5%. Much of this savings is due to salary and overtime savings in the Police and Fire departments, as well as unspent funds for vehicle leases, services, supplies, equipment, and building improvements.

Culture and Recreation was under budget by roughly $91,300, or 1.1%, this was attributable to unspent funding on projects in the Parks division, as well as other fluctuations across multiple expenditure categories in Parks, Trees and Recreation & Senior Services divisions.

Highways and Streets expenditures were under budget by $232,500, or 4.6%. This savings was mainly a result of savings in the Streets Division in cont ractual and garage expenses, offset by some overspending in the Electrical Division.

Library expenditures were just under bu dget by less than $5,000, or 0.1% at y ear-end. The difference is due to minor, offsetting variations in several spending categories.

Capital outlay expenditures were over budge t by $2.1 million, or 17.3% at year-e nd. This variance can be explained through the recording of construction in progress of roughly $2.27 million across the General Fund. This is an unbudgeted expense and represents capitalized costs for ongoing projects that have not yet been completed or transitioned to depreciable assets, reflecting investments in infrastructure and other long-term improvements.

Actual debt service expenditures were below budgeted levels, at a savings of 24%, or $1.3 million, under budget. This is due mainly to equipment & vehicle capital leases not being fulfilled by the manufacturer/suppliers by the end of the fiscal year. Most of these leases were for the Police Department, where r oughly $1.1 million was budgeted to acquire patrol vehicle leases budgeted for in FY 2024. As noted above, almost all of these appropriations are carried over into the following fiscal year.

A total overall favorable variance between actual revenues & expenditures of $10.6 million resulted from a combination of stronger revenue performance in property tax combined with significant savings across departments. Savings on salaries & benefits, contractual services, and vehicle & equipment purchases resulted in the positive variance for the General Fund.

CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital Assets

The City’s capital assets for its governmental and business-type activities as of June 30, 2024, amounted to nearly $847 million (net of accumulated depreciation and amortization). This investment in capital assets includes land, buildings and improvements, machinery a nd equipment, vehicles, infrastructure, wate r rights, rights of way and construction in progress. It also includes the new category of lease assets and subscription assets in compliance with GASB Statements Nos. 87 and 96. The subscription asset category reflects the va lue of the City’s right, as a part of a subscription-based information technology arrangement, to use the informati on technology as an asset over the life of its corresponding arrangement, in accordance with GASB Statement No. 96. Similarly, in accordance with GASB Statement No. 87, the lease asset category reflects the value of the City’s right to use leased assets, such as vehi cles or equipment, over the term of the lease agreement, representing a shift towa rds recognizing leases as both a right-to-use asset and a corresponding lease liability.

City of Redlands
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2024

25 Major capital asset events for Governmental Activities during FY 2024 include the following:

Additions and deletions to machinery, equipment, and vehicles in governmental activities resulted in a net decrease of $986,000, 3.7%. This decrease reflects the auction and proper disposal of a larger numbe r of vehicles and equipment than were acquired during the year. Over time, a backlog of aged vehicles had accumulated, and the City has made significant progress in addressing this by removing these assets from its records and ensuring proper disposal. Notably, many of the disposed assets included long-held police and fire department vehicles and equipment. During the year, the City also added key assets, including a donated vehicle and a new vector truck for the streets division, supporting essential services and operational efficiency.

Net additions to infrastructure assets in general government activities totaled nearly $10.5 million, or 3.8%. Roughly $8.7 million of these additions were the result of project s constructed by the City, including the 2022 Alley Paving Improvements and the 2022 and 2023 Pa vement Management Program street r esurfacing projects. Deletions in this category represent adjustments made when portions of existi ng infrastructure assets were replaced or reconstructed.

Specifically, if an infrastructure asset was newly constructed, no deletions were recorded.

However, if an asset was completely reconstructed, the full cost of the original asset was removed from the records as a deletion. For assets where only a portion was removed and replaced, the corresponding percentage of the original asset's cost was recorded as a deletion in the accompanying schedules.

Construction in Progress values in general government activities increased significantly by $4.9 million, or 43%. This increase reflects the initiation and continuation of several large capital improvement projects and equipment purchases, including the Fire Station No. 262 Remodel Architectural and Construction Services, th e Redlands Bowl Lighting, Speakers, Communication Outlets & Cabli ng Replacement, the purchase of three Type I Fire Engines, and the 2023 Alley Paving Improvement Project. Transfers and deletions in this category represent projects that were completed by June 30, 2024. Upon completion, these projects were recl assified into other asset categories, most commonly the infrastructure asset class, to reflect their transition from in-progress to capitalized assets.

Right-of-way assets increased by 8.8%, or $29.8 million. This increase was primarily due to several public development projects noted above under net additions to infrastructure assets, including the 2022 Alley Paving Improvements and the 2022 and 2023 Pavement Management Pr ogram street resurfacing projects. Right-of-way assets include land and infrastructure dedicated to public use, su ch as streets, sidewalks, and alleys, which play a crucial role in maintaining safe and efficient transportation networks. These assets reflect the City’s commitment to improving local mobility and accessibility for residents and businesses.

Accumulated Depreciation increased by $6.6 million, or 4.2%. The City’s measurement of accumulated depreciation is based on estimated useful lives by infrastructure asset type . Estimated useful lives were initially established using engineering standards, as well as discussions with City sta ff regarding the City’s maintenance program for each asset type. The largest increases were in the categories of road system assets and building & improvements.

New categories have been introduced in the capital assets not e as a result of the implementation of GASB Statements Nos. 87 and 96. These include lease assets, subscription assets, and accumulated amortization, which are being presented here to align with these updated reporting standards.

Lease assets represent the value of the C ity's right to use leased properties, vehicles, and equipment under long-term agreements in compliance with GASB Statement No. 87. These assets are recognized when the City enters into lease arrangements for essential services and operations. Overall, lease assets increased by roughly $3.1 million, or 240%, as a result of new lease agreements for public works and public safety vehicles.

City of Redlands
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2024

26 Subscription assets represent the value of the City's right to use software and other technology under subscription-based information technology arrangements in compliance with GASB Statement No. 96. These assets are recognized when the City enters into agreements for IT services critical to operations and ser vice delivery. Overall, subscription assets decreased by roughly $170,600, or 29%, as a result of expired subscriptions.

Accumulated amortization represents the portion of lease and subscription asset values that have been expensed over time as the City uses these assets. This measure reflects th e wear and usage of intangible assets in compliance with GASB standards. Overall, accumulated amortization decrea sed by roughly $590,700, or 85.6%, as a result of newly added assets that have not yet undergone significant amortiza tion or adjustments to prior accumulated balances due to asset reclassifications.

For business type activities, machinery, equipment and vehicle assets increased by roughly $872,000, or 3.62%, representing purchases of office, laboratory and sampling equi pment as well as the purchase of three (3) front-loading solid waste collection vehicles.

Infrastructure assets increased by roughly $5 million, or 2.42%. The vast majority of this increase can be attributed to the reclassification of construction in progress from the co mpletion of the 2022 Water Pipeline Replacement Project that replaced roughly 3 miles of water pipeline.

Construction in progress increased by $3.7 million, or 44%, as the result of the net effect of the completion the 2022 Water Pipeline Replacement, as well as the initiation and continuation of additional capital projects like the Recycled Water Reservoir design, the Tate raw water influent pipeline project, the SCADA Equipment upgrade project, the Water Facilities Generator design services project, the Automated Metering Infrastructure implementation project, and the Hinckley Treatment Plan Sludge Press Engineering project.

Accumulated depreciation increased by $7.9 million, or 4%, with the largest increases in the categories of Infrastructure and Building & Improvements. Lease Assets increased by $2.2 million, or 360% and this reflects new vehicle leases in the Water, Wastewater and Solid Waste divisions. Subscription Assets were reduced to zero as a result of the expiration of existing agreements. Accumulated amortization increased by $223,100 as a result of newly added assets that have not yet undergone significant amortization or adjustments to prior accumulated balances due to asset reclassifications.

Overall, for primary government the City’s net capital assets increased significantly by $45.5 million for the fiscal year ended June 30, 2024, or 5.7% over prior year. This is slightly lower than the previous year’s increase of 7.5%.

City of Redlands
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2024

27 Capital assets for the governmental and business type activities are presented below to illustrate changes from the prior year:

Inc./ (Dec.)
2024 2023 2024 2023 2024 2023 % of Change
Land 41,707,282$ 40,956,320$ 28,069,057$ 28,069,057$ 69,776,339$ 69,025,377$ 1.1% Buildings & Im provem ents 62,724,536 61,847,805 123,210,762 122,661,207 185,935,298 184,509,012 0.8% Machinery/Equip./Vehicles 25,482,981 26,468,907 24,968,572 24,096,435 50,451,553 50,565,342 (0.2%) Infrastructure 282,812,418 272,359,117 210,736,273 205,766,544 493,548,691 478,125,661 3.2% Water Rights 408,125 408,125 9,792,995 9,884,095 10,201,120 10,292,220 (0.9%) Right of Way 366,862,877 337,105,665 - - 366,862,877 337,105,665 8.8% Construction in Progress 16,307,905 11,404,751 12,194,230 8,463,598 28,502,135 19,868,349 43.5% Accum ulated Depreciation (162,650,313) (156,079,017) (201,824,376) (193,915,709) (364,474,689) (349,994,726) 4.1% Lease Assets 4,377,917 1,288,724 2,854,808 621,090 7,232,725 1,909,814 278.7% Subscription Assets 422,936 593,542 - 107,285 422,936 700,827 (39.7%) Accum ulated Am ortization (1,280,507) (689,822) (379,595) (156,441) (1,660,102) (846,263) 96.2% Total 637,176,157$ 595,664,117$ 209,622,726$ 205,597,161$ 846,798,883$ 801,261,278$ 5.7% Governmental Activities Business-Type Activities Total

Internal Service Fund capital assets, net of accumulated depreciation, are included in Governmental Activities.

Additional information on the City’s Capital Assets can be found in Note 6 of the section titled Notes to the Basic Financial Statements.

Long-Term Liabilities

Major long-term liability events during FY 2024 include the following:

 The Lease Liability category increased significantly by $3.8 million, or 283% as a result of the addition of 80 new leases for vehicles in Police, Fire, Building Mainte nance, Streets, Parks, Engineering, Solid Waste, Cemetery, Water and Wastewater operations.
 Subscription Liability is recognized in accordance with GASB Statement No. 96, which requires that the City establish accounting methods for a right-to-use subscription asset representing its agreements for subscription- based information technology arrangements and a corr esponding subscription liability for the same. This liability was reduced by 70%, or $130,400 due to the expiration of a technology agreement.  Taxable pension bonds experienced a decrease of 3% as a result of annual debt service and no new additions were made to such debt.
 The Revenue Bond liability was fully eliminated during the fiscal year following the repayment of the Solid Waste Revenue Bonds, Series 2013A. This serial bond was secured by a pledge of revenues from the Solid Waste (Disposal) Fund to ensure repayment of the debt.
 Notes payable decreased by roughly $1.2 million, or 7%, as a result of repayments and no new additions to debt in this category.
 Claims payable had a very small reduction $92,400, or 0.6% due to minor variances in claims filed against the City, which can fluctuate significantly from year to year.  Compensated absences increased by approximately $912,200, or 10% . This increase is attributed to a combination of higher employee leave accruals compared to leave usage during the fiscal year and a citywide wage increase, which elevated the valuation of accrued leave balances.

City of Redlands
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2024

28  The landfill closure liability increased significantly by $3.8 million due to a substantial adjustment in the plan for closure and post-closure maintenance of the California Street Landfill. This was higher than the prior year because a comprehensive overhaul of the landfill’s perm it and closure/post-closure maintenance plan was required, rather than relying on the annual inflation factor. The updated plans were thoroughly analyzed to incorporate changes and develop a revised cost estimate. The resulting amount reflects the updated closure and post-closure requirements, significantly influenced by increases in the Construction Cost Index and Consumer Price Index (CPI), which played a critical role in driving up projected costs.  In FY 2023, the City experienced a $55 million (27%) reduction in Total OPEB Liability, primarily driven by updated actuarial assumptions and favorable experience variances. While the FY 2024 decrease is smaller, the $17 million reduction (11.6%) underscores continued favorable trends in act ual experience, including lower healthcare costs and demographic shifts, albeit to a lesser extent than the prior year.  The City’s net pension liability (NPL) increased by $8.9 million, or 5.75%, during the fiscal year. This moderate increase follows a more dramatic rise of $68.3 million (79%) in the prior year. This increase was driven by CalPERS’ investment underperformance, with actual returns falling below the assumed 6.8%, as well as the annual accrual of interest on the Unfunded Accrued Li ability (UAL), the amortization of prior years' losses under CalPERS’ smoothing methodology, and ongoing adjustments to actuarial assumptions such as salary scales and demographic factors.

Long-term liabilities for governmental and business type activities are presented below to illustrate changes from the prior year:

Inc./ (Dec.)
2024 2023 2024 2023 2024 2023 % of Change
Lease Liability 2, 941,545$ 832,107 $ 2,249,119 $ 523,389 $ 5,190,664 $ 1,355,496 $ 100.00% Subs cription Liability 55,044 185,429 - - 55,044 185,429 100.00% Taxable Pension Bonds 4,469,940 4,607,478 - - 4,469,940 4,607,478 -2.99% Revenue Bonds - - - 1,660,000 - 1,660,000 -100.00% Notes Payable 4,789,210 4,358,566 11,309,430 12,938,540 16,098,640 17,297,106 -6.93% Claims Payable 15,433,473 15,525,893 - - 15,433,473 15,525,893 -0.60% Compensated Absences 8,638,503 7,925,416 1,264,298 1,065,169 9,902,801 8,990,585 10.15% Landfill Clos ure Liability - - 15,418,260 11,606,913 15,418,260 11,606,913 32.84% Total OPEB Liability 89,577,526 102,959,850 40,315,855 44,000,415 129,893,381 146,960,265 -11.61% Net Pens ion Liability 139,682,059 131,813,535 24,033,967 23,007,396 163,716,026 154,820,931 5.75% Total 265,587,300 $ 268,208,274 $ 94,590,929 $ 94,801,822 $ 360,178,229 $ 363,010,096 $ -0.78% Governmental Activities Business-Type Activities Total

Additional information on the City’s long-term liabilities can be found in Note 7 and 9-13 of the Notes to the Basic Financial Statements.

REQUESTS FOR INFORMATION

This financial report is designed to provide a general overview of the City’s finances. Questions concerning any of the information provided in this report or requests for additiona l financial information should be sent to the Management Services Department at [email protected] or to Ma nagement Services / Finance Director, 35 Cajon Street, Suite 222, Redlands, CA 92373. This fina ncial report is also available in electronic format on the City’s website at http://cityofredlands.org/finance/annualreport. Additional information intended for the business community is available on the Economic Development web page also lo cated on the City’s website listed above at http://www.cityofredlands.org/ED.

BASIC FINANCIAL STATEMENTS
29 This page intentionally left blank.
30 GOVERNMENT-WIDE FINANCIAL STATEMENTS
31 Governmental Business-Type
Activities Activities Total
ASSETS
Current assets:

Cash and investments 165,954,022 $ 104,921,112$ 270,875,134$ Accounts receivable, net 2,214,991 9,075,199 11,290,190 Taxes receivable 11,090,408 913 11,091,321 Interest receivable 676,973 433,083 1,110,056 Lease receivable - due within one year 376,633 227,499 604,132 Due from other governments 748,719 51,947 800,666 Prepaid items 996,279 15,585 1,011,864 Inventories 104,416 - 104,416 Total current assets 182,162,441 114,725,338 296,887,779 Noncurrent assets:

Restricted cash and investments 237,153 696,278 933,431 Notes receivable 3,012,822 - 3,012,822 Lease receivable - due in more than one year 2,233,541 2,166,650 4,400,191 Capital assets:

Non-depreciable 425,286,189 50,056,282 475,342,471 Depreciable, net 211,889,968 159,566,444 371,456,412 Total capital assets 637,176,157 209,622,726 846,798,883 Total noncurrent assets 642,659,673 212,485,654 855,145,327 Total assets 824,822,114 327,210,992 1,152,033,106

DEFERRED OUTFLOWS OF RESOURCES
Related to OPEB 32,510,200 10,814,162 43,324,362 Related to pensions 50,476,620 6,875,831 57,352,451 Total deferred outflows of resources 82,986,820 17,689,993 100,676,813

June 30, 2024
Statement of Net Position
City of Redlands
Primary Government
See accompanying Notes to the Basic Financial Statements. 32 Governmental Business-Type
Activities Activities Total

LIABILITIES
Current liabilities:

Accounts payable 7,199,760 3,671,398 10,871,158 Accrued payroll 4,374,348 1,146,104 5,520,452 Interest payable 119,128 58,338 177,466 Unearned revenue 7,967,968 329,047 8,297,015 Deposits payable 3,225,839 2,995,334 6,221,173 Compensated absences - due within one year 4,319,252 632,151 4,951,403 Claims payable - due within one year 7,716,737 - 7,716,737 Long-term debt - due within one year 1,282,467 2,172,232 3,454,699 Total current liabilities 36,205,499 11,004,604 47,210,103 Noncurrent liabilities:

Compensated absences - due in more than one year 4,319,251 632,147 4,951,398 Claims payable - due in more than one year 7,716,736 - 7,716,736 Long-term debt - due in more than one year 10,973,272 11,386,317 22,359,589 Landfill closure liability - 15,418,260 15,418,260 Total OPEB liability - due in more than one year 89,577,526 40,315,855 129,893,381 Aggregate net pension liability - due in more than one year 139,682,059 24,033,967 163,716,026 Total noncurrent liabilities 252,268,844 91,786,546 344,055,390 Total liabilities 288,474,343 102,791,150 391,265,493

DEFERRED INFLOWS OF RESOURCES
Related to leases 2,446,319 2,265,187 4,711,506 Related to OPEB 57,592,310 15,903,770 73,496,080 Related to pensions 1,364,017 - 1,364,017 Total deferred inflows of resources 61,402,646 18,168,957 79,571,603

NET POSITION
Net investment in capital assets 629,390,358 196,064,177 825,454,535 Restricted:

Donations 635,580 - 635,580 PEG fees 697,864
- 697,864
Park and open space acquisition/improvement 5,217,214 - 5,217,214 Street reconstruction/improvement projects 7,978,438 - 7,978,438 Public facilities 1,928,937 - 1,928,937 Public safety 677,405 - 677,405 Police programs and equipment 2,020,886 - 2,020,886 Public art 9,867 - 9,867 Street reconstruction/improvement projects 3,780,874 - 3,780,874 Debt service 579,267 462,600 1,041,867 Capital projects 2,764,922 19,189,911 21,954,833 Endowment - non-expendable - 110,741 110,741 Endowment - expendable 32,285 - 32,285 CFD assessment 80,284 - 80,284 Total restricted 26,403,823 19,763,252 46,167,075 Unrestricted (deficit) (97,862,236) 8,113,449 (89,748,787) 557,931,945$ 223,940,878$ 781,872,823$ Total net position Primary Government
City of Redlands
Statement of Net Position (Continued)
June 30, 2024
See accompanying Notes to the Basic Financial Statements. 33 Operating Capital
Charges for Grants an d Grants and
Functions/Programs Expenses Services Contributions Contributions Total Primary government:

Governmental activities:

General government 42,250,996$ 16,010,783 $ 13,896,634 $ 187,679 $ 30,095,096 $ Public safety 70,359,582 965,128 296,798 164,967 1,426,893 Culture and recreation 9,900,700 641,939 34,345 641,425 1,317,709 Highway and streets 13,911,149 375,497 - 37,157,273 37,532,770 Library 4,068,345 20,721 - 56,431 77,152 Interest on long-term debt 679,186 - - - - Total governmental activities 141,169,958 18,014,068 14,227,777 38,207,775 70,449,620 Business-type activities:

Water 30,614,235 27,009,859 30,595 2,014,529 29,054,983 Disposal 22,954,172 20,764,912 33,972 197,199 20,996,083 Wastewater 16,143,743 13,144,186 - 1,516,510 14,660,696 Groves 1,507,349 845,420 - - 845,420 Non-Potable 581,877 553,827 - 139,006 692,833 Cemetery 1,399,130 947,465 - - 947,465 Aviation 789,821 152,175 49,550 - 201,725 Total business-type activities 73,990,327 63,417,844 114,117 3,867,244 67,399,205 Total primary government 215,160,285$ 81,431,912 $ 14,341,894 $ 42,075,019 $ 137,848,825 $

City of Redlands
Statement of Activities
For the Year Ended June 30, 2024
Program Revenues
See accompanying Notes to the Basic Financial Statements. 34 Governmental Business-type
Functions/Programs Activities Activities Total
Primary government:

Governmental activities:

General government (12,155,900)$ - $ (12,155,900)$ Public safety (68,932,689) - (68,932,689) Culture and recreation (8,582,991) - (8,582,991) Highway and streets 23,621,621 - 23,621,621 Library (3,991,193) - (3,991,193) Interest on long-term debt (679,186) - (679,186) Total governmental activities (70,720,338) - (70,720,338) Business-type activities:

Water - (1,559,252) (1,559,252) Disposal - (1,958,089) (1,958,089) Wastewater - (1,483,047) (1,483,047) Groves - (661,929) (661,929) Non-Potable - 110,956 110,956 Cemetery - (451,665) (451,665) Aviation - (588,096) (588,096) Total business-type activities - (6,591,122) (6,591,122) Total primary government (70,720,338) (6,591,122) (77,311,460) General Revenues and Transfers:

General revenues:

Taxes:

Property taxes 42,883,738 104,411 42,988,149 Sales and use taxes 47,629,644 - 47,629,644 Franchise taxes 4,471,469 - 4,471,469 Other taxes 2,676,553 - 2,676,553 Total taxes 97,661,404 104,411 97,765,815 Investment income 9,235,054 5,841,165 15,076,219 Intergovernmental - unrestricted 852,762 - 852,762 Miscellaneous revenue 2,523,968 1,973,183 4,497,151 Transfers 2,827,146 (2,827,146) -
Total general revenues and transfers 113,100,334 5,091,613 118,191,947 Change in net position 42,379,996 (1,499,509) 40,880,487 Net Position:

Beginning of year 515,551,949 225,440,387 740,992,336 End of year 557,931,945$ 223,940,878 $ 781,872,823 $
For the Year Ended June 30, 2024
Statement of Activities (Continued)
City of Redlands
Net (Expense) Revenue
and Changes in Net Position
See accompanying Notes to the Basic Financial Statements. 35 This page intentionally left blank.
36 FUND FINANCIAL STATEMENTS
37 This page intentionally left blank.
38 Governmental Funds Financial Statements
General Fund - This fund accounts for all revenues and expenditures used to finance the traditional services associated with a municipal government which are not accounted for in the other funds. In Redlands, these services include general government, public safety, culture and recreation, highway and streets, and library.

Governmental Grants Special Revenue Fund - This fund accounts for the receipt and expenditure of grant monies received from various agencies for general government projects. 39 This page intentionally left blank.
40 Governmental
Grants Non-major Total
General Special Revenue Governmental Governmental
Fund Fund Funds Funds
ASSETS
Cash and investments 108,182,523$ 6,541,368$ 28,503,677$ 143,227,568$ Restricted cash and investments - - 237,153 237,153 Accounts receivable, net 1,399,943 - 13,290 1,413,233 Taxes receivable 10,091,348 - 999,060 11,090,408 Interest receivable 585,762 - - 585,762 Lease receivable 2,610,174 - - 2,610,174 Due from other governments 204,063 490,970 53,686 748,719 Prepaid items 501,110 248,438 14,681 764,229 Due from other funds 9,164 - - 9,164 Notes receivable 3,012,822 - - 3,012,822 Total assets 126,596,909$ 7,280,776$ 29,821,547$ 163,699,232$

LIABILITIES, DEFERRED INFLOWS OF

RESOURCES, AND FUND BALANCES
Liabilities:

Accounts payable 4,255,112$ 456,658$ 1,157,984$ 5,869,754$ Accrued payroll 3,140,038 34,660 284,825 3,459,523 Deposits payable 2,719,278 - 506,561 3,225,839 Unearned revenues 836,019 6,560,418 571,531 7,967,968 Due to other funds - - 9,164 9,164 Total liabilities 10,950,447 7,051,736 2,530,065 20,532,248

DEFERRED INFLOWS OF RESOURCES
Unavailable revenue 2,023,454 210,500 33,470 2,267,424 Deferred inflows related to leases 2,446,319 - - 2,446,319 Total deferred inflows of resources 4,469,773 210,500 33,470 4,713,743

Fund Balances:

Nonspendable 3,513,932 248,438 44,881 3,807,251 Restricted 1,333,444 - 25,046,165 26,379,609 Committed 12,232,036 - - 12,232,036 Assigned 33,591,308 - 2,177,312 35,768,620 Unassigned (deficit) 60,505,969 (229,898) (10,346) 60,265,725 Total fund balances 111,176,689 18,540 27,258,012 138,453,241 Total liabilities, deferred inflows of
resources, and fund balances 126,596,909$ 7,280,776$ 29,821,547$ 163,699,232$ Major Funds
June 30, 2024
Governmental Funds
Balance Sheet
City of Redlands
See accompanying Notes to the Basic Financial Statements. 41 Total Fund Balances - Total Governmental Funds 138,453,241$ Unavailable revenues reported on the Governmental Fund Financial Statements resulting from activities in which revenues were earned but were not available are reclassified as revenues in the Government-Wide Financial Statements. 2,267,424 Capital Assets use d in the governmenta l activities were no t financial resources an d therefore were no t reported in the Governmental Funds Balance Sheet.

Government-Wide Statement of Net Position 637,176,157
Less: capital assets reported in Internal Service Funds (960,158) Total capital assets 636,215,999
Long-term liabilities are no t due and payable in the curren t period and therefore were no t reported in the Governmenta l Funds Balance Sheet.

Amount reported in Government-Wide Statement of Net Position Compensated absences - due within one year (4,319,252)
Compensated absences - due in more than one year (4,319,251) Long-term debt - due within one year (1,282,467)
Long-term debt - due in more than one year (10,973,272) Less: amount reported in Internal Service Funds:

Compensated absences - due within one year 235,128
Compensated absences - due in more than one year 235,127 Long-term debt - due within one year 69,767
Long-term debt - due in more than one year 44,714
Total long-term liabilities (20,309,506)
Interest payable on long-term debt did not require current financial resources. Therefore, interes t payable was not reported as a liability in the governmental funds. (119,128)
Aggregate net pension liability and total OPEB liability used in the governmental activities were not financial resources and therefore were not re
ported in the Governmental Funds Balance Sheet.

Total OPEB liability (89,577,526)
Net pension liability (139,682,059)
Less: amount reported in Internal Service Funds:

Total OPEB liability 7,566,136
Net pension liability 6,790,716
Total OPEB and Pension (214,902,733)
Deferred outflows o f resources relate d to OPEB an d pensions are no t available fo r current period and, therefore, are deferred in the governmental funds or not recorded in the governmental funds Amount reported in Government-Wide Statement of Net Position Deferred outflows of resources related to OPEB 32,510,200 Deferred outflows of resources related to pensions 50,476,620 Less: amount reported in Internal Service Funds:

Deferred outflows of resources related to OPEB (2,497,511) Deferred outflows of resources related to pensions (1,942,742) Total deferred outflows of resources 78,546,567
Deferred inflows of resources related to OPEB and pensions are not available for current period and, therefore, are deferred in the governmental funds or not recorded in the governmental funds.

Amount reported in Government-Wide Statement of Net Position Deferred inflows of resources related to OPEB (57,592,310) Deferred inflows of resources related to pensions (1,364,017) Less: amount reported in Internal Service Funds:

Deferred inflows of resources related to OPEB 4,682,033 Deferred inflows of resources related to pensions -
Total deferred inflows of resources (54,274,294)
Internal service funds are used by management to charge the costs of certain activities, such as fleet maintenance, risk management, and information technology, to individual funds. The assets and liabilities of the internal service funds are included in the governmental activities in the statement of net position. (7,945,625) Net Position of Governmental Activities 557,931,945$
Amounts reported for Governmental Activities in the Statement of Net Position were different because:

City of Redlands
Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Position
June 30, 2024
See accompanying Notes to the Basic Financial Statements. 42 Formerly
Major Fund
Governmental Public Facilities
Grants Development Non-major Total
General Special Revenue Special Revenue Governmental Governmental Fund Fund Fund Funds Funds
REVENUES:

Property taxes 41,713,771 $ - $ 1,169,967 $ 42,883,738 $ Sales and use taxes 47,629,644 - - 47,629,644 Other taxes 2,676,553 - - 2,676,553 Franchise fees 4,471,469 - - 4,471,469 Licenses and permits 9,238,592 - - 9,238,592 Fines and forfeitures 62,969 - 490,841 553,810 Intergovernmental 780,165 14,061,381 7,156,743 21,998,289 Charges for services 7,101,106 - 2,834,860 9,935,966 Investment income 5,647,723 1,118 1,267,444 6,916,285 Rents and leases 1,167,604 - 5,008 1,172,612 Miscellaneous 2,111,512 - 96,251 2,207,763 Total revenues 122,601,108 14,062,499 13,021,114 149,684,721

EXPENDITURES:

Current:

General government 23,972,409 12,008,843 971,270 36,952,522 Public safety 54,538,333 211,543 5,609,207 60,359,083 Culture and recreation 7,936,523 - 20,355 7,956,878 Highway and streets 4,796,525 - 1,716,779 6,513,304 Library 3,580,553 - - 3,580,553 Capital outlay 14,505,154 683,003 8,705,928 23,894,085 Debt service:

Principal 3,655,908 -
251,882 3,907,790
Interest and fiscal charges 387,035 - 243,428 630,463 Total expenditures 113,372,440 12,903,389 17,518,849 143,794,678

REVENUES OVER (UNDER) EXPENDITURES 9,228,668 1,159,110 (4,497,735) 5,890,043 OTHER FINANCING SOURCES (USES):

Inception of finance purchase agreement 3,668,445 - - 3,668,445 Inception of lease liability 2,546,260 - - 2,546,260 Transfers in 2,850,162 405 20,210,190 23,060,757 Transfers out (18,074,687) (63,649) (7,838,130) (25,976,466) Total other financing sources (uses) (9,009,820) (63,244) 12,372,060 3,298,996 NET CHANGE IN FUND BALANCES 218,848 1,095,866 7,874,325 9,189,039 FUND BALANCES (DEFICIT):

Beginning of year, as previously reported 110,957,841 (1,077,326) (6,161,839) 25,545,526 129,264,202 Change with financial reporting entity
(major to non major fund) - - 6,161,839 (6,161,839) - Beginning of year, as restated (Note 20) 110,957,841 (1,077,326) - 19,383,687 129,264,202 End of year 111,176,689$ 18,540$ -$ 27,258,012$ 138,453,241$ Major Funds
For the Year Ended June 30, 2024
Governmental Funds
Statement of Revenues, Expenditures, and Changes in Fund Balances City of Redlands
See accompanying Notes to the Basic Financial Statements. 43 Total Fund Balances - Total Governmental Funds 9,189,039$ Governmental funds reported capital outlay as expenditures. However, in the Government-Wide Statement of Activities, the cost of those assets was allocated over their estimated useful lives as depreciation and amortization expenses. This is the amount of capital assets recorded in the current period (net of $361,933 added in internal service funds) ($105,936 of the governmental fund capital outlay balance were for repairs and maintenance expenditures). 23,894,085 In the Government-Wide Statement of Activities, donated assets are reported as a capital contribution. 30,109,488 Depreciation/amortization expense on capital assets was reported in the Government-Wid e Statement of Activities and Changes in Net Position, but they did not require the use of current financial resources. Therefore, depreciation/amortization expense, net of internal service funds of $550,385, was not reported as expenditures in the Governmental Funds. (10,427,180)
The net effect of various miscellaneous transactions involving capital assets (i.e. sales, trade-ins, and donations) decreased net
position. (1,911,827)
Issuance of long-term liabilities provides current financial resources to governmental funds, but the issuance increased long- term liabilities in the Government-Wide Statement of Net Position.

Lease liabilities (2,546,260)
Repayment of long-term liabilities was an expenditures in governmental funds, but the repayment reduced long-term liabilities in the Government-Wide Statement of Net Position.

Princi
pal payment of long-term debt (net of internal service funds principal payments of $137,492) 3,907,790 Amortization of accreted interest (47,462)
Interest expense on long-term debt was reported in the Government-Wide Statement of Activities, but it did not require the use of current financial resources. This amount represented the changes in accrued interest from prior year. 4,332 Compensate
d absences expenses reported in the Government-Wide Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds. (net of $10,915 deducted in internal service funds
). (657,630)
Revenues in the Government-Wide Statement of Activities that do not provide current financial resources and are not reported as revenue in the governmental funds. (111,623) Certain
pension expenses reported in the Government-Wid e Statement of Activities do not require the use o f current financial resources and therefore, are not reported as expenditures in governmental funds.

Changes in pension related deferred outflows of resources (2,814,648) Changes in net pension liabilities (7,271,505)
Changes in pension related deferred inflows of resources 4,323,676 Certain OPEB expenses reported in the Government-Wid e Statement of Activities do not require the use o f current financial resources and therefore, are not reported as expenditures in governmental funds.

Changes in OPEB related deferred outflows of resources (5,561,609) Changes in total OPEB liabilities 12,262,219
Changes in OPEB related deferred inflows of resources (12,036,267) The internal service funds are used by management to charge the costs o f certain activities, such as flee t maintenance, risk management, and information technology to individual funds. The net revenue of certain activities of internal service funds is reported with governmental activities. 5,743,823
Chan
ge in Net Position of Governmental Activities 42,379,996$ Amounts reported for Governmental Activities in the Statement of Net Position were different because:

City of Redlands
Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-Wide Statement of Activities and Changes in Net Position For the Year Ended June 30, 2024
See accompanying Notes to the Basic Financial Statements. 44 Proprietary Funds Financial Statements
Water Fund - This fund is used to account for the activities of the City's water utility operations, projects, debt service costs, and impact fees of the City.

Disposal Fund - This fund is used to account for the activities of the City's refuse disposal collection operations, projects, debt service costs, and impact fees of the City.

Wastewater Fund - This fund is used to account for the activities of the City's wastewater utility operations, projects, debt service costs, and impact fees of the City.

Internal Service Funds - These funds are used to provide goods and services by one department or agency to other departments or agencies of the City on a cost reimbursement basis. 45 Water Disposal Wastewater
Fund Fund Fund
ASSETS
Current assets:

Cash and investments 55,445,535$ 22,087,401$ 19,220,772$ Accounts receivable, net 4,146,726 2,844,219 1,837,350 Taxes receivable - 810 - Interest receivable 228,862 91,170 79,338 Lease receivable - due within one year 96,323 - - Due from other governments - - - Prepaid items 10,208 275 5,102 Inventories - - - Total current assets 59,927,654 25,023,875 21,142,562 Noncurrent assets:

Restricted cash and investments 696,278 - - Lease receivable - due in more than one year 1,663,622 - - Advances to other funds 487,867 707,929 - Capital assets:

Non-depreciable 23,137,263 34,217 11,518,711 Depreciable, net 107,835,235 8,941,853 39,815,932 Total capital assets 130,972,498 8,976,070 51,334,643 Total noncurrent assets 133,820,265 9,683,999 51,334,643 Total assets 193,747,919 34,707,874 72,477,205

DEFERRED OUTFLOW OF RESOURCES
Related to OPEB 5,055,117 3,347,072 1,998,651
Related to pensions 2,662,873 1,988,426 1,821,795
Total deferred outflow of resources 7,717,990 5,335,498 3,820,446

(Continued)
Major Funds
City of Redlands
Statement of Net Position
Proprietary Funds
June 30, 2024
See accompanying Notes to the Basic Financial Statements. 46 Governmental
Non-Major Activities
Enterprise Internal
Funds Total Service Funds
ASSETS
Current assets:

Cash and investments 8,167,404$ 104,921,112$ 22,726,454$ Accounts receivable, net 246,904 9,075,199 801,758 Taxes receivable 103 913 - Interest receivable 33,713 433,083 91,211 Lease receivable - due within one year 131,176 227,499 - Due from other governments 51,947 51,947 - Prepaid items - 15,585 232,050 Inventories - - 104,416 Total current assets 8,631,247 114,725,338 23,955,889 Noncurrent assets:

Restricted cash and investments - 696,278 - Lease receivable - due in more than one year 503,028 2,166,650 - Advances to other funds - 1,195,796 - Capital assets:

Non-depreciable 15,366,091 50,056,282 - Depreciable, net 2,973,424 159,566,444 960,158 Total capital assets 18,339,515 209,622,726 960,158 Total noncurrent assets 18,842,543 213,681,450 960,158 Total assets 27,473,790 328,406,788 24,916,047

DEFERRED OUTFLOW OF RESOURCES
Related to OPEB 413,322 10,814,162 2,497,511 Related to pensions 402,737 6,875,831 1,942,742 Total deferred outflow of resources 816,059 17,689,993 4,440,253

(Continued)
City of Redlands
Statement of Net Position (Continued)
Proprietary Funds
June 30, 2024
See accompanying Notes to the Basic Financial Statements. 47 Water Disposal Wastewater
Fund Fund Fund

LIABILITIES
Current liabilities:

Accounts payable 1,572,277 803,521 1,169,866 Accrued payroll 433,503 345,369 297,714 Interest payable - 57,660 - Deposits payable 1,560,817 28,755 5,705 Unearned revenue - 313,175 - Compensated absences - due within one year 288,267 154,515 166,984 Claims payable - due within one year - - - Long-term debt - due within one year 1,185,832 451,689 461,715 Total current liabilities 5,040,696 2,154,684 2,101,984 Noncurrent liabilities:

Advances from other funds - - - Compensated absences - due in more than one year 288,266 154,515 166,983 Claims payable - due in more than one year - - - Long term debt - due in more than one year 6,916,655 4,002,963 363,808 Landfill closure - 15,418,260 - Total OPEB liability 20,671,204 9,913,592 8,537,898 Net pension liability 9,307,881 6,950,398 6,367,952 Total noncurrent liabilities 37,184,006 36,439,728 15,436,641 Total liabilities 42,224,702 38,594,412 17,538,625

DEFERRED INFLOWS OF RESOURCES
Related to leases 1,645,026 - - Related to OPEB 6,436,221 5,795,839 2,893,814 Total deferred inflows of resources 8,081,247 5,795,839 2,893,814

NET POSITION
Net investment in capital assets 122,870,011 4,521,418 50,509,120 Restricted:

Debt service 462,600 -
-
Capital projects 5,000,000 12,595,507 1,296,116 Endowment - non-expendable - - - Total restricted 5,462,600 12,595,507 1,296,116 Unrestricted (deficit) 22,827,349 (21,463,804) 4,059,976 Total net position (deficit) 151,159,960$ (4,346,879)$ 55,865,212$

(Continued)
June 30, 2024
Major Funds
City of Redlands
Statement of Net Position (Continued)
Proprietary Funds
See accompanying Notes to the Basic Financial Statements. 48 Governmental
Non-Major Activities
Enterprise Internal
Funds Total Service Funds

LIABILITIES
Current liabilities:

Accounts payable 125,734 3,671,398 1,330,006 Accrued payroll 69,518 1,146,104 914,825 Interest payable 678 58,338 - Deposits payable 1,400,057 2,995,334 - Unearned revenue 15,872 329,047 - Compensated absences - due within one year 22,385 632,151 235,128 Claims payable - due within one year - - 7,716,737 Long-term debt - due within one year 72,996 2,172,232 69,767 Total current liabilities 1,707,240 11,004,604 10,266,463 Noncurrent liabilities:

Advances from other funds 1,195,796 1,195,796 - Compensated absences - due in more than one year 22,383 632,147 235,127 Claims payable - due in more than one year - - 7,716,736 Long term debt - due in more than one year 102,891 11,386,317 44,714 Landfill closure - 15,418,260 - Total OPEB liability 1,193,161 40,315,855 7,566,136 Net pension liability 1,407,736 24,033,967 6,790,716 Total noncurrent liabilities 3,921,967 92,982,342 22,353,429 Total liabilities 5,629,207 103,986,946 32,619,892

DEFERRED INFLOWS OF RESOURCES
Related to leases 620,161 2,265,187 - Related to OPEB 777,896 15,903,770 4,682,033 Total deferred inflows of resources 1,398,057 18,168,957 4,682,033

NET POSITION
Net investment in capital assets 18,163,628 196,064,177 960,158 Restricted:

Debt service - 462,600 -

Capital projects 298,288 19,189,911 - Endowment - non-expendable 110,741 110,741 - Total restricted 409,029 19,763,252 - Unrestricted (deficit) 2,689,928 8,113,449 (8,905,783) Total net position (deficit) 21,262,585$ 223,940,878$ (7,945,625)$

(Concluded)
June 30, 2024
City of Redlands
Statement of Net Position (Continued)
Proprietary Funds
See accompanying Notes to the Basic Financial Statements. 49 Water Disposal Wastewater
Fund Fund Fund
OPERATING REVENUES:

Charges for services 27,009,859$ 20,764,912$ 13,144,186$ Miscellaneous operating revenue 1,200,621 33,626 23,375 Total operating revenues 28,210,480 20,798,538 13,167,561 OPERATING EXPENSES:

Salaries and benefits 7,868,779 6,465,818 5,640,342 General and administrative 8,612,822 14,161,251 4,419,660 Parts and supplies 5,445,261 922,560 2,093,932 Utilities 3,757,345 248,853 1,299,768 Depreciation/amortization 4,736,405 1,007,198 2,686,237 Total operating expenses 30,420,612 22,805,680 16,139,939

OPERATING INCOME (LOSS) (2,210,132) (2,007,142) (2,972,378) NONOPERATING REVENUES (EXPENSES):

Investment income 3,133,824 1,237,599 1,024,765 Interest expense (193,623) (148,492) (3,804) Property taxes - - - Operating grants 30,595 33,972 - Total nonoperating revenues (expenses) 2,970,796 1,123,079 1,020,961

INCOME (LOSS) BEFORE CAPITAL
CONTRIBUTIONS AND TRANSFERS 760,664 (884,063) (1,951,417) CAPITAL CONTRIBUTIONS AND TRANSFERS:

Capital contributions 2,014,529 197,199 1,516,510 Transfers in 292,640 - - Transfers out (884,047) (2,138,586) (245,846) Total capital contributions and transfers 1,423,122 (1,941,387) 1,270,664 Changes in net position 2,183,786 (2,825,450) (680,753) NET POSITION (DEFICIT):

Beginning of year 148,976,174 (1,521,429)
56,545,965
End of year 151,159,960$ (4,346,879)$ 55,865,212$

(Continued)
Major Funds
City of Redlands
Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds
For the Year Ended June 30, 2024
See accompanying Notes to the Basic Financial Statements. 50 Governmental
Non-Major Activities
Enterprise Internal
Funds Total Service Funds
OPERATING REVENUES:

Charges for services 2,498,887$ 63,417,844$ 21,294,014$ Miscellaneous operating revenue 715,561 1,973,183 836,204 Total operating revenues 3,214,448 65,391,027 22,130,218 OPERATING EXPENSES:

Salaries and benefits 1,167,612 21,142,551 5,888,024 General and administrative 2,158,995 29,352,728 10,270,294 Parts and supplies 379,911 8,841,664 6,220,901 Utilities 183,401 5,489,367 340,211 Depreciation/amortization 330,529 8,760,369 550,385 Total operating expenses 4,220,448 73,586,679 23,269,815

OPERATING INCOME (LOSS) (1,006,000) (8,195,652) (1,139,597) NONOPERATING REVENUES (EXPENSES):

Investment income 444,977 5,841,165 1,146,158 Interest expense (57,729) (403,648) (5,593) Property taxes 104,411 104,411 - Operating grants 49,550 114,117 - Total nonoperating revenues (expenses) 541,209 5,656,045 1,140,565

INCOME (LOSS) BEFORE CAPITAL
CONTRIBUTIONS AND TRANSFERS (464,791) (2,539,607) 968

CAPITAL CONTRIBUTIONS AND TRANSFERS
Capital contributions 139,006 3,867,244 - Transfers in 406,357 698,997 6,151,403 Transfers out (257,664) (3,526,143) (408,548) Total capital contributions and transfers 287,699 1,040,098 5,742,855 Changes in net position (177,092) (1,499,509) 5,743,823 NET POSITION (DEFICIT):

Beginning of year 21,439,677 225,440,387
(13,689,448)
End of year 21,262,585$ 223,940,878$ (7,945,625)$

(Concluded)
For the Year Ended June 30, 2024
City of Redlands
Statement of Revenues, Expenses, and Changes in Net Position (Continued) Proprietary Funds
See accompanying Notes to the Basic Financial Statements. 51 Water Disposal Wastewater
Fund Fund Fund
CASH FLOWS FROM OPERATING ACTIVITIES:

Cash received from customers 26,533,094 $ 20,840,564 $ 13,094,827 $ Cash payments to suppliers for goods and services (19,277,147) (11,192,196) (7,306,208) Cash payments to employees for services (6,803,254) (5,272,174) (4,636,859) Receipts from other operating activities 1,200,621 33,626 23,375 Net cash provided by (used in) operating activities 1,653,314 4,409,820 1,175,135

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:

Operating grants 30,595 33,972 - Property taxes 35 (602) - Advances to other funds 142,136 29,684 - Advances from other funds - - - Transfers from other funds 292,640 - - Transfers to other funds (884,047) (2,138,586) (245,846) Net cash provided by (used in) noncapital financing activities (418,641) (2,075,532) (245,846) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:

Acquisition of capital assets (7,477,928) (1,809,862) (3,366,968) Cash contributions received from developers 2,014,529 197,199 1,516,510 Inception of lease liability 1,307,582 184,995 349,282 Principal payment of long-term debt (1,000,900) (2,064,640) (406,424) Interest paid on debt (193,623) (182,393) (3,803) Net cash provided by (used in) capital and related financing activities (5,350,340) (3,674,701) (1,911,403) CASH FLOWS FROM INVESTING ACTIVITIES:

Investment income (loss) 2,904,962 1,146,429 945,427 Net cash (used in) investing activities 2,904,962 1,146,429 945,427 Net change in cash and cash equivalents (1,210,705) (193,984) (36,687) CASH AND CASH EQUIVALENTS:

Beginning of year 57,352,518 22,281,385 19,257,459 End of year 56,141,813$
22,087,401$ 19,220,772$

RECONCILIATION OF CASH AND CASH
EQUIVALENTS TO STATEMENT OF NET POSITION:

Cash and cash investments 55,445,535$ 22,087,401$ 19,220,772$ Restricted cash and investments 696,278 - - Total cash and cash equivalents 56,141,813$ 22,087,401$ 19,220,772$ (Continued)
Major Funds
City of Redlands
Statement of Cash Flows
Proprietary Funds
For the Year Ended June 30, 2024
See accompanying Notes to the Basic Financial Statements. 52 Water Disposal Wastewater
Fund Fund Fund

RECONCILIATION OF OPERATING INCOME (LOSS) TO NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:

Operating income (loss) (2,210,132) $ (2,007,142) $ (2,972,378) $ Adjustments to reconcile operating (loss) to net
cash provided by (used in) operating activities:

Depreciation 4,736,405 1,007,198 2,686,237 Changes in operating assets and liabilities, and
deferred outflows and inflows of resources:

Accounts receivable, net (368,488) (103,426) (48,937) Prepaid items (10,208) (275) (5,102) Inventories - - - Lease receivable 93,575 - - Deferred outflows - OPEB related 641,724 655,093 294,123 Deferred outflows - pension related 389,226 184,927 74,161 Accounts payable (1,451,511) 329,396 512,254 Accrued payroll 105,281 81,509 81,879 Deposits payable (71,559) 263 (422) Unearned revenue (228) 178,815 - Compensated absences 74,117 60,894 53,121 Claims payable - - - Landfill closure - 3,811,347 - Total OPEB liability (1,414,871) (1,444,348) (648,483) Net pension liability 45,890 355,076 614,425 Deferred inflows - lease related (130,065) - - Deferred inflows - OPEB related 1,388,801 1,417,733 636,533 Deferred inflows - pension related (164,643) (117,240) (102,276) Total adjustments 3,863,446 6,416,962 4,147,513 Net cash provided by (used in) operating activities 1,653,314$ 4,409,820 $ 1,175,135 $ NONCASH CAPITAL AND RELATED FINANCING ACTIVITIES:

Contributed property, plant and equipment - $ 197,199$ -$ Total noncash capital and related financing activities -$ 197,199$ -$
For the Year Ended June 30, 2024
Major Funds
City of Redlands
Statement of Cash Flows (Continued)
Proprietary Funds
See accompanying Notes to the Basic Financial Statements. 53 Governmental
Activities
Non-major Internal
Funds Total Service Funds
CASH FLOWS FROM OPERATING ACTIVITIES:

Cash received from customers 2,685,998 $ 63,154,483 $ 20,550,593 $ Cash payments to suppliers for goods and services (2,845,620) (40,621,171) (16,972,070) Cash payments to employees for services (1,022,310) (17,734,597) (4,522,000) Receipts from other operating activities 715,561 1,973,183 836,204 Net cash provided by (used in) operating activities (466,371) 6,771,898 (107,273) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:

Operating grants 63,405 127,972 - Property taxes 104,687 104,120 - Advances to other funds - 171,820 - Advances from other funds (155,729) (155,729) - Transfers from other funds 406,357 698,997 6,151,403 Transfers to other funds (257,664) (3,526,143) (408,548) Net cash provided by (used in) noncapital financing activities 161,056 (2,578,963) 5,742,855 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:

Acquisition of capital assets (131,176) (12,785,934) (397,859) Cash contributions received from developers 139,006 3,867,244 - Inception of lease liability 122,163 1,964,022 55,274 Principal payment of long-term debt (55,438) (3,527,402) (137,492) Interest paid on debt (58,250) (438,069) (5,593) Net cash provided by (used in) capital and related financing activities 16,305 (10,920,139) (485,670) CASH FLOWS FROM INVESTING ACTIVITIES:

Investment income (loss) 411,264 5,408,082 1,054,947 Net cash (used in) investing activities 411,264 5,408,082 1,054,947 Net change in cash and cash equivalents 122,254 (1,319,122) 6,204,859 CASH AND CASH EQUIVALENTS:

Beginning of year 8,045,150 106,936,512 16,521,595 End of year 8,167,404$ 105,617,390$
22,726,454$

RECONCILIATION OF CASH AND CASH
EQUIVALENTS TO STATEMENT OF NET POSITION:

Cash and cash investments 8,167,404$ 104,921,112$ 22,726,454$ Restricted cash and investments - 696,278 - Total cash and cash equivalents 8,167,404$ 105,617,390$ 22,726,454$ (Continued)
Statement of Cash Flows (Continued)
City of Redlands
Proprietary Funds
For the Year Ended June 30, 2024
See accompanying Notes to the Basic Financial Statements. 54 Governmental
Activities
Non-major Internal
Funds Total Service Funds

RECONCILIATION OF OPERATING INCOME (LOSS) TO NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:

Operating income (loss) (1,006,000)$ (8,195,652)$ (1,139,597)$ Adjustments to reconcile operating (loss) to net
cash provided by (used in) operating activities:

Depreciation 330,529 8,760,369 550,385 Changes in operating assets and liabilities, and
deferred outflows and inflows of resources:

Accounts receivable, net 101,115 (419,736) (743,421) Prepaid items - (15,585) (64,635) Inventories - - (10,162) Lease receivable 136,053 229,628 - Deferred outflows - OPEB related 80,215 1,671,155 508,031 Deferred outflows - pension related 57,469 705,783 98,264 Accounts payable (123,313) (733,174) 26,553 Accrued payroll 13,525 282,194 237,993 Deposits payable 79,429 7,711 - Unearned revenue 10,000 188,587 - Compensated absences 10,996 199,128 55,457 Claims payable - - (92,420) Landfill closure - 3,811,347 - Total OPEB liability (176,858) (3,684,560) (1,120,105) Net pension liability 11,180 1,026,571 597,019 Deferred inflows - lease related (139,486) (269,551) - Deferred inflows - OPEB related 173,600 3,616,667 1,099,466 Deferred inflows - pension related (24,825) (408,984) (110,101) Total adjustments 539,629 14,967,550 1,032,324 Net cash provided by (used in) operating activities (466,371)$ 6,771,898$ (107,273)$ NONCASH CAPITAL AND RELATED FINANCING ACTIVITIES:

Contributed property, plant and equipment 139,006$ 336,205$ -$ Total noncash capital and related financing activities 139,006$ 336,205$ -$ For the Year Ended June 30, 2024
City of Redlands
Statement of Cash Flows (Continued)
Proprietary Funds
See accompanying Notes to the Basic Financial Statements. 55 This page intentionally left blank.
56 Fiduciary Funds Financial Statements
Community Facility District Custodial Fund - This fund accounts for the collection and subsequent expenditure retained for various community facility districts.

RDA Successor Agency Private Purpose Trust Fund - This fund accounts for the assets and liabilities of the former redevelopment agency and is allocated revenue to pay estimated installment payments of enforceable obligations until obligations of the former redevelopment agency are paid in full and assets have been liquidated. The fund was closed due to the dissolution of the RDA Successor Agency during the year ended June 30, 2024. 57 This page intentionally left blank.
58 Community RDA
Facilities Successor Agency
District Private Purpose
Custodial Fund Trust Fund
ASSETS
Cash and investments 650$ -$
Restricted cash and investments with fiscal agent 3,139,368 - Total assets 3,140,018 -

LIABILITIES
Accounts payable 3,201 -
Total liabilities 3,201 -

NET POSITION
Restricted for:

Individuals, organizations, and other governments 3,136,817 - Total net position 3,136,817$ -$
City of Redlands
Statement of Fiduciary Net Position
Fiduciary Funds
June 30, 2024
See accompanying Notes to the Basic Financial Statements. 59 Community RDA
Facilities Successor Agency
District Private Purpose
Custodial Fund Trust Fund
ADDITIONS:

Fee collections for other governments 1,568,821$ -$ Investment income (loss) 127 (16,576) Contribution from City - 409,436 Total additions 1,568,948 392,860
DEDUCTIONS:

Administration 26,065 23,284
Contractual services 3,201 -
Conduit debt payment - principal 965,000 - Conduit debt payment - interest 532,756 - Total deductions 1,527,022 23,284
Change in net position 41,926 369,576 NET POSITION (DEFICIT):

Beginning of year 3,094,891 (369,576)
End of year 3,136,817$ -$
City of Redlands
Statement of Changes in Fiduciary Net Position
Fiduciary Funds
For the Year Ended June 30, 2024
See accompanying Notes to the Basic Financial Statements. 60 61

NOTES TO THE BASIC FINANCIAL STATEMENTS
City of Redlands
Index of Notes to the Basic Financial Statements
For the Year Ended June 30, 2024

62 Page

Note 1 – Summary of Significant Accounting Policies ............................................................................................. 65

A. Financial Reporting Entity .................................................................................................... .................... 65 B. Basis of Presentation, Accounting and Measurement Focus ..................................................................... 66 C. Deferred Outflows and Inflows of Resources ........................................................................................... 69 D. Cash, Cash Equivalents and Investments .................................................................................................. 70 E. Restricted Cash and Investments ............................................................................................................... 71 F. Receivables ................................................................................................................................................ 71 G. Interfund Transactions ............................................................................................................................... 71 H. Inventories and prepaid items .................................................................................................................... 71 I. Leases ........................................................................................................................................................ 71 J. Subscription-Based Information Technology Arrangements (SBITAs) ................................................... 73 K. Capital Assets ............................................................................................................................................ 73 L. Long Term Debt ........................................................................................................................................ 74 M. Compensated Absences ............................................................................................................................. 74 N. Claims and Judgements Payable ................................................................................................................ 75 O. Pension Plans ............................................................................................................................................. 75 P. Other Postemployment Benefits (OPEB) .................................................................................................. 75 Q. Encumbrances ............................................................................................................................................ 76 R. Fund Balances ................................................................................................................. .......................... 76 S. Net Position ............................................................................................................................................... 77 T. Property Taxes ........................................................................................................................................... 78 U. Use of Accounting Estimates ................................................................................................... ................. 78 V. Implementation of New GASB Pronouncements for the Year Ended June 30, 2024 ............................... 78 W. Upcoming Government Accounting Standards Implementations ............................................................. 78

Note 2 – Cash and Investments .................................................................................................................................. 79

A. Demand Deposits ............................................................................................................... ........................ 80 B. Investments Authorized b
y the California Government
Code and the City’s Investment Policy ............................................................................................... 80 C. Investments Authorized by Debt Agreements ........................................................................................... 81 D. Fair Value Measurement ........................................................................................................................... 81 E. Risk Disclosure .......................................................................................................................................... 82 F. Investment in State Investment Pool ......................................................................................................... 84 G. California Asset Management Program ........................................................................................... ......... 85

Note 3 – Leases Receivable ......................................................................................................................................... 85

A. Governmental Activities ............................................................................................................................ 85 B. Business-Type Activities ........................................................................................................................... 86

Note 4 – Notes Receivable ........................................................................................................................................... 87

Note 5 – Interfund Receivables, Payables, and Transfers ....................................................................................... 87

A. Due To / From Other Funds ...................................................................................................................... 87 B. Advance From / From Other Funds ........................................................................................................... 87 C. Transfers .................................................................................................................................................... 88 City of Redlands
Index of Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2024

63 Page

Note 6 – Capital Assets ............................................................................................................................................... 89

A. Governmental Activities ............................................................................................................................ 89 B. Business-Type Activities ........................................................................................................................... 90

Note 7 – Long-Term Liabilities .................................................................................................................................. 91

A. Governmental Activities ............................................................................................................................ 91 B. Business-Type Activities ........................................................................................................................... 94

Note 8 – Special Assessment Debt with No City Commitment ...................................................................... ......... 97

Note 9 – Compensated Absences ................................................................................................................................ 98

A. Governmental Activities ............................................................................................................................ 98 B. Business-Type Activities ........................................................................................................................... 99

Note 10 – Solid Waste Landfill ................................................................................................................................... 99

Note 11 – Pension Plans ............................................................................................................................................ 100

A. Summary ................................................................................................................................................. 100 B. City Miscellaneous Plans ...................................................................................................... .................. 101 C. City Safety Plans ..................................................................................................................................... 106

Note 12 – Other Postemployment Benefits ............................................................................................................. 112

A. Summary ................................................................................................................................................. 112 B. General Information about OPEB ........................................................................................................... 112 C. Total OPEB Liability, OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB ...................................................................................................... 114

Note 13 – Risk Management ..................................................................................................................................... 117

A. Coverage .................................................................................................................................................. 117 B. Claims Activity ........................................................................................................................................ 117

Note 14 – Fund Balance and Net Position ............................................................................................................... 118

A. Fund Balance/Net Position Deficits ............................................................................................ ............ 118 B. Expenditures Exceeding Appropriations ................................................................................................. 119

Note 15 – Net Investments in Capital Assets ................................................................................... ....................... 119

Note 16 – Fund Balance Classification .................................................................................................................... 120

Note 17 – Successor Agency Private Purpose Trust for Assets of Former Redevelopment ............................... 120 City of Redlands
Index of Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2024

64 Page

Note 18 – Tax Abatements – Economic Development Incentives ......................................................................... 121

Note 19 – Endowments .......................................................................................................... ................................... 122

Note 20 – Changes to or within the Financial Reporting Entity ........................................................................... 122

Note 21 – Commitments and Contingencies ........................................................................................................... 123

A. Litigation ................................................................................................................................................. 123 B. Sales Tax – Donut Hole ........................................................................................................................... 123 C. Federal and State Grants .......................................................................................................................... 123 D. Contractual Commitments ....................................................................................................................... 123

City of Redlands
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024

65 Note 1 – Summary of Significant Accounting Policies

The basic financial statements of the City of Redlands, California (the “City”) have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) as applied to governmental agencies. The Governmental Accounting Standards Boar d (“GASB”) is the accepted standard-setting body for establishing governmental accounting and fi nancial reporting standards in the United States. The more significant of the City’s accounting policies are described below.

A. Financial Reporting Entity

The City is a municipal corporation governed by a five-member city council with the mayor elected by the council itself. The City was incorporated in 1888 under the general laws of the State of California and enjoys all the rights and privileges applicable to a General Law City. Th e City provides the following services: police; building inspection; parks and streets; water; disposal; sanita tion; leisure services; planning and zoning; general administration services; aviation; and redevelopment.

Blended Component Units

The financial reporting entity consists of the primary government, the City , and its component units. Component units are legally separate entities for which the elected officials of the primary government are financially accountable. In addition, component units can be othe r organizations for which the primary government is accountable and their exclusion would cause the reporting en tity’s financial statements to be misleading or incomplete.

Blended component units, although legally separate entities, are, in subs tance part of the government’s operation and so data from these units are combined with data of the primary government. Discretely presented component units, on the other hand, are reported in a separate column in the combined financial statements to emphasize that they are legally separate from the government.

Although the following are legally separate from the City, they have been “blended” as though they are part of the City because the component unit’s governing body is substantially the same as the City’s and there is a financial benefit or burden relationship between the City and the component unit; management of the City has operational responsibilities for the component units; and/or the component units provide services entirely, or almost entirely, to the City or otherwise exclusively, or almost exclus ively, benefits the City, even though it does not provide services directly to it.

Redlands Public Improvement Corporation

The Redlands Public Improvement Co rporation (“Corporation”) was organi zed in June 1985 pursuant to the Nonprofit Public Benefit Corporation Law of the State of California, solely for the purpose of providing financial assistance to the City by acquiring, constructing, improving, developing and installing certain real and personal property together with appurtenances and appurtenant work for the use, benefit and enjoyment of the public. The corporation was formed at the request of the City and the directors receive no compensation. The corporation is presented as a governmental fund type.

Redlands Joint Powers Financing Authority (JPFA)

The Redlands Financing Authority (“Authority”) was estab lished May 1, 1999, pursuant to the Joint Exercise of Powers Laws of the State of California. The Authority was created by the former Redevelopment Agency and the City for the primary purpose of assisting the financing of capital improvements, working capital, liability and other insurance needs, or projects whenever there are significant public benefits. No separate annual financial statements are prepared for the Authority.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

66 Note 1 – Summary of Significant Accounting Policies (Continued)

A. Financial Reporting Entity (Continued)

Related Organizations

The City of Redlands’ officials are also responsible for appointing members of the boards of other organizations, but the City of Redlands’ accountability for these organizations does not extend beyond making the appointments.

The board of the Friends of the A.K. Smiley Public Li brary and the Redlands Historical Museum Association are appointed by the City Council.

B. Basis of Presentation, Accounting and Measurement Focus

The accounts of the City are organized on the basis of fu nds, each of which is cons idered a separate accounting entity. The operations of each fund are accounted for by pr oviding a separate set of self-balancing accounts that comprise its assets, deferred outflows of resources, liabilities, deferred inflows of resources, fund equity, revenues and expenditures or expenses, as appropriate. Fund acc ounting segregates funds according to their intended purpose and is used to aid management in demonstrati ng compliance with finance-re lated legal and contractual provisions. The minimum number of funds is maintained in accordance with legal and managerial requirements.

Government-Wide Financial Statements

The City’s Government-Wide Financial Statements incl ude a Statement of Net Position and a Statement of Activities. These statements present summaries of govern mental and business-type activities for the City accompanied by a total column. Fiduciary activities of the City are not included in these statements.

These financial statements are presented on an “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all of the City’s assets and liabilities, including capital assets, as well as infrastructure assets, and long-term liabilities, are included in the accomp anying Statement of Net Position. The Statement of Activities presents changes in Net Position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. Under the accrual basis of accounting, revenues, expenses, gains, losses, assets, deferred outflows of resources, liabilities, and deferred inflows of resources resulting from exchange and exchange-like transactions are recognized when the exchange takes place. Revenues, expe nses, gains, losses, assets, deferred outflows of resources, liabilities and deferred inflows of resources resulting from non-exchange transactions are recognized in accordance with the requirements of U.S. GAAP.

Program revenues include charges for services, special ass essments, and payments made by parties outside of the reporting government's citizenry if that money is restri cted to a particular program. Program revenues are netted with program expenses in the statement of activities to present the net cost of each program. Program revenues for the City are classified in three categories:

 Charges for services
 Operating grants and contributions
 Capital grants and contributions

Certain eliminations have been made in regards to interfund activities, payables and receivables. All internal balances in the Statement of Net Position have been eliminated except those representing balances between the governmental activities and the business-type activities, which are presented as internal balances and eliminated in the total primary government column. In the Statement of Activities and Changes in Net Position, internal service fund transactions have been eliminated; however, those transactions between governmental and business-type activities have not been eliminated.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

67 Note 1 – Summary of Significant Accounting Policies (Continued)

B. Basis of Presentation, Accounting and Measurement Focus (Continued)

The following interfund activities have been eliminated:

 Due to/from other funds
 Advance to/from other funds
 Due to City/from Fiduciary Funds
 Transfers in/out

Governmental Fund Financial Statements

Governmental Fund Financial Statements include a Balance Sheet and a Statement of Revenues, Expenditures and Changes in Fund Balances. An accompanying schedule is presented to reconcile and explain the differences in Net Position as presented in these statements to the Net Position presented in the Government-Wide Financial Statements. The City has presented all major funds that met the applicable criteria.

All governmental funds are accounted for on a spending or "current financial resources" measurement focus and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the Balance Sheet. The Statement of Revenues, Expend itures and Changes in Fund Balances presents increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets.

Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expend itures of the current period. Measurable means that the amounts can be estimated, or otherwise determined. Ava ilable means that the amounts were collected during the reporting period or soon enough thereafter to be availa ble to finance the expenditures accrued for the reporting period. The City uses an availability period of 60 days for all revenues.

Sales taxes, property taxes, franchise taxes, gas taxes, motor vehicle in-lieu, transient occupancy taxes, grants 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 period to the extent normally collected with in the availability period.

Other revenue items are considered to be measurable and available when cash is received by the government.

Revenue recognition is subject to the measurable and av ailable criteria for the governmental funds in the fund financial statements. Exchange transactions are recognized as revenues in the period in which they are earned (i.e., the related goods or services are provided). Locally imposed derived tax revenues are recognized as revenues in the period in which the underlying exchange transaction upon which they are based takes place.

Imposed non-exchange transactions are recognized as revenues in the period for which they were imposed. If the period of use is not specified, they are recognized as re venues when an enforceable legal claim to the revenues arises or when they are received, whichever occurs first. Government-mandated and voluntary non-exchange transactions have been recognized as revenues when all applicable eligibility requirements have been met.

The Reconciliation of the Fund Financial Statements to the Government-Wide Financial Statements is provided to explain the differences created by the integrated approach of GASB Statement No. 34.

The City reports the following major governmental funds:

General Fund - This fund accounts for all revenues and expenditures used to finance the traditional services associated with a municipal government which are not accounted for in the other funds. In Redlands, these services include general government, public safety, culture and recreation, highway and streets, and library.

Governmental Grants Special Revenue Fund - This f und accounts for the receipt and expenditure of grant monies received from various agencies for general government projects.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

68 Note 1 – Summary of Significant Accounting Policies (Continued)

B. Basis of Presentation, Accounting and Measurement Focus (Continued)

Proprietary Fund Financial Statements

Proprietary Fund Financial Statements include a Statement of Net Position, a Statement of Revenues, Expenses and Changes in Fund Net Position, and a Statement of Cash Flows.

A separate column representing internal service funds is also presented in these statements. However, internal service balances and activities have been combined with the governmental activities in the Government-Wide Financial Statements. The City’s internal service funds include funds which provide services directly to other City funds.

Proprietary funds are accounted for using the "economic resources" measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included on the Statement of Net Position. The Statement of Revenues, Expenses a nd Changes in Fund Net Po sition presents increases (revenues) and decreases (expenses) in total Net Position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. In these funds, receivables have been recorded as revenue and provisions have been made for uncollectible amounts.

Operating revenues in the proprietary funds are those re venues that are generated fro m 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.

The City reports the following major proprietary funds:

Water Fund - This fund is used to account for the activities of the City's water utility operations, projects, debt service costs, and impact fees of the City.

Disposal Fund - This fund is used to account for the activities of the City's refuse disposal collection operations, projects, debt service costs, and impact fees of the City.

Wastewater Fund - This fund is used to account for th e activities of the City's wastewater utility operations, projects, debt service costs, and impact fees of the City.

Internal service fund balances and activities have been combined with governmental activities in the Government- Wide Financial Statements, and are comprised of the following funds:

General Liability Self-Insurance Fund - This fund is used to account for the City’s self-insured general and automobile liability programs, which are provided to all City departments and funds.

Information Technology Fund - This fu nd is used to account for the general maintenance and service of all City computers and phone equipment provided to all City departments.

Workers' Compensation Self-Insurance Fund - This fund is used to account for the City’s self-insured Workers’ Compensation and General Safety Programs, which are provided to all City departments and funds.

Equipment Maintenance Fund - This fund is used to account for providing ongoing maintenance of all City vehicles and major equipment and to account for vehicle rental services to all City departments.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

69 Note 1 – Summary of Significant Accounting Policies (Continued)

B. Basis of Presentation, Accounting and Measurement Focus (Continued)

Proprietary Fund Financial Statements (Continued)

Utility Billing Fund - This fund is used to account fo r billing services costs provided for water, sewer, and solid waste.

Payroll Clearing Fund - This fund is used to account for the City’s reoccurring payroll obligations.

Fiduciary Fund Financial Statements

Fiduciary fund financial statements include a Statement of Net Position and a Statement of Changes in Fiduciary Net Position. The City’s fiduciary funds represent custodial funds and private purpose trust funds. Both custodial funds and the private purpose trust funds are accounted for on the full accrual basis of accounting.

Fiduciary fund types are accounted for according to the na ture of the fund. Custodial funds are used to report fiduciary activities that are not required to be reporte d in pension (and other empl oyee benefit) trust funds, investment trust funds, or private-purpose trust funds. Private-purpose trust funds account for resources of all other trust arrangements in which principal and income benefit individuals, private organizations, or other governments (i.e. unclaimed property/escheat property). They are al so used to account for vari ous assessment districts for which the City acts as an agent for debt service activity, as the City is prohibited from levying additional taxes for these districts. Such funds include Community Facilities Districts, which do not have trust agreements with the City.

The City’s private purpose trust fund is a fiduciary fund type used by the City to report assets, liabilities and activities of the Successor Agency to the Redevelopment Agency (Successor Agency) for the City of Redlands. Its results of operations are presented on the Statement of Changes of Fiduciary Net Position.

Successor Agency of the Redevelopment Agency for the City of Redlands

The Redevelopment Obligation Retirement Fund was created to serve as a custodian for the assets and to wind down the affairs of the RDA on February 1, 2012, pursuant to Assembly Bill x1 26. Its purpose is to expeditiously wind down the affairs of the dissolved Redevelopment Agency (RDA). The Successor Agency is a separate public entity from the City, subject to the direction of an oversight board. The City Council serves as the governing board of the Successor Agency. In gene ral, the Successor Agency’s assets can only be used to pay enforceable obligations in existence at the date of dissolution (including the completion of any unfinished projects that were subject to legally enforceable contract ual commitments). In future fiscal years, the Successor Agency will only be allocated revenue in the amount that is necessary to pay the estimated annual installment payments on enforceable obligations of th e former RDA until all enfor ceable obligations of the fo rmer RDA have been paid in full and all assets have been liquidated. Based upon the nature of the Su ccessor Agency’s custodial role, the Successor Agency has been included in the accompanying basic financial statements as a private purpose trust fund. In February 2015, the California Department of Finance (Finance) approved the City’s revised Long-Range Property Management Plan (LRPMP), with the assets deemed for governmental use and future development.

C. Deferred Outflows and Inflows of Resources

The Statement of Net Position and Balance Sheet – Gove rnmental Funds reports separate sections for Deferred Outflows of Resources, and Deferred In flows of Resources, when applicable.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

70 Note 1 – Summary of Significant Accounting Policies (Continued)

C. Deferred Outflows and Inflows of Resources (Continued)

Deferred Outflows of Resources represent a consumption of net assets th at applies to future period(s) and so will not be recognized as an outflow of resources (expense/ expenditure) until then.

Deferred Inflows of Resources represent an acquisition of net assets th at applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time.

D. Cash, Cash Equivalents and Investments

The City pools its available cash for investment purposes. The City considers pooled cash and investment amounts, with original maturities of three months or less, to be cash equivalents.

Investments are reported in the accompa nying financial statements at fair value, except for certain investment contracts that are reported at cost because they are not tran sferable and they have terms that are not affected by changes in market interest rates. Changes in fair value that occur du ring a fiscal year are recognized as investment income reported for that fiscal year, a nd may result in negative investment income in the accompanying financial statements. Investment income includes interest ear nings, changes in fair value, and any gains or losses realized up on the liquidation, maturity, or sale of investments.

Investment income earned by the pooled investments is allocated to the various funds b ased on each fund's average cash and investment balance, except for investme nt income associated with funds not legally required to receive pooled investment income which has been assigned to and recorded as revenue of the general fund, as provided by California Government Code Section 53647.

For purposes of the statemen t of cash flows, amounts reported as cash and cash equivalents, include amounts on deposit in the City pool and any short-term, highly liqui d investments that are both readily convertible to known amounts of cash or so near their maturity that they present insignificant risk of changes in value because of changes in interest rates.

Certain disclosure requirements, if applicable, for deposits and investment risks in the following areas:

 Interest rate risk
 Credit risk
- Overall
- Custodial credit risk
- Concentration of credit risk
 Foreign currency risk

In addition, other disclosures are speci fied including use of certain methods to present deposits and investments, highly sensitive investments, credit quality at year-end and other disclosures.

U.S. GAAP establishes a framework for measuring fair value, and establishes disclosures about fair value measurement. Investments, unless otherwise specified, recorded at fair value in the Statements of Net Position, are categorized based upon the level of judgment associated with the inputs used to measure their fair value.

Levels of inputs are as follows:

Level 1 – Inputs are unadjusted, quoted prices for iden tical assets or liabilities in active markets at the measurement date.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

71 Note 1 – Summary of Significant Accounting Policies (Continued)

D. Cash, Cash Equivalents and Investments (Continued)

Level 2 – Inputs, other than quoted prices included in Level 1, which are observable for the assets or liabilities through corroboration with market data at the measurement date.

Level 3 – Unobservable inputs that refl ect management’s best estimate of what market participants would use in pricing the assets or liabilities at the measurement date.

E. Restricted Cash and Investments

Certain restricted cash and investments are held by fiscal agents for the redemption of bonded debt, for acquisition and construction of capital projects, and to meet bond indenture debt reserve requirements.

F. Receivables

Customer or trade receivables are reported as “accounts receivable” and are shown net of an allowance for uncollectible accounts based on hist orical and management estimates.

Noncurrent portions of long-term receivables (e.g., “notes receivable”) due to governmental fund types are reported in their respective balance sheets despite their spending measurement focus. Recognition of governmental fund type revenues represented by noncurrent receivables are deferred until they become current receivables.

Noncurrent portions of long-term notes receivable are offset by restricted fund balance in the special revenue funds.

G. Interfund Transactions

Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” or “advances to/from other funds” (i.e., the current portion of interfund loans). Any residual balances outst anding between the governmental activities and business- type activities are reported in the Governmental-Wide Financial Statements as “internal balances.”

H. Inventories and prepaid items

Inventory, consisting of expendable supplies, is valued at first in first out basis. The cost of governmental funds inventory is recorded as expenditure at the time the individual inventory is consumed. Prepaid items are recorded at cost. Using the consumption method, prepaid items are recorded as expenditures over the period that service is provided. Reported inventory and prepaid items are equally offset by a fund balance reservation, which indicates that they do not constitute “available spendable resources” even though they are a component of current assets.

I. Leases

Lessee

The City has a policy to recognize a lease liability and a right ‐to‐use lease asset (lease asset) in the government‐ wide financial statements. The City recognizes lease liabilities with an initial, individual value of $25,000 or more.

At the commencement of a lease, the City initially measures the lease lia bility at the present value of payments expected to be made during the lease term. Subsequently, the lease liability is reduced by the principal portion of lease payments made.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

72 Note 1 – Summary of Significant Accounting Policies (Continued)

I. Leases (Continued)

Lessee (Continued)

Lease assets are recorded at the amount of the initial measurement of the lease liabilities and modified by any lease payments made to the lessor at or before the commencement of the lease term, less any lease incentives received from the lessor at or before the commencement of the lease term along with any initial direct costs that are ancillary charges necessary to place the lease assets into service. Lease assets are amortized using the straight-line method over the shorter of the lease term or the useful life of the underlying asset, unless the lease contains a purchase option that the City has determined is reasonably certain of being exercised. In this case, the lease asset is amortized over the useful life of the underlying asset.

Key estimates and judgments related to leases include how the City determines (1) the discount rate it uses to discount the expected lease payments to present value, (2) lease term, and (3) lease payments.

 The City uses the interest rate charged by the lessor as the discount rate. When the interest rate charged by the lessor is not provided, the City generally uses its estimated incremental borrowing rate as the discount rate for leases.

The lease term includes the noncancellable period of the lease. Lease payments included in the measurement of the lease liability are composed of fixed payments and purch ase option price that the City is reasonably certain to exercise. The City monitors changes in circumstances that would require a remeasurement of its lease and will remeasure any lease asset and liability if certain changes occur that are expected to significantly affect the amount of the lease liability.

Lease assets are reported as right to use along with other capital assets and lease liabilities are reported with long- term debt on the statement of net position.

Lessor

The City is a lessor for leases of special purpose facilities, office and commercial space, and land. The City recognizes leases receivable and deferred inflows of resources in the financial statements.

At the commencement of a lease, the City initially measures the lease receivable at the present value of payments expected to be received during the lease term. Subsequently, the lease receivable is reduced by the principal portion of lease payments received. The deferred inflows of r esources are initially measured as the initial amount of the lease receivable, adjusted for lease payments received at or before the lease commencement date. Subsequently, the deferred inflows of resources are recognized as revenue over the life of the lease term in a systematic and rational method.

Key estimates and judgments include how the City determines (1) the discount rate it uses to discount the expected lease receipts to present value, (2) lease term, and (3) lease receipts.

 The City uses its estimated incremental borrowing rate as the discount rate for leases.

 The lease term includes the noncancellable period of the lease. Lease receipts included in the measurement of the lease receivable is composed of fixed payments from the lessee.

The City monitors changes in circum stances that would require a remeasureme nt of its lease and will remeasure the lease receivable and deferred inflows of resources if certain changes occur that ar e expected to significantly affect the amount of the lease receivable.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

73 Note 1 – Summary of Significant Accounting Policies (Continued)

J. Subscription-Based Information Technology Arrangements (SBITAs)

The City has a policy to recognize a SBITA liability and a right ‐to‐use subscription asset (SBITA asset) in the government-wide financial statements with an initial, individual value of $25,000 or more with a subscription term greater than one year.

At the commencement of a subscription, when the subscription asset is placed into service, the SBITA liability is measured at the present value of payments expected to be made during the subscripti on term. Future subscription payments are discounted using the City's incremental borrowing rate and the City recognizes amortization of the discount on the subscription liability as interest expense in subsequent financial reporting periods.

SBITA assets are measured as the sum of the initial sub scription liability, payments made to the SBITA vendor before the commencement of the lease term, and capitali zable implementation costs less any incentives received from the SBITA vendor at or before the commencement of the subscription term. Subscription assets are amortized using the straight-line method over the subscription term.

Key estimates and judgments related to SBITAs include how the City determines (1) the discount rate it uses to discount the expected subscription payments to present value, (2) subscription term, and (3) subscription payments.

- The City uses the interest rate charged by the SBITA vendor as the discount rate. When the interest rate charged by the SBITA vendor is not provided, the City generally uses its estimated incremental borrowing rate as the discount rate for SBITAs.

- The subscription term includes the period during whic h the City has a noncancelable right to use the underlying IT asset. The subscription term also includes periods covered by an option to extend if it is reasonably certain to be exercised.

- Subscription payments included in the measurement of the subscription liability are composed of fixed payments and purchase option years that the City is reasonably certain to exercise. The City monitors changes in circumstances that w ould require a remeasurement of a subscription and will remeasure any subscription asset and liability if certain changes occur that are expected to significantly affect the amount of the subscription liability.

Right-to-use subscription assets are reported along with other capital assets and subscription liabilities are reported with long-term debt on the statement of net position.

K. Capital Assets

Capital assets, which include land, rights of way, structures, equipment, and infrastructure assets , the right to use leased equipment, and infrastructure assets, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements . Such assets are recorded at historical cost (except for intangible right‐to‐use lease assets) or estimated historical cost if purchased or constructed. Donated assets are valued at the fair value of the assets on the date on which they were contributed. Donated works of art and similar items, and capital assets received in a service concession arrangement are reported at acquisition value rather than fair value. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. The City utilizes a capitalization threshold of $5,000 depending on asset type.

Major capital outlay for capital assets and improvements ar e capitalized as projects are constructed. For debt- financed capital assets, interest incurred during the construction phase is reflected in the capitalization value of the asset constructed, net of interest earned on the invest ed proceeds over the same period. Capital assets acquired through lease obligations are valued at the present value of future lease payments at the date acquired. Contributed capital assets are valued at their estimated acquisition value at the date of contribution.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

74 Note 1 – Summary of Significant Accounting Policies (Continued)

K. Capital Assets (Continued)

Capital assets used in operations are depreciated over their estimated useful lives using the straight-line method in the government-wide financial statements and in the fund financial statements of the proprietary funds.

Depreciation is charged as an expense against opera tions and accumulated depreci ation is reported on the respective balance sheet. The range of lives used for depreciation purposes for each capital asset class is as follows:

Asset Type Years
Infrastructure 20-75
Buildings and improvement 10-40
Machinery, equipment, and vehicles 3-25
Lease and subscription assets Contract term

L. Long-Term Debt

Government-Wide Financial Statements and Proprietary Fund Financial Statements

Long-term debt and other financial obligations are reported as liabilities in the appropriate funds. Bond premiums and discounts are deferred and amortized over the life of the bonds using straight line method. Bonds payable are reported net of the applicable premium or discount. Issuance costs are expensed when incurred. Gains or losses on bond refunding are reported as either deferred outflows of resources or deferred inflows of resources and amortized over the term of the related debt.

Governmental Fund Financial Statements

The governmental fund financial statements do not present long-term debt but are shown in the Reconciliation of the Governmental Funds Balance Shee t to the Government-Wide Statement of Net Position. Governmental fund types recognize bond premiums and discounts during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Debt issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

M. Compensated Absences

A total of 10 to 25 days of vacation and 12 days of sick leave per year may be accumulated by each employee. The City accrues a liability for compensated absences which meets the following criteria:

1) The City's obligation relating to employees' rights to r eceive compensation for future absences is attributable to employees' services already rendered.
2) The obligation relates to rights that vest or accumulate. Payment of the compensation is probable. 3) The amount can be reasonably estimated.

Government-Wide Financial Statements

For governmental and business-type activities, compensated absences are recorded as expenses when earned.

Fund Financial Statements

For governmental funds, compensated absences are recorded as expenditures in the year paid. The General Fund is typically used to liquidate compensated absences. In proprietary funds, compensated absences are expensed to the various funds in the period they are earned, and such fund’s share of the unpaid liability is recorded as a long- term liability of the fund.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

75 Note 1 – Summary of Significant Accounting Policies (Continued)

N. Claims and Judgments Payable

The short-term and long-term workers’ compensation clai ms liability is reported in the Workers’ Compensation Insurance Internal Service Fund. The short-term and long-term general claims liability is reported in the Comprehensive Liability Insurance Intern al Service Fund. The short-term liability which will be liquidated with current financial resources is the amount of settlement reached, but unpaid, related to claims and judgments entered.

Under the modified accrual basis, the following revenue sources are considered to be susceptible to accrual:
property taxes, sales taxes, federal and state grants.

O. Pension Plans

For purposes of measuring the net pension liability, de ferred outflows of resources and deferred inflows of resources related to pensions, and pens ion expense, information about the fiduciary net position of the plans and additions to/deductions from the plans’ fiduciary net position have been determined on the same basis as they are reported by the plans (Note 11). For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with benefit terms. Investments are reported at fair value. The General Fund and Internal Service Funds are typically used to liquidate the pension liability related to the City's governmental activities while the pension liability for Bu siness-type activities is liquidated from the respective Enterprise Funds.

The following timeframes are used for pension reporting:

Valuation date June 30, 2022
Measurement date June 30, 2023
Measurement period July 1, 2022 to June 30, 2023

Gains and losses related to changes in total pension lia bility and fiduciary net position are recognized in pension expense systematically over time. The first amortized amounts are recognized in pension expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to pensions and are to be recognized in future pension expense. The amortization period differs depending on the source of the gain or loss. The difference between projected and actual earnings is amortized straight-line over 5 years. All other amounts are amortized straight-line over the average expected remaining service lives of all members that are provided with benefits (active, inac tive, and retired) as of the beginning of the measurement period.

P. Other Postemployment Benefits (OPEB)

For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the OPEB plan, the assets of which are held in an irrevocable trust, and additions to/deductions from the OPEB pl an’s fiduciary net position have been determined by an independent actuary (Note 12). For this purpose, benefit payments are recognized when currently due and payable in accordance with the bene fit terms. Investments are reported at fair value. The General Fund and Internal Service Funds are typically used to liquidate the OPEB liability related to the City's governmental activities while the OPEB liability for Busi ness-type activities is liquidated from the respective Enterprise Funds.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

76 Note 1 – Summary of Significant Accounting Policies (Continued)

P. Other Postemployment Benefits (OPEB) (Continued)

For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the OPEB plan, the assets of which are held in an irrevocable trust, and additions to/deductions from the OPEB pl an’s fiduciary net position have been determined by an independent actuary (Note 12). For this purpose, benefit payments are recognized when currently due and payable in accordance with the bene fit terms. Investments are reported at fair value. The General Fund and Internal Service Funds are typically used to liquidate the OPEB liability related to the City's governmental activities while the OPEB liability for Busi ness-type activities is liquidated from the respective Enterprise Funds.

Generally accepted accounting principles require that the reported results must pertain to liability and fiduciary net position information within certain defined timeframes. For this report, the following timeframes are used:

Valuation date June 30, 2023
M easurement date June 30, 2023
M easurement period July 1, 2022 to June 30, 2023

Q. Encumbrances

Encumbrance accounting, under which purchase orders, contr acts and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of formal budgetary control in the governmental funds.

R. Fund Balances

In the Governmental Fund Financial Statements, fund balances are classified in the following categories:

Nonspendable – Items cannot be spent because they are not in spendable form, such as prepaid items and inventories, items that are legally or contractually requi red to be maintained intact, such as principal of an endowment or revolving loan funds.

Restricted – Restricted fund balances encompass the portion of net fund resources subject to externally enforceable legal restrictions. This includes externally imposed restrictions by creditors, such as through debt covenants, grantors, contributors, laws or regulations of other governments, as well as restrictions imposed by law through constitutional provisions or enabling legislation.

Committed – Committed fund balances encompass the portion of net fund resources, the use of which is constrained by limitations that the government imposes upon itself at its highest level of decision making (normally the governing body) and that remain bi nding unless removed in the same manner. The County Council is considered the highest auth ority for the City. A City Council resolution is required to have fund balance committed.

Assigned – Assigned fund balances encompass the portion of net fund resources reflecting the government’s intended use of resources. Assignment of resources can be done by the highest level of decision making or by a committee or official designated for that purpose. The City Council has not delegated the authority to assign fund balance to management.

Unassigned – This category is for any balances that have no restrictions placed upon them. The General Fund is the only fund that reports a positive unassigned fund balance amount. In other governmental funds it is not appropriate to report a positive unassigned fund balance amount. However, in governmental funds other than the General Fund, if expenditures incurred for speci fic purposes exceed the amounts that are restricted, committed, or assigned to those purposes, it may be necessary to report a negative unassigned fund balance in that fund.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

77 Note 1 – Summary of Significant Accounting Policies (Continued)

R. Fund Balances (Continued)

Fund Balance Flow Assumptions

Sometimes the City will fund outlays fo r a particular purpose from both restricted and unrestricted resources (the total of committed, assigned and unassigned fund balance). In order to calculate the amounts to report as restricted and unrestricted, a flow assumption must be made about th e order in which the resources are considered to be applied. It is the City’s policy to consider restricted f und balance to have been deplet ed before using any of the components of unrestricted fund balance. Further, when the components of unrestricted fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned and then unassigned fund balance.

Net Position Flow Assumption

Sometimes the City will fund outlays for a particular purpo se from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calcu late the amounts to report as restricted – net position and unrestricted – net position in the government-wide and pr oprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the City’s policy to consider restricted – net position to have been depleted before unrestricted – net position is applied.

Stabilization Arrangement

As described in Chapter 3.06 of the Municipal Code, the City has established a stabilization arrangement committing a minimum of 12 percent of the sum of the General Fund’s operating expenses and operating transfers out. The balance at June 30, 2024, is $9,794,310 and is included in committe d fund balance. These funds may be used only when the City is faced with an unforeseen or uncontrollable event which includes but is not limited to:

1) Local revenue shortfalls due to a major business closure or relocation. 2) Legislative or judicial mandates to provide new or expanded services or programs that, in total, cost the City $200,000 or more.
3) Natural and civil disasters such as earthquakes, fires, floods, riots and health epidemics.

S. Net Position

For the Government-Wide Financial Statements, net position is classified in the following categories:

Net Investment in Capital Assets component of net position consists of capital assets, net of accumulated depreciation and amortization and reduced by any debt outstanding and any deferred outflows/inflows of resources related to such borrowings that are attributable to the acquisition, construction or improvement of those assets. If there are significant unspent related debt proceeds at year-end, the portion of the debt attributable to the unspent proceeds is not included in the calculation of net investment in capital assets. Rather, that portion of the debt is offset by unspent proceeds.

Restricted component of net position consists of restricted assets reduced by liabilities and deferred inflows of resources related to those assets.

Unrestricted component of net position is the amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of net investment in capital assets or the restricted component of net position.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

78 Note 1 – Summary of Significant Accounting Policies (Continued)

S. Net Position (Continued)

When both restricted and unrestricted resources are available for use, the City’s policy is to use restricted resources first, then unrestricted resources that are needed.

T. Property Taxes

With the passage of Proposition 13 in 1978 (Article XIIIA, California State Constitution), property taxes are limited to one percent of market value, plus additional taxes for repayment of existing or subsequent voter- approved indebtedness. Under Article XIIIA, the market value of taxable property is subject to a maximum annual increase of two percent. Market value may be appraised at signi ficantly more than two percent depending on other factors such as improvements, sale or change of ownership. The City receives a portion of the one percent general tax levy which is shared by several other local governments includi ng the county and the school district. The City's share is based on a formula prescribed in Section 26912(b) of the Government Code. The county apportions property taxes to the City on a scheduled basis which generally adheres to the actual tax collection periods. The tax lien date is January 1 of each year and covers the ensuing fiscal year 's tax returns. The tax levy date is from July 1 to June 30 of each year. The first installment becomes due on N ovember 1 with penalties and interest accruing after December 10. The second installment is due no later than April 10.

U. Use of Accounting Estimates

The preparation of financial statements in conformity with U.S. GAAP re quires management to make estimates and assumptions, in some cases when a pplicable, that affect the amounts in the financial statements and the accompanying notes. Actual results could differ from the estimates.

V. Implementation of New GASB Pronouncements for the Year Ended June 30, 2024

The requirements of the following accounting standards are effective for the purpose of implementation, if applicable to the City, for the year ended June 30, 2024. The financial statements included herein apply the requirements and provisions of these statements, including necessary retroactive adjustments to financial statement classifications and presentations.

GASB Statement No. 100 – In June 2022, GASB 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 informa tion for making decisions or assessing accountability. Implementation of this Statement had a mode rate effect on the City’s financial statements for the fiscal year ended June 30, 2024.

W. Upcoming Government Accounting Standards Implementations

The City is currently analyzing its accounting practices to determine the potential impact on the financial statements for the following GASB statements:

GASB Statement No. 101 – In June 2022, GASB 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 am ending certain previously required disclosures.

Application of this statement is effective for the City’s fiscal year ending June 30, 2025.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

79 Note 1 – Summary of Significant Accounting Policies (Continued)

W. Upcoming Government Accounting Standards Implementations (Continued)

GASB Statement No. 102 – In December 2023, GASB issued Statement No. 102, Certain Risk Disclosures . This Statement requires a government to assess whether a concen tration or constraint makes the primary government reporting unit or other reporting units that report a liability fo r revenue debt vulnerable to the risk of a substantial impact. Additionally, this Statement requires a government to assess whether an event or events associated with a concentration or constraint that could cause the substantial impact have occurred, have begun to occur, or are more likely than not to begin to occur within 12 months of the date the financial statements are issued. Application of this statement is effective for the City’s fiscal year ending June 30, 2025.

GASB Statement No. 103 – In April 2024, GASB issued Statement No. 103, Financial Reporting Model Improvements. The objective of this Statement is to improve key components of the financial reporting model to enhance its effectiveness in providing informati on that is essential for decision making and assessing a government’s accountability. Application of this statemen t is effective for the City’s fiscal year ending June 30, 2026.

GASB Statement No. 104 – In September 2024, GASB issued Statement No. 104, Disclosure of Certain Capital Assets. This Statement requires certain types of capital asset s to be disclosed separately in the capital assets note disclosures required by Statement 34. Lease assets recogni zed in accordance with St atement No. 87, Leases, and intangible right-to-use assets recognized in accordance with Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements, should be disclosed separately by major class of underlying asset in the capital assets note disclosures. Subscripti on assets recognized in accordance with Statement No. 96, Subscription-Based Information Technology Arrangements , also should be separately disclosed. In addition, this Statement requires intangible assets ot her than those three types to be disclosed separately by major class.

Application of this statement is effective for the City’s fiscal year ending June 30, 2026.

Note 2 – Cash and Investments

Cash and investments are presented in the accompanying financial statements at June 30, 2024, as follows:

Fiduciary Funds
Governmental Business-Type Statement of
Activities Activities Total Net Position Total
Cash and investments 165,954,022$ 104,921,112$ 270,875,134$ 650$ 270,875,784$ Cash and investments with fiscal agent 237,153 696,278 933,431 3,139,368 4,072,799 Total cash and inv estments 166,191,175$ 105,617,390$ 271,808,565$ 3,140,018$ 274,948,583$ Gov ernment-W ide Statement of Net Position

Cash and investments at June 30, 2024, consisted of the following:

Cash:

Cash on hand 3,950$
Deposits with financial institutions 46,847,550
Total cash 46,851,500
Investments:

Investments 224,024,284
Investments held by bond truste e 4,072,799
Total inv estments 228,097,083
Total cash and inv estments 274,948,583$

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

80 Note 2 – Cash and Investments (Continued)

The City maintains a cash and investment pool for all funds. Certain restricted funds that are held and invested by independent outside custodians throug h contractual agreements are not pooled. These restricted funds include cash and investment held by trustees.

A. Demand Deposits

The carrying amounts of the City’s demand deposits were $46,847,550 at June 30, 2024. Bank balances were $48,533,537 at that date, the total amount of which w as collateralized or insured with securities held by the pledging financial institutions in the City’s name as discussed below.

The California Government Code re quires California banks and savings and loan associations to secure the City’s cash deposits by pledging securities as collateral. This Code states that collateral pledged in this manner shall have the effect of perfecting a se curity interest in such collateral su perior to those of a general creditor.

Thus, collateral for cash deposits is considered to be held in the City's name.

The fair value of pledged securities must equal at least 110% of the City's cash deposits. California law also allows institutions to secure City’s deposits by pledging first trust deed mortgage notes having a value of 150% of the City’s total cash deposits. The City may waive collateral requiremen ts for cash deposits, which are fully insured up to $250,000 by the Federal Deposit Insurance Corporation (“FDIC”). The City, however, has not waived the collateralization requirements.

The City follows the practice of pooling cash and investments of all funds, except for funds required to be held by fiscal agents under the provisions of bond indentures. In terest income earned on pooled cash and investments is allocated to the various funds based on the period-end cash and investment balances. Interest income from cash and investments with fiscal agents is credited directly to the related fund.

B. Investments Authorized by the California Government Code and the City’s Investment Policy

The table below identifies the investment types that are authorized for the City by the California Government Code and the City's investment policy.

Authorized Maximum Maximum
By Investment Maximum Percentage Investment in
Authorized Investment Types Policy Maturity of Portfolio One Issuer* Local Agency Bonds No 5 years None None
U.S. Treasury Obligations Yes 5 years None None
U.S. Agency Securities Yes 5 years None None
Banker's Acceptances Yes 180 days 40% 30%
Commercial Paper Yes 270 days 15% 10%
Negotiable Certificates of Deposit Yes 5 years 30% 30%
Repurchase Agreements Yes 7 days None None
Reverse Repurchase Agreements No 92 days None None
Medium-Term Notes Yes 5 years 15% 15%
Mutual Funds Yes N/A 10% 10%
Money Market Mutual Funds Yes N/A 10% 10%
Mortgage Pass-Through Securities No 5 years None None
County Pooled Investment Funds No N/A None None
Local Agency Investment Fund (LAIF) Yes N/A $75 Million** None JPA Pools (other investment pools) Yes N/A None None
** Limit set by LAIF governing Board not California Government Code * Based on state law requirements or City investment policy requirements, whichever is more restrictive.

In accordance with the City's investment policy, a maximum of 25% of the City's investment portfolio may be invested for more than 5 years, not to exceed 10 years.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

81 Note 2 – Cash and Investments (Continued)

B. Investments Authorized by the California Government Code and the City’s Investment Policy (Continued)

The table also identifies certain provisions of the California Government Code (or the City's investment policy, if more restrictive) that address interest rate risk and concentration of credit risk. This table does not address investments of debt proceeds held by bond trustees that are governed by the provisions of debt agreements of the City, rather than the general provisions of the California Government Code or the City's investment policy.

C. Investments Authorized by Debt Agreements

Investments of debt proceeds held by fiscal agent are govern ed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the City's investment policy. The table below identifies the investment types that ar e authorized for investments held by fiscal agent. The table also identifies certain provisions of these debt agreements that address interest rate risk and concentration of credit risk.

Maximum Maximum Maximum
Maximum Percentage Percentage Investment in
Authorized Inv estment Types Maturity Allowed of Portfolio One Issuer U.S. Treasury Obligations 5 years None None None
U.S. Agency Securities 5 years None None None
Banker's Acceptances 180 days 40% 30% 30%
Commercial Paper 270 days 15% 15% 15%
Mone y Ma rke t Mutua l Funds N/ A None None None
Investment Contracts 30 years None None None

D. Fair Value Measurement

At June 30, 2024, investments, excluding restricted cash a nd investments held by fiscal agent, are reported at fair value based on quoted market prices. The following tabl e presents the fair value measurements of investments recognized in the accompanying Statement of Net Position measured at fair value on a recurring basis and the level within GASB 72 fair value hierarchy in which the fair value measurements fall at June 30, 2024:

Total at
Inv estments measured by fair v alue lev el: June 30, 2024 Level 1 Level 2 Federal Agency Securities 96,918,822$ -$ 96,918,822$ Corporate Bonds 26,165,462 - 26,165,462 Negotiable Certificates of Deposit 12,656,381 - 12,656,381 Municipal Bonds 9,444,718 - 9,444,718 U.S. Treasury Notes 6,636,590 6,636,590 - Total inv estments by fair v alue lev el 151,821,973 6,636,590$ 145,185,383$ Investments not subject to the fair value hierarchy:

Local Agency Investment Fund 31,825,662
California Asset Management Program 40,376,649
Money market mutual funds 4,072,799
Total investments not subject to the fair value hierarchy 76,275,110 Total investments 228,097,083$

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

82 Note 2 – Cash and Investments (Continued)

E. Risk Disclosure

Debt and equity securities classified in Level 2 are valued using the following approaches:

• U.S. Treasuries, U.S. Agencies, and Commercial Paper: quoted prices for identical securities in markets that are not active;
• Medium term notes: quoted prices for similar securities in active markets; and • Asset-backed securities: recent appraisals of the asset value.

Disclosures Relating to Interest Rate Risk

Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment.

Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer-term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. Information about the sensitivity of the fair values of the City's investments (including investments held by fiscal agent) to market inte rest rate fluctuations is provided by the following table that shows the distribution of the City's investments by maturity:

12 Months 13 to 24 25 to 36 37 to 48 More than 48
Inve stme nt Type or less Months M onths Months Months T otal Held by City:

Federal Agency S ecurities 25,423,051 $ 32,342,843 $ 31,254,488 $ 7,898,440 $ - $ 96,918,822$ Corporate Bonds 10,813,930 7,589,952 4,857,250 2,904,330 - 26,165,462 Negotiable Certificates of Deposit 4,137,745 3,527,617 2,808,290 2,182,730 - 12,656,381 Municipal Bonds 3,992,758 2,824,901 942,840 1,684,219 - 9,444,718 U.S . Treasury Notes 1,956,070 2,840,870 1,839,650 - - 6,636,590 Local Agency Investment Fund 31,825,662 - - - - 31,825,662 California Asset Management Program 40,376,649 - - - - 40,376,649 Held by Trustees:

Money Market Funds 4,072,799 - - - - 4,072,799 T otal inv estments 122,598,664$ 49,126,183 $ 41,702,518 $ 14,669,719 $ - $ 228,097,083$

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

83 Note 2 – Cash and Investments (Continued)

E. Risk Disclosure (Continued)

Disclosures Relating to Credit Risk

Generally, credit risk is the risk that an issuer of an i nvestment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization.

Presented below is the minimum rating required by the California Government Code, the City's investment policy, or debt agreements, and the actual Moody’s rating as of year-end for each investment type.

Inve stme nt Type To t a l
Mi n i m u m
Le gal Rating
AA+/
AA/AA- A+/A/A- AAA/AAAm Not Rated
Held by City:

Federal Agency S ecurities 96,918,822 $ N/A 34,105,317 $ - $ 2,424,205$ 60,389,300 $ Corporate Bonds 26,165,462 A 5,933,840 16,341,262 3,890,360 - Negotiable Certificates of Deposit 12,656,381 N/A - - - 12,656,381 Municipal Bonds 9,444,718 A 6,319,704 942,840 - 2,182,174 Held by Trustee:

Money Market Funds 4,072,799 - - - 4,072,799 T otal Rated Investments 149,258,182 46,358,861 $ 17,284,102 $ 6,314,565 $ 79,300,654 $ Not rated:

Local Agency Investment Fund 31,825,662 N/A
California Asset Management Program 40,376,649 N/A
Exempt from credit rating disclosure:

U.S . Treasury Notes 6,636,590 N/A
T otal inv estments 228,097,083$

Disclosure Relating to Concentration of Credit Risk

The investment policy of the City contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. Investments in any one issuer (other than U.S. Treasury securities, mutual funds, and external investment pools) that represent 5 percent or more of total City investments are as follows:

Reported Percentage
Amount of Portfolio
57,645,844$ 25.27%
18,549,900 8.13%
13,425,970 5.89%Federal Agency Securities
Inve stme nt Type
Federal Agency Securities
Federal Agency Securities
Federal Farm Credit Bank
Federal Home Loan Mortgage Corporation
Federal Home Loan Bank
Issuer

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

84 Note 2 – Cash and Investments (Continued)

E. Risk Disclosure (Continued)

Disclosures Relating to Custodial Credit Risk

Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the City’s investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits:

The California Government Code requires that a financ ial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The fair value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposi ted by the public agencies. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. At June 30, 2024, the City’s deposits (bank balances) were collateralized under California Law.

F. Investment in State Investment Pool

The City is a participant in the Lo cal Agency Investment Fund (“LAIF”) which is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The City’s investments in LAIF at June 30, 2024 included a portion of pool funds invested in Structure Notes and Asset- Backed Securities:

Structured Notes are debt securities (other than asset-backed securities) whose cash -flow characteristics (coupon rate, redemption amount, or stated maturity) de pend upon one or more indices and/or that have embedded forwards or options.

Asset-Backed Securities, the bulk of which are mortgage-backed securities, entitle their purchasers to receive a share of the cash flows from pool of assets such as principal and interest repayments from a pool of mortgages (such as Collateralized Mortgage Obligations) or credit card receivables.

As of June 30, 2024, the City had $31,825,662 invested in LAIF, which had invested 3.00% of the pool investment funds in Structured Notes and Asset-Back Securities. LAIF determines fair value on its investment portfolio based on market quotations for those securities where market quotations are readily available and based on amortized cost or best estimate for those securities where fair value is not readily available. The City valued its investments in LAIF as of June 30, 2024, by multiplying its account balance with LAIF times a fair value factor determined by LAIF. This fair value factor was dete rmined by dividing all LAIF participants ’ total aggregate amortized cost by total aggregate fair value. The fair value of the City’s position in the pool is the same as the value of the pool shares. The credit quality rating of LAIF is unrated as of June 30, 2024.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

85 Note 2 – Cash and Investments (Continued)

G. California Asset Management Program

The City is a voluntary participant in the California Asset Management Program (CAMP). CAMP is an investment pool offered by the California Asset Management Trust (the Trust). The Trust is a joint powers authority and public agency created by the Declaration of Trust and established under the provisions of the California Joint Exercise of Powers Act for the purpose of exercising the common power of its Participants to inv est funds. The investments are limited to investments permitted by California Govern ment Code. The total amount invested by all public agencies in CAMP at June 30, 2024 was $20.0 billion, respectively. A board of five trustees who are officials or employees of public agencies has oversight responsibility for CAMP. The value of the pool shares in CAMP, which may be withdrawn at any time, is determ ined on an amortized cost basis, which is different from the fair value of the City’s position in the pool. At June 30, 2024 the amortized cost approximates the City’s cost.

Note 3 – Lease Receivable

A. Governmental Activities

The portion of the City’s property is leased to others. Such property includes special purpose facilities, office and commercial space, and land. Lease receivable consists of agreements with other for the right-to-use of the underlying assets at various locations owned by the City. The terms of the arrangements range from 1 to 30 years.

The calculated interest rates used vary depending on the length of the lease. For the fiscal year ended June 30, 2024, the City recognized $975,428 in lease revenue and $42,393 in interest revenue.

A summary of changes in lease receivable for the fiscal year ended June 30, 2024 is as follows:

Balance Balance Due within Due in More
July 1, 2023 Additions Deletions June 30, 2024 One Year Than One Year Leases receivable 4,445,199$ 135,047$ (1,970,072)$ 2,610,174$ 376,633$ 2,233,541$ Classification

As of June 30, 2024, the required payments for these leases, including interest, are:

Year Ending
June 30, Principal Interest Total
2025 376,633 $ 34,331 $ 410,964 $
2026 477,479 29,939 507,418
2027 377,867 25,728 403,595
2028 204,064 22,493 226,557
2029 124,929 20,162 145,091
2030 - 2034 426,297 77,647 503,944 2035 - 2039 354,664 42,722 397,386 2040 - 2044 268,241 9,973 278,214 Total 2,610,174$ 262,995$ 2,873,169$
City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

86 Note 3 – Lease Receivable (Continued)

A. Governmental Activities (Continued)

As of June 30, 2024, the amounts reported as deferred inflows of resources will be recognized as lease revenue as follows:

Year Ending Amortization
June 30, Schedule
2025 396,100 $
2026 484,977
2027 381,459
2028 206,524
2029 128,781
2030 - 2034 413,812
2035 - 2039 274,398
2040 - 2044 160,268
Total 2,446,319$

B. Business-Type Activities

The portion of the City’s property is leased to others. Such property includes special purpose facilities, office and commercial space, and land. Lease receivable consists of agreements with other for the right-to-use of the underlying assets at various locations owned by the City. The terms of the arrangements range from 2 to 30 years.

The calculated interest rates used vary depending on the length of the lease. For the fiscal year ended June 30, 2024, the City recognized $269,551 in lease revenue and $43,981 in interest revenue.

A summary of changes in lease receivable for the fiscal year ended June 30, 2024 is as follows:

Balance Balance Due within Due in More
July 1, 2023 Additions Deletions June 30, 2024 One Year Than One Year Leases receivable 2,623,777$ -$ (229,628)$ 2,394,149$ 227,499$ 2,166,650$ Classification

As of June 30, 2024, the required payments for these leases, including interest, are:

Year Ending
June 30, Principal Interest Total
2025 227,499 $ 40,580 $ 268,079 $
2026 216,649 37,180 253,829
2027 230,833 33,632 264,465
2028 236,592 29,925 266,517
2029 236,377 26,126 262,503
2030-2034 392,399 98,186 490,585 2035-2039 247,716 74,278 321,994 2040-2044 327,757 45,521 373,278 2045-2048 278,327 10,075 288,402 Total 2,394,149$ 395,503 $ 2,789,652 $
City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

87 Note 3 – Lease Receivable (Continued)

B. Business-Type Activities (Continued)

As of June 30, 2024, the amounts reported as deferred inflows of resources will be recognized as lease revenue as follows:

Year Ending Amortization
June 30, Schedule
2025 262,776 $
2026 242,451
2027 242,451
2028 242,451
2029 236,567
2030 - 2034 417,953
2035 - 2039 231,256
2040 - 2044 231,256
2045 - 2048 158,026
Total 2,265,187$

Note 4 – Loan Receivable

On March 5, 2024, the City entered into a loan agreement with the Museum of Redlands (the “Museum”) in the amount of $1,000,000 to fund the completion of certain improvements associated with the proposed “Museum of Redlands”.

The loan bears an annual interest rate of 4% and repaym ent of the loan principal and interest accrued on the unpaid principal balance is due on or before March 5, 2026. On May 7, 2024, the City entered into a loan agreement with the Museum in the amount of $2,000,000 to fund the completion of certain improvements associated with the proposed “Museum of Redlands”. The loan will be repaid thr ough grant funding secured by the Museum from the State of California. The loan bears an annual interest rate of 0% and repayment of the loan principal is due upon receipt of the grant funding or before May 1, 2027. At June 30, 2024, the outstanding balance of the loan receivable was $3,012,822.

Note 5 – Interfund Receivables, Payables, and Transfers

A. Due To / From Other Funds

At June 30, 2024, the City reported a short term cash flow borrowing of $9,164 between the General Fund and the Transportation Development Act Special Revenue Fund to cover deficit cash positions.

B. Advance From / From Other Funds

As of June 30, 2024, advances to/from other funds were as follows:

Advances To Advances From Amount
Water Enterprise Fund Cemetery Enterprise Fund 487,867$ Disposal Enterprise Fund Aviation Enterprise Fund 707,929 Total 1,195,796$

The Water Enterprise Fund and Disposal Enterprise Fund a dvanced the Cemetery and Aviation Enterprise Funds a total of $1,195,796 to provide funding for capital expenditures.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

88 Note 5 – Interfund Receivables, Payables, and Transfers (Continued)

C. Transfers

Interfund transfers during the year ended June 30, 2024, consisted of the following:

Transfers In Transfers Out Amount Purpose
General Fund Governmental Grants Special Revenue Fund 63,649$ Program subsidy General Fund State Gas Tax Special Revenue Fund 1,980,462 Capital projects General Fund Traffic Safety Special Revenue Fund 155,962 Program subsidy General Fund Water Enterprise Fund 268,701 Program subsidy General Fund Water Enterprise Fund 212,934 Fixed Asset Transfer General Fund Disposal Enterprise Fund 67,102 Program subsidy General Fund Disposal Enterprise Fund 36,297 Program subsidy General Fund Wastewater Service Enterprise Fund 28,758 Program subsidy General Fund Equipment Maintenance Internal Service Fund 36,297 Fixed Asset Transfer Subtotal 2,850,162
Governmental Grants Special Revenue Fund General Fund 405 Program subsidy Emergency Service Special Revenue Fund General Fund 4,185,998 Program subsidy Downtown Redlands Business Area
Special Revenue Fund General Fund 103,306 Program subsidy Parking Authority Special Revenue Fund General Fund 18,653 Program subsidy Landscape M aintenance District
Special Revenue Fund General Fund 6,200 Program subsidy Public Facilities Development Special Revenue Fund General Fund 7,690,541 Forgiveness of advance Safety Hall Replacement Capital Projects Fund General Fund 257,547 Capital projects Water Service Enterprise Fund General Fund 34,976 Capital projects Groves Enterprise Fund General Fund 200,658 Capital projects General Liability Self-Insurance Internal Service Fund General Fund 5,576,403 Reserve funding Subtotal 18,074,687
PARIS Special Revenue Fund State Gas Tax Special Revenue Fund 1,837,555 Capital projects PARIS Special Revenue Fund Measure I Special Revenue Fund 3,733,391 Capital projects PARIS Special Revenue Fund Water Enterprise Fund 102,412 Capital projects PARIS Special Revenue Fund Disposal Enterprise Fund 1,885,248 Capital projects PARIS Special Revenue Fund Wastewater Service Enterprise Fund 17,088 Capital projects Subtotal 7,575,694
Groves Enterprise Fund CFD 2004-1 Assessment Special Revenue Fund 130,760 Capital projects Groves Enterprise Fund Disposal Enterprise Fund 74,939 Capital projects Subtotal 205,699
General Liability Self-Insurance Internal Service Fund Water Enterprise Fund 300,000 Reserve funding General Liability Self-Insurance Internal Service Fund Disposal Enterprise Fund 75,000 Reserve funding General Liability Self-Insurance Internal Service Fund Wastewater Service Fund 200,000 Reserve funding Subtotal 575,000
Water Enterprise Fund Non-Potable Water Enterprise Fund 257,664 Fixed asset transfer General Debt Service Fund Payroll Clearing Internal Service Fund 372,251 Debt service - pension bonds Total 29,911,157$
City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

89 Note 6 – Capital Assets

A. Governmental Activities

The summary of changes in governmental activities capital assets for the year ended June 30, 2024, is as follows:

Balance Transfers/ Balance
July 1, 2023 Additions Deletions Reclassifications June 30, 2024 Capital assets, not being depreciated:

Land 40,956,320$ 750,962$ -$ -$ 41,707,282$ Water rights 408,125 - - - 408,125 Right of way 337,105,665 29,757,212 - - 366,862,877 Construction in progress 11,404,751 8,062,518 - (3,159,364) 16,307,905 Total capital assets, not being depreciated 389,874,861 38,570,692 - (3,159,364) 425,286,189 Capital assets, being depreciated/amortized:

Infrastructure 272,359,117 10,990,335 (3,202,795) 2,665,761 282,812,418 Building and improvements 61,847,805 492,919 - 383,812 62,724,536 M achinery, equipment and vehicles 26,468,907 1,258,293 (2,354,010) 109,791 25,482,981 Lease assets - buildings and improvements 53,177 - - - 53,177 Lease assets - machinery, equipment and vehicles 1,235,547 3,089,193 - - 4,324,740 Subscription assets 593,542 - (170,606) - 422,936 Total capital assets, being depreciated/amortized 362,558,095 15,830,740 (5,727,411) 3,159,364 375,820,788 Accumulated depreciation/amortization:

Infrastructure (111,741,859) (6,262,854) 1,290,968 - (116,713,745) Building and improvements (24,247,751) (2,349,967) - - (26,597,718) M achinery, equipment and vehicles (20,089,407) (1,603,453) 2,354,010 - (19,338,850) Lease assets - buildings and improvements (17,726) (8,863) - - (26,589) Lease assets - machinery, equipment and vehicles (443,236) (547,940) - - (991,176) Subscription assets (228,860) (204,488) 170,606 - (262,742) Total accumulated depreciation/amortization (156,768,839) (10,977,565) 3,815,584 - (163,930,820) Total capital assets, being depreciated/amortized, net 205,789,256 4,853,175 (1,911,827) 3,159,364 211,889,968 Total capital assets, net 595,664,117$ 43,423,867$ (1,911,827)$ -$ 637,176,157$

Depreciation and amortization expense we re charged to the functions/programs of the governmental activities as follows:

General government 874,649$
Public safety 1,008,821
Culture and recreation 1,311,127
Highway and streets 7,232,583
Internal service funds 550,385
Total depreciation/amortization expense 10,977,565$

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

90 Note 6 – Capital Assets (Continued)

B. Business-Type Activities

The summary of changes in business-type activities capital assets for the year ended June 30, 2024, is as follows:

Balance Transfers/ Balance
July 1, 2023 Additions Deletions Reclassifications June 30, 2024 Capital assets, not being depreciated:

Land 28,069,057$ -$ -$ -$ 28,069,057$ Water rights 9,884,095 - (91,100) - 9,792,995 Construction in progress 8,463,598 5,735,369 (7,500) (1,997,237) 12,194,230 Total capital assets, not being depreciated 46,416,750 5,735,369 (98,600) (1,997,237) 50,056,282 Capital assets, being depreciated/amortized:

Infrastructure 205,766,544 3,040,084 (56,960) 1,986,605 210,736,273 Building and improvements 122,661,207 538,923 - 10,632 123,210,762 Machinery, equipment and vehicles 24,096,435 1,373,875 (501,738) - 24,968,572 Lease assets - buildings and improvements 53,178 - - - 53,178 Lease assets - machinery, equipment and vehicles 567,912 2,233,718 - - 2,801,630 Subscription assets 107,285 - (107,285) - - Total capital assets, being depreciated/amortized 353,252,561 7,186,600 (665,983) 1,997,237 361,770,415 Accumulated depreciation/amortization:

Infrastructure (93,902,934) (3,594,944) 19,525 - (97,478,353) Buildings and improvements (82,466,619) (3,080,579) - - (85,547,198) Machinery, equipment and vehicles (17,546,156) (1,754,407) 501,738 - (18,798,825) Lease assets - buildings and improvements (17,726) (8,863) - - (26,589) Lease assets - machinery, equipment and vehicles (82,740) (270,266) - - (353,006) Subscription assets (55,975) (51,310) 107,285 - - Total accumulated depreciation/amortization (194,072,150) (8,760,369) 628,548 - (202,203,971) Total capital assets, being depreciated/amortized, net 159,180,411 (1,573,769) (37,435) 1,997,237 159,566,444 Total capital assets, net 205,597,161$ 4,161,600$ (136,035)$ -$ 209,622,726$

Depreciation and amortization expense were charged to the funds of the business-type activities as follows:

Water Fund 4,736,405$
Disposal Fund 1,007,198
Wastewater Fund 2,686,237
Groves Fund 31,780
Non-Potable Water Fund 8,149
Cemetery Fund 67,515
Aviation Fund 223,085
Total depreciation/amortization expense 8,760,369$

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

91 Note 7 – Long-Term Liabilities

A. Governmental Activities

A summary of changes in the long-term liabilities of the governmental activities for the year ended June 30, 2024, is as follows:

Balance Debt Debt Balance Due within Due in More
July 1, 2023 Issued Retired June 30, 2024 One Year Than One Yea r Gove rnme ntal Acti vi ti e s:

Public borrowings:

Taxable Pension Funding Bonds 4,770,000 $ - $ (185,000)$ 4,585,000 $ 200,000 $ 4,385,000 $ less: accreted interest (162,522) - 47,462 (115,060) - (115,060) Total taxable pension funding bonds 4,607,478 - (137,538) 4,469,940 200,000 4,269,940 Direct borrowings:

Notes payable:

I-Bank Sports Park 1,154,446 - (66,882) 1,087,564 68,988 1,018,576 Finance Purchase Agreements 3,204,120 3,668,445 (3,170,919) 3,701,646 154,364 3,547,282 Total notes payable 4,358,566 3,668,445 (3,237,801) 4,789,210 223,352 4,565,858 Lease liability 832,107 2,601,534 (492,096) 2,941,545 804,071 2,137,474 Subscription liability 185,429 - (130,385) 55,044 55,044 - Total 9,983,580$ 6,269,979 $ (3,997,820) $ 12,255,739 $ 1,282,467 $ 10,973,272 $ Classification

2007 Taxable Pension Funding Bonds

On August 1, 2007, the City issued $25,862,392 of 2007 Taxable Pension Funding Bonds to refund the City's obligation to PERS, reimburse the City for its payment of a portion of its fiscal year ended 2008 unfunded liability and pay the costs of issuance of the bonds. Interest is payable February 1 and August 1 of each year commencing on February 1, 2008. Interest rate is 5.233 percent with annual principal payments plus accreted value commencing February 1, 2008 through February 1, 2037. The amount outstanding at June 30, 2024, is $4,585,000.

The annual debt service requirements on 2007 Taxable Pension Funding Bonds are as follows:

Year Ending
June 30, Principal Interest Total
2025 200,000 $ 207,455 $ 407,455 $ 2026 215,000 207,455 422,455 2027 230,000 207,455 437,455 2028 250,000 207,455 457,455 2029 265,000 204,799 469,799 2030-2034 1,805,000 767,408 2,572,408 2035-2037 1,620,000 149,321 1,769,321 Subtotal 4,585,000 1,951,348 6,536,348 Less: accreted interest (115,060) - (115,060) Total 4,469,940$ 1,951,348 $ 6,421,288 $

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

92 Note 7 – Long-Term Liabilities (Continued)

A. Governmental Activities (Continued)

I-Bank Sports Park Note Payable

On December 1, 2006, the City entered into this agreement for the purpose of obtaining additional funds to complete the Sports Park project. The City has agreed to pay the amount over thirty years commencing on the date of the lease, which carries an annual interest rate of 3. 15 percent with principal and interest payments due every six months starting August 1, 2007, and the final payment to be made on August 1, 2036. The City pledged the Community Center to obtain this loan with I-Bank. At June 30, 2024, the outstanding balance of the I-Bank Sports Park Lease Liability balance was $1,087,564.

The annual debt service requirements the I-Bank Sports Park Note Payable are as follows:

Ye ar Ending
June 30, Principal Interest Total
2025 68,988 $ 33,172 $ 102,160 $
2026 71,162 30,964 102,126
2027 73,403 28,687 102,090
2028 75,715 26,339 102,054
2029 78,100 23,916 102,016
2030-2034 428,991 80,486 509,477 2035-2037 291,205 13,949 305,154 Total 1,087,564$ 237,513 $ 1,325,077 $

Finance Purchase Agreements

The City has entered into various finance purchase ag reements for various equipment purchases. These leases qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of future minimum lease payments as of the date of inception. The assets acquired under capital leases are classified as machinery, equipment and vehicles. The finance purchase agreements carry annual interest rates from 2.58 to 8.12 percent with principal and interest payments due bi-annually. The gross value of equipment acquired under finance purchase agreements at June 30, 2024, was $8,500,658, with an accumulated amortization of $4,799,012. The outstanding balance at June 30, 2024, is $3,701,646.

The annual debt service requirements of the finance purchase agreements are as follows:

Ye ar Ending
June 30, Principal Interest Total
2025 154,364$ 216,097 $ 370,461 $
2026 139,801 207,051 346,852
2027 115,507 199,445 314,952
2028 122,404 192,447 314,851
2029 129,732 185,119 314,851
2030-2034 774,893 799,360 1,574,253 2035-2039 1,036,349 537,906 1,574,255 2040-2044 1,228,596 188,235 1,416,831 Total 3,701,646$ 2,525,660 $ 6,227,306 $
City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

93 Note 7 – Long-Term Liabilities (Continued)

A. Governmental Activities (Continued)

Lease Liability

The City has entered into leases for building space and equi pment use. The terms of the agreements range from 5 to 6 years. The calculated interest ra tes varied based on the length of the l ease ranging from 0.38 to 0.85 percent.

As of June 30, 2024, the capitalized right-to-use assets related to leases were $4,377,917 and the total lease liability was $2,941,545, of which $804,071 is reported as a current liability representi ng the amount due within the next fiscal year.

The annual debt service requirements of the lease liability are as follows:

Ye ar Ending
June 30, Principal Interest Total
2025 804,071$ 58,151 $ 862,222 $
2026 627,856 44,018 671,874
2027 594,159 30,278 624,437
2028 551,626 16,533 568,159
2029 363,833 3,639 367,472
Total 2,941,545$ 152,619 $ 3,094,164 $

Subscription Liability

The City has entered into subscrip tion-based information technology arrangements (SBITAs) for services related to cloud-based software applications, data storage and management services. Under the terms of these arrangements, the City does not take possession of the software at any time and the vendor provides ongoing services for the software's operation. The subscription periods vary, with initial non-cancellable terms ranging from 2 to 6 years. The calculated interest rates varied ranging from 2.92 percent to 3.01 percent, which is based on the length of the SBITA and date of the agreement.

As of June 30, 2024, the capitalized right-to-use assets related to SBITAs were $422,936 and the total subscription liability was $55,044, of which $55,044 is reported as a cu rrent liability representing the amount due within the next fiscal year.

The annual debt service requirements of the subscription liability are as follows:

Ye ar Ending
June 30, Principal Interest Total
2025 55,044 $ 1,657 $ 56,701 $

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

94 Note 7 – Long-Term Liabilities (Continued)

B. Business-Type Activities

A summary of changes in the long-term liabilities of the business-type activities for the year ended June 30, 2024, is as follows:

Balance Debt Debt Balance Due within Due in More
July 1, 2023 Issued Retired June 30, 2024 One Year Than One Yea r Business-Type Activities:

Public borrowings:

Bonds payable:

Solid Waste Revenue Bonds, Series 2013A 1,660,000$ -$ (1,660,000)$ -$ -$ -$ Total bonds payable 1,660,000 - (1,660,000) - - - Direct borrowings:

Notes payable
California Recycled Water Project 703,585 - (347,450) 356,135 356,135 - Safe Drinking Water Project 1,282,305 - (355,782) 926,523 364,156 562,367 Hinckley Water Treatment Plant Upgrade 6,246,664 - (499,952) 5,746,712 512,536 5,234,176 I-Bank Solid Waste 2,041,318 - (143,754) 1,897,564 148,081 1,749,483 I-Bank City Streets 2,263,095 - (142,754) 2,120,341 147,378 1,972,963 Finance Purchase Agreements 401,555 - (139,400) 262,155 143,631 118,524 Total notes payable 12,938,522 - (1,629,092) 11,309,430 1,671,917 9,637,513 Lease liability 523,407 1,964,022 (238,310) 2,249,119 500,315 1,748,804 Total 15,121,929$ 1,964,022$ (3,527,402)$ 13,558,549$ 2,172,232$ 11,386,317$ Classification

Solid Waste Revenue Bonds, Series 2013A

The $13,500,000 of Solid Waste Revenue Bonds, issue of 2013, Series A, consists of serial bonds with varying interest rates from 3 percent to 5 percent. Interest is payable semiannually on March 1 and September 1. Serial bonds mature semiannually September 1, 2014 through September 1, 2023. The revenues of the Disposal Fund are pledged as security toward the payment of this debt. The proceeds were used to finance a portion of the cost of acquisition and construction of street improvements within the City of Redlands. The bonds were paid in full as of June 30, 2024.

California Recycled Water Project Note Payable

On September 2, 2003, the City entered into a loan agreement with the California Water Resources Control Board in the amount of $7,918,234 to assist in financing the construction of advanced wastewater treatment facilities at the existing wastewater treatment plant. The note carries an annual interest rate of 2.5 percent with principal and interest payments due annually starting November 30, 2005 through November 30, 2024. The amount outstanding at June 30, 2024, was $356,135.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

95 Note 7 – Long-Term Liabilities (Continued)

B. Business-Type Activities (Continued)

California Recycled Water Project Note Payable (Continued)

The annual debt service requirements of the California Recycled Water Project Note Payable are as follows:

Year Ending
June 30, Principal Interest Total
2025 356,135$ 8,903 $ 365,038 $

Safe Drinking Water Project Note Payable

On January 30, 2004, the City entered into a loan agreement with the State of California, Department of Water Resources in the amount of $1,664,876 to assist in financi ng construction of a project which will enable the City to meet safe drinking water standards. As of June 30, 2006, the loan had been increased to $6,100,844. The note carries an annual interest rate of 2.34 percent with prin cipal and interest payments due every six months starting January 1, 2006 through January 1, 2027. At June 30, 2024, the City has $926,523 in outstanding principal.

The annual debt service requirements of the Safe Drinking Water Project Note Payable are as follows:

Year Ending
June 30, Principal Interest Total
2025 364,156$ 19,563 $ 383,719 $
2026 372,727 10,992 383,719
2027 189,640 2,219 191,859
Total 926,523$ 32,774 $ 959,297 $

Hinckley Water Treatment Plant Upgrade Note Payable

On June 21, 2011, the City entered into an agreement with the Clean Water State Revolving Fund Control Board for construction of the Hinckley water treatment pl ant upgrade. The City may borrow up to $13,663,033 or the eligible costs of the project, whichever is less. The loan has an interest rate of 2.5017 percent with maturities through 2034. Principal and interest is due every six m onths starting January 1, 2011 through July 1, 2034. The outstanding balance at June 30, 2024, is $5,746,712.

The annual debt service requirements of the Hinckley Water Treatment Plant Upgrade Note Payable are as follows:

Year Ending
June 30, Principal Interest Total
2025 512,536$ 140,580 $ 653,116 $
2026 525,439 127,678 653,117
2027 538,666 114,450 653,116
2028 552,226 100,890 653,116
2029 566,127 86,989 653,116
2030-2034 3,051,718 213,862 3,265,580
Total 5,746,712$ 784,449$ 6,531,161$

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

96 Note 7 – Long-Term Liabilities (Continued)

B. Business-Type Activities (Continued)

I-Bank Solid Waste Note Payable

On March 2, 2015, the City entered into an agreement for the purpose of obtaining additional funds to complete the Solid Waste project. The City has agreed to pay the amount over twenty years commencing on the date of the loan, which carries an annual interest rate of 3.01 percent with principal and interest payments due every six months starting August 1, 2015 through August 1, 2034. At June 30, 2024, the outstanding balance of the loan was $1,897,564.

The annual debt service requirements of the I-Bank Solid Waste Note Payable are as follows:

Year Ending
June 30, Principal Interest Total
2025 148,081$ 54,888 $ 202,969 $
2026 152,538 50,364 202,902
2027 157,129 45,703 202,832
2028 161,859 40,902 202,761
2029 166,731 35,957 202,688
2030-2034 912,024 100,237 1,012,261
2035 199,202 2,998 202,200
Total 1,897,564$ 331,049$ 2,228,613$

I-Bank City Streets Note Payable

On July 1, 2016, the City entered into an agreement for the purpose of obtaining funds for the City Streets project.

The City has agreed to pay the amount over twenty year s commencing on the date of the loan, which carries an annual interest rate of 3.24 percent with principal and interest payments due every six months starting August 1, 2017 through August 1, 2035. At June 30, 2024, the outstanding balance of the loan was $2,120,341.

The annual debt service requirements of the I-Bank City Streets Note Payable are as follows:

Year Ending
June 30, Principal Interest Total
2025 147,378$ 66,312$ 213,690$
2026 152,153 61,459 213,612
2027 157,083 56,450 213,533
2028 162,172 51,278 213,450
2029 167,427 45,938 213,365
2030-2034 922,105 143,343 1,065,448
2035-2036 412,023 13,456 425,479
Total 2,120,341$ 438,236$ 2,558,577$

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

97 Note 7 – Long-Term Liabilities (Continued)

B. Business-Type Activities (Continued)

Finance Purchase Agreements

The City has entered into various finance purchase ag reements for various equipment purchases. These lease qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the present value of future minimum lease payments as of the date of inception. The finance purchase agreements carry annual interest rates from 2.99 to 3.35 percent with principal and interest payments due bi-annually. The asset acquired under the finance purchase agreement is classified as machinery, equipment and vehicles. The gross value of equipment acquired under finance purchase agreements at June 30, 2024, was $787,621, with an accumulated amortization of $525,466. The outstanding balance at June 30, 2024, is $262,155.

The annual debt service requirements of the Finance Purchase Agreements are as follows:

Year Ending
June 30, Principal Interest Total
2025 143,631$ 7,999 $ 151,630 $
2026 118,524 3,544 122,068
Total 262,155$ 11,543 $ 273,698 $

Lease Liability

The City has entered into leases for building space and equi pment use. The terms of the agreements range from 5 to 6 years. The calculated interest ra tes varied based on the length of the l ease ranging from 0.38 to 0.85 percent.

As of June 30, 2024, the capitalized right-to-use assets related to leases were $2,854,808 and the total lease liability was $2,249,119, of which $500,315 is reported as a current liability representi ng the amount due within the next fiscal year.

Principal and interest payments to maturity are as follows:

Year Ending
June 30, Principal Interest Total
2025 500,315$ 45,730 $ 546,045 $
2026 501,273 35,287 536,560
2027 501,667 24,285 525,952
2028 460,494 13,139 473,633
2029 285,370 3,075 288,445
Total 2,249,119$ 121,516 $ 2,370,635 $

Note 8 – Special Assessment Debt with No City Commitment

The special assessment bonds are secured by valid assessment liens upon certain lands within the special assessment district and are not direct liabilities of the City and, accordingly, are not included in the accompanying basic financial statements. The City has no obligation beyond the balan ces in the designated agency funds for any delinquent assessment district bond payments. If delinquencies occur be yond the amounts held in the reserve funds created from bond proceeds, the City has no duty to pay the delinquency out of any available funds of the City. Neither the faith, credit, nor taxing power of the City is pledged to the paym ent of the bonds. The City acts solely as an agent for those paying assessments and for the bondholders.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

98 Note 8 – Special Assessment Debt with No City Commitment (Continued)

In September 2001, the City issued for and on behalf of the Community Facilities District No. 2001-1 (Northwest Development Project) $9,255,000 aggregate principal amount of 2001 Special Tax Bonds to finance the acquisition of certain public improvements with appurtenant work and incidental expenses within the District. The Bonds were issued pursuant to the Mello-Roos Community Facilities Act of 1982 and are payable from proceeds of annual special tax to be levied on the property within the District. Bonds ma turing in the years 2002 to 2015 are serial bonds payable in annual installments of $170,000 to $355,000 while bonds maturing in the year 2026 in the amount of $2,535,000 are term bonds. The interest rates on the bonds range from 3.75% to 6.45%. The outstanding balance at June 30, 2024, was $1,960,000.

In February 2004, the City issued for and on behalf of the Community Facilities District No. 2003-1 (Redlands Business Center) $9,545,000 aggregate principal amount of 2004 Special Tax Bonds to finance the acquisition and construction of certain street improvements, sewers, storm drains, water distribution facilities, and other public improvements within the District. The Bonds were issued pursuant to the Mello-Roos Community Facilities Act of 1982 and are payable from proceeds of annual special tax to be levied on the property within the District. Bonds maturing in the years 2006 to 2021 are serial bonds payable in annual installments of $20,000 to $270,000, while bonds maturing in the year 2027 in the amount of $2,255,000 and bonds maturing in the y ear 2033 in the amount of $5,280,000 are term bonds. The interest rates on the bonds range from 2.50% to 5.90%. The outstanding balance at June 30, 2024, was $6,440,000.

Noncommittal debt amounts issued and outstanding at June 30, 2024 are as follows:

Outstanding
Original Balance
Amount June 30, 2024
CFD 2001-1 Special Tax Bonds (Northwest Development Project) 9,255,000$ 1,960,000$ CFD 2003-1 Special Tax Bonds (Redlands Business Center) 9,545,000 6,440,000 Total 18,800,000$ 8,400,000$

Note 9 – Compensated Absences

A. Governmental Activities

A summary of changes in the compen sated absences balances for the governme ntal activities for the year ended June 30, 2024 is as follows:

Balance Balance Due within Due in More
July 1, 2023 Additions Deletions June 30, 2024 One Year Than One Year Compensated absences 7,925,416$ 12,859,780$ (12,146,693)$ 8,638,503$ 4,319,252$ 4,319,251$ Classification

Compensated absences in the governmental activities are obligations of the following funds:

Governmental Funds 8,168,248$
Liability Self-Insurance Internal Service Fund 6,136
Information Technology Internal Service Fund 196,698
Workers Compensation
Self-Insurance Internal Service Fund 13,942
Equipment Maintenance Internal Service Fund 78,324
Utility Billing Internal Service Fund 175,155
Total 8,638,503$

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

99 Note 9 – Compensated Absences (Continued)

B. Business-Type Activities

A summary of changes in the compen sated absences balances for the business- type activities for the year ended June 30, 2024 is as follows:

Balance Balance Due within Due in More
July 1, 2023 Additions Deletions June 30, 2024 One Year Than One Year Compensated absences 1,065,169$ 3,590,933$ (3,391,804)$ 1,264,298$ 632,151$ 632,147$ Classification

Compensated absences in the business-type activities are obligations of the following funds:

Water Fund 576,533$
Disposal Fund 309,030
Wastewater Fund 333,967
Groves Fund 2,087
Non-Potable Water Fund 1,165
Cemetery Fund 38,700
Aviation Fund 2,816
Total 1,264,298$

Note 10 ‒ Solid Waste Landfill

State and federal laws and regulations require the City to provide financial assurance for closure and post closure costs of the California Street Landfill site when it stops accepting waste and to perform certain maintenance and monitoring functions at the site for fifteen years after closure. Although closure and post closure activities will be paid only near or after the date that the landfill stops accepting waste, the City reports a portion of these closure and post closure costs as an operating expense in each period based on landfill capacity used as of each balance sheet date. The $15,418,260 reported as landfill closure and post closure liability at June 30, 2024, represents the cumulative amount reported to date based on the use of 69.45 percent of the total estimated capacity of the landfill including final covering. The City will recognize the remaining estimated costs of closure and post closure care of $6,782,825 as the remaining estimated capacity is filled. These amounts are based on what it would cost to perform closure and post closure activities in 2024 dollars. The City expects to close the landfill in the year 204 2. Actual costs may differ due to inflation, changes in technology or changes in regulations.

The City is required by state and federal laws and regulations to maintain adequate funds to provide financial assurance for closure and post closure costs through one of a combination of alternative mechanisms. For closure costs, the City has established an enterprise fund mechanism with a separate fund, the California Street Landfill Closure fund, that is included within the Disposal Enterprise Fund. For post closure costs, the City has entered into a Pledge of Revenue Agreement with the California Integrated Waste Manage ment Board. The City is in compliance with these requirements. At June 30, 2024, $12,595,507 is held for landf ill closure. The City expects that future inflation costs will be paid from future annual operating revenues in the enterprise fund. Post cl osure costs are agreed to be covered by revenue from solid waste customer billings which is deposited directly into the Disposal enterprise fund.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

100
Note 11 – Pension Plans

A. Summary

The City participates in the California Public Employees Retirement System (CalPERS), a pension plan available to all qualified employees. The Safety Plan is a cost-sharing multiple employer define d benefit pension plan. The Miscellaneous Plan is an agent multiple employer define d benefit pension plan. A summary of pension amounts for the City’s plans at June 30, 2024, is presented below:

Governmental Business-Type
Activities Activities Total
Deferred outflows of resources:

Pension contribution made after measurement date:

CalPERS Miscellaneous 3,923,165$ 3,038,834 6,961,999 $ CalPERS Safety 11,753,041 - 11,753,041 Total pension contribution made after measurement date 15,676,206 3,038,834 18,715,040 Projected earnings on pension plan investments in excess of actual earnings:

CalPERS Miscellaneous 3,801,794 2,944,821 6,746,615 CalPERS Safety 14,869,263 - 14,869,263 Total projected earnings on pension plan investments in excess of actual earnings 18,671,057 2,944,821 21,615,878 Change in assumption
CalPERS Miscellaneous 1,071,426 829,912 1,901,338 CalPERS Safety 6,341,190 - 6,341,190 Total change in assumption 7,412,616 829,912 8,242,528 Difference between expected and actual experience:

CalPERS Miscellaneous 80,384 62,264 142,648 CalPERS Safety 7,294,269 - 7,294,269 Total difference between expected and actual experience 7,374,653 62,264 7,436,917 Adjustment due to difference in proportions
CalPERS Safety 1,342,088 - 1,342,088 Total adjustment due to difference in proportions 1,342,088 - 1,342,088 Total deferred outflows of resources
CalPERS Miscellaneous 8,876,769 6,875,831 15,752,600 CalPERS Safety 41,599,851 - 41,599,851 Total deferred outflows of resources 50,476,620$ 6,875,831 $ 57,352,451 $ Net pension liability:

CalPERS M iscellaneous 31,028,112$ 24,033,967 $ 55,062,079 $ CalPERS Safety 108,653,947 - 108,653,947 Total net pension liability 139,682,059$ 24,033,967 $ 163,716,026 $ Deferred inflows of resources:

Employer contributions in excess of proportionate share of contribution CalPERS Safety 1,364,017$ - $ 1,364,017$ Total employer contributions in excess of proportionate share of contribution 1,364,017 - 1,364,017 Total deferred inflows of resources
CalPERS Safety 1,364,017 - 1,364,017 Total deferred inflows of resources 1,364,017$ - $ 1,364,017$ Pension expense (credit):

CalPERS M iscellaneous 5,363,262$ 4,154,312 $ 9,517,574 $ CalPERS Safety 16,867,427 - 16,867,427 Total net pension expenses 22,230,689$ 4,154,312 $ 26,385,001 $

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

101
Note 11 – Pension Plans (Continued)

B. City Miscellaneous Plans

Plan Description

Substantially all City Miscellaneous employees working the equivalent of 1,000 hours per fiscal year are eligible to participate in the Miscellaneous Plan Agent multiple-employer defined benefit plan administered by California Public Employees Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers. Benefit Provisions under the Plans are established by State statutes within the Public Employee’s Retirement Law. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website. Copies of the CalPERS annual financial report may be obtained from the CalPERS Executive Office – 400 P Street, Sacramento, CA 95814.

Employees Covered

At June 30, 2023, the measurement date, the following employees were covered by the benefit terms for the Plan:

M iscellaneous Plans
Active employees 370
Transferred and terminated employees 444
Retired employees and beneficiaries 560
Total 1,374

Benefits Provided

CalPERS provide retirement and disability benefits, annual cost-of-living adjust ments, and death benefits to plan members and beneficiaries. Classic CalPERS member becomes eligible for service retirement upon attainment of age 55 with at least 5 years of credited service. PEPRA miscellaneous members become eligible for service retirement upon attainment of age 62 with at least 5 years of service. The service retirement benefit is a monthly allowance equal to the product of the benefit f actor, years of service, and final compensation. The final compensation is the monthly average of the member's highest 36 full-time equivalent monthly pay.

Following are the benefit provisions for each plan:

Hire Date PEPRA Classic
Benefit formula 2% @ 55 2% @ 62
Benefit vesting schedule 5 years service 5 years service Benefit payments Monthly for life Monthly for life
Retirement age 50 - 63 52 - 67
Monthly benefits, as a % of eligible compensation 1.426% to 2.418% 1.000% to 2.500% Required employee contribution rates 7.000% 7.000%
Required employer contribution rates 9.090% 10.060%
Final Annual Compensation 1 year 1 year
Miscellaneous Plans

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

102
Note 11 – Pension Plans (Continued)

B. City Miscellaneous Plans (Continued)

Contributions

Section 20814(c) of the California Public Employees’ Retirement Law (“PERL”) requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. The total plan contributions are determined through CalPERS’ annual actuarial valuation process. The actuarially determ ined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees.

For the year ended June 30, 2024, the plan’s contributions made for the Plan was as follows:

Miscellaneous Plans
Contributions - employer 6,961,999$

Net Pension Liability

The City’s net pension liability is measured as the tota l pension liability, less the pension plan’s fiduciary net position. The net pension liability of the Plan is measured as of June 30, 2023, using an annual actuarial valuation as of June 30, 2022 rolled forward to June 30, 2023 usi ng standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below.

Actuarial Assumptions

The total pension liabilities in the June 30, 2022 actuarial valuations were determined using the following actuarial assumptions:

Actuarial Cost M ethod
Actuarial Assumptions:

Discount Rate
Inflation
Salary Increases
Investment Rate of Return
Morta l i ty Ra te Ta bl e
1 Post Retirement Benefit Increase
Entry Age Normal in accordance with the requirement of GASB Statement No. 68

6.90%

2.30%
Varies by Entry Age and Service

6.90%
Derived using CalPERS’ M embership Data for all Funds. The mortality table used was developed based on CalPERS’ specific data. The table includes 20 years of mortality improvements using Society of Actuaries Scale BB.

Contract COLA up to 2.30% until Purchasing Power Protection Allowance Floor on Purchasing Power applies, 2.30% thereafter

1The mortality table used was developed based on CalPERS-specific data. The table includes 20 years of mortality improvements using Society of Actuaries Scale 80% of scale MP 2020. For more details on this table, please refer to the 2021 experience study report (based on CalPERS de mographic data from 2000 to 2019) that can be found on the CalPERS website at www.calpers.ca.gov under Forms and Publications.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

103
Note 11 – Pension Plans (Continued)

B. City Miscellaneous Plans (Continued)

Discount Rate

In determining the long-term expected rate of return, CalPERS took into account, bot h short-term and long-term market return expectations as well as the expected pe nsion fund cash flows. Such cash flows were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the l ong-term (11-60 years) using a building-block approach.

Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as th e one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate ca lculated above and rounded down to the nearest one quarter of one percent.

The table below reflects long-term expected real rate of return by asset class. The ra te of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These geometric rates of return are net of administrative expenses.

Asset Class New S trategic Allocation Real Return Years 1 - 10 1 Real Return Years 11 +
2 Global equity 50.00% 4.80% 5.98%
Global fixed income 28.00% 1.00% 2.62%
Inflation sensitive assets 0.00% 0.77% 1.81%
Private equity 8.00% 6.30% 7.23%
Real assets 13.00% 3.75% 4.93%
Liquidity 1.00% 0.00% -0.92%
1 An expected inflation of 2.00% was used for this period. 2 An expected inflation of 2.92% was used for this period.

The discount rate used to measure the total pension liability was 6.90% for the plan . To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate.

Based on the testing, none of the tested plans run out of assets. Therefore, the current 6.90% discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The long term expected discount rate of 6.90% is applied to all plans in the Public Empl oyees Retirement Fund (PERF). The stress test results are presented in a detailed report called “GASB Crossover T esting Report” that can be obtained from the CalPERS website under the GASB 68 Section.

Sensitivity of the Net Pension Liability to Changes in the Discount Rate

The following presents the City’s net pension liability, calculated using the discount rate, as well as what the City’s net pension liability would be if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate:

Discount Rate - 1% Current Discount Discount Rate + 1%
(5.90%) Rate (6.90%) (7.90%)
81,280,202$ 55,062,079$ 33,422,077$ Plan's Aggregate Net Pension Liability/(Asset)

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

104
Note 11 – Pension Plans (Continued)

B. City Miscellaneous Plans (Continued)

Changes in the Net Pension Liability

The following table shows the changes in net pension liability recognized over the measurement period:

Total Pension
Liability
Plan Fiduciary Net
Position Net Pension Liability
Balance at June 30, 2022 (Valuation Date) 196,074,708 $ 142,674,042 $ 53,400,666 $ Changes in the year:

Service cost 4,056,901 - 4,056,901 Interest on the total pension liabilities 13,369,640 - 13,369,640 Differences between expected and actual experience 970,748 - 970,748 Changes of benefit terms 330,342 - 330,342 Benefit paym ents, including refunds of m em bers contributions (11, 282,718) (11,282,718) - Contributions - em ployer - 6,626,543 (6,626,543) Contributions - em ployee - 1,726,746 (1,726,746) Net in v es tmen t in co me - 8,817,845 (8,817,845) Adm inistrative ex penses - (104,916) 104,916 Net changes 7,444,913 5,783,500 1,661,413 Balance at June 30, 2023 (Measurement Date) 203,519,621 $ 148,457,542 $ 55,062,079 $ Miscellaneous Plans

Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions

For the year ended June 30, 2024, the City recognized pension expense in the amount of $9,517,574 for the miscellaneous plans.

The amortization period differs depending on the source of the gain or loss. The difference between projected and actual earnings is amortized over 5-years straight line. All other amounts are amortized straight-line over the average expected remaining service liv es of all members that are provided w ith benefits (active, inactive and retired) as of the beginning of the measurement period.

The Expected Average Remaining Service Lifetime (“EAR SL”) is calculated by dividing the total future service years by the total number of plan participants (active, inactive, and retired) in the risk pool. The EARSL for the Miscellaneous Plan for the 2022-23 measurement period is 3.1 years, which was obtained by dividing the total service years of 4,006 (the sum of remaining service lifetimes of the active employees) by 1,287 (the total number of participants: active, inactive, and retired).

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

105
Note 11 – Pension Plans (Continued)

B. City Miscellaneous Plans (Continued)

Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions

At June 30, 2024 the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred outflows Deferred inflows
of Resources of Resources
Pension contributions made subsequent
to measurement date 6,961,999$ -$ Difference between projected and actual
earning on pension plan investments 6,746,615 - Changes in assumptions 1,901,338 - Differences between expected
and actual experience 142,648 - Total 15,752,600$ - $
Miscellaneous Plans

For the City Miscellaneous Plan, $6,961,999 was reported as deferred outflows of resources related to pensions resulting from City’s contributions subsequent to the me asurement date and will be recognized as a reduction of the net pension liability in the year ended June 30, 2025. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Year Ended June 30,
2025 2,898,761 $
2026 986,110
2027 4,723,646
2028 182,084
2029 -
Thereafter -
8,790,601$
Deferred Outflows/(Inflows)
of Resources

Pension Plan Fiduciary Net Position

Detailed information about the plan’s fiduciary net position is available in the separately issued CalPERS financial reports.

Payable to the Pension Plan

At June 30, 2024, the City reported a payable of $0 for the outstanding amount of contributions to the pension plan required for the year ended June 30, 2024.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

106
Note 11 – Pension Plans (Continued)

C. City Safety Plans

Plan Description

Substantially all City Safety employ ees working the equivalent of 1,000 hou rs per fiscal year are eligible to participate in the Safety Plan Cost-sharing multiple-em ployer defined benefit plan administered by California Public Employees Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers. Benefit Provisions under the Plans are established by State statutes within the Public Employee’s Retirement Law. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website. Copies of the CalPERS annual financial report may be obtained from the CalPERS Executive Office – 400 P Street, Sacramento, CA 95814.

Employees Covered

At June 30, 2023, the measurement date, the following employees were covered by the benefit terms the Plan:

Safet y Plans
Active employees 133
Transferred and terminated employees 56
Retired employees and beneficiaries 255
Total 444

Benefits Provided

CalPERS provide retirement and disability benefits, annual cost-of-living adjust ments, and death benefits to plan members and beneficiaries. Classic and PEPRA Safety CalPERS member becomes eligible for service retirement upon attainment of age 55 with at least 5 years of credited service. PEPRA miscellaneous members become eligible for service retirement upon attainment of age 62 with at least 5 years of service. The service retirement benefit is a monthly allowance equal to the product of the benefit factor, years of service, and final compensation. The final compensation is the monthly average of the member's highest 36 full-time equivalent monthly pay.

Following are the benefit provisions for each plan:

Hire Date Classic Fire PEPRA Fire Classic Police PEPRA Police Benefit formula 3% @ 50 2.7% @ 57 3% @ 50 2.7% @ 57
Benefit vesting schedule 5 years service 5 years service 5 years service 5 years service Benefit payments M onthly for life M onthly for life M onthly for life M onthly for life Retirement age 50 50 - 57 50 50 - 57 Monthly benefits, as a % of eligible compensation 3.000% 2.000% to 2.700% 3.000% 2.000% to 2.700% Required employee contribution rates 9.00% 13.750% 9.00% 13.750% Required employer contribution rates 29.090% 14.500% 29.090% 14.500% Final Annual Compensation 1 year 1 year 1 year 1 year
Safety Cost-Sharing Plans

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

107
Note 11 – Pension Plans (Continued)

C. City Safety Plans (Continued)

Contributions

Section 20814(c) of the California Public Employees’ Retirement Law (PERL) requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Th e total plan contributions are determined through the CalPERS’ annual actuarial valuation process. For public agency cost-sharing plans covered by the Safety risk pools, the Plan’s actuarially determined rate is based on the estimated amount necessary to pay the Plan’s allocated share of the risk pool’s costs of benefits earned by employees during the year, and any unfunded accrued liability.

The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees.

For the year ended June 30, 2024, employer contributions made for the Safety Cost-sharing Plan was as follows:

Safety Plans
Contributions - employer 11,753,041$

Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions

The City’s net pension liability for each Plan is measured as the proportionate share of the net pension liability.

The net pension liability of the Plans is measured as of June 30, 2023, and the total pension liability for each Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2022 rolled forward to June 30, 2023 using standard update procedures. The City’s proportion of the net pension liability was based on a projection of the City’s long-term share of contributions to the pension plans relative to the projected contributions of all participating employers, actuarially determined.

As of June 30, 2024, the City reported net pension liability for its proportionate shares of the net pension liability of the Safety Plan as follows:

Plan Total Pension Plan Fiduciary Net Plan Net Pension
L iability Position L iability/(Asset)
Balance at: 6/30/22 (Valuation date) 324,559,447$ 223,139,182 $ 101,420,265 Balance at: 6/30/23 (Measurement date) 339,316,329 230,662,382 108,653,947 Net Changes during 2022-2023 14,756,882 7,523,200 7,233,682 Increase (Decrease)

The following is the approach established by the plan actuary to allocate the net pension liability and pension expense to the individual employers within the risk pool.

(1) In determining a cost-sharing plan’s proportionate share, total amounts of liabilities and assets are first calculated for the risk pool as a whole on the valuation date (June 30, 2022). The risk pool’s fiduciary net position (“FNP”) subtracted from its total pension liability (“TPL”) determines the net pension liability (“NPL”) at the valuation date.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

108
Note 11 – Pension Plans (Continued)

C. City Safety Plans (Continued)

Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resour ces Related to Pensions (Continued)

(2) Using standard actuarial roll forward methods, the risk pool TPL is then computed at the measurement date (June 30, 2023). Risk pool FNP at the measurement date is then subtracted from this number to compute the NPL for the risk pool at the measurement date. For purposes of FNP in this step and any later reference thereto, the risk pool’s FNP at the measurement date denotes th e aggregate risk pool’s FNP at June 30, 2022 less the sum of all additional side fund (or unfunded liability ) contributions made by all employers during the measurement period (2022-23).

(3) The individual plan’s TPL, FNP and NPL are also calculated at the valuation date.

(4) Two ratios are created by dividing the plan’s individual TPL and FNP as of the valuation date from (3) by the amounts in step (1), the risk pool’s total TPL and FNP, respectively.

(5) The plan’s TPL as of the Measurement Date is equal to the risk pool TPL generated in (2) multiplied by the TPL ratio generated in (4). The plan’s FNP as of the Me asurement Date is equal to the FNP generated in (2) multiplied by the FNP ratio generated in (4) plus any additional side fund (or unfunded liability) contributions made by the employer on behalf of the plan during the measurement period.

(6) The plan’s NPL at the Measurement Date is the difference between the TPL and FNP calculated in (5).

The City’s proportionate share of the net pension liability for the Safety Plan as of June 30, 2023 and 2022 was as follows:

Proportion June 30, 2022 1.47594%
Proportion June 30, 2023 1.45358%
Change - Increase (Decrease) -0.02236%

For the year ended June 30, 2024, the City recognized pension credit in the amount of $294,073 for the Safety Plan.

The amortization period differs depending on the source of the gain or loss. The difference between projected and actual earnings is amortized over 5-years straight line. All other amounts are amortized straight-line over the average expected remaining service liv es of all members that are provided w ith benefits (active, inactive and retired) as of the beginning of the measurement period.

The EARSL for PERF C for the measurement date ending June 30, 2023 is 3.8 years, which was obtained by dividing the total service years of 600,538 (the sum of remaining service lifetimes of the active employees) by 160,073 (the total number of participants: active, inactive, and retired) in PERF C. Inactive employees and retirees have remaining service lifetimes equa l to 0. Total future service is b ased on the members’ probability of decrementing due to an event other than receiving a cash refund.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

109
Note 11 – Pension Plans (Continued)

C. City Safety Plans (Continued)

Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resour ces Related to Pensions (Continued)

At June 30, 2024, the City reported deferred outflows of resources and defe rred inflows of resources related to pensions from the following sources:

Deferred outflows Deferred inflows
of Resources of Resources
Pension contributions made subsequent
to measurement date 11,753,041$ -$ Difference between projected and actual earning on
pension plan investments 14,869,263 - Adjustment due to differences in proportions 1,342,088 - Changes in assumptions 6,341,190 - Difference between actual and expected experience 7,294,269 - Difference between employer's actual contributions
and proportionate share of contributions - (1,364,017) Total 41,599,851$ (1,364,017)$
Safety Plans

For the City Safety Plan, $11,753,041 was reported as deferred outflows of resources related to pensions resulting from City’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2025. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Year Ended June 30,
Deferred Outflows/
(Inflows) of Resources
2025 9,221,574$
2026 6,555,973
2027 12,290,218
2028 415,028
2029 -
Thereafter -
28,482,793$

Actuarial Methods and Assumptions Used to Determine Total Pension Liability

For the measurement period ended June 30, 2023 (the measurement date), the total pension liability was determined by rolling forward the June 30, 2022 to tal pension liability. Both the June 30, 2023 and the June 30, 2022 total pension liabilities were based on the following actuarial methods and assumptions:

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

110
Note 11 – Pension Plans (Continued)

C. City Safety Plans (Continued)

Actuarial Methods and Assumptions Used to Determine Total Pension Liability (Continued)

Actuarial Cost Method
Actuarial Assumptions:

Discount Rate
Inflation
Salary Increases
Investment Rate of Return
Morta l i ty Ra te Ta bl e
Post Retirement Benefit Increase Contract COLA up to 2.30% until Purchasing Power Protection Allowance Floor on Purchasing Power applies, 2.30% thereafter
Entry Age Normal in accordance with the requirement of GASB Statement No. 68

6.90%

2.30%
Varies by Entry Age and Service

6.90%
Derived using CalPERS’ Membership Data for all Funds. The mortality table used was developed based on CalPERS’ specific data. The table includes 20 years of mortality improvements using Society of Actuaries Scale BB.

1The mortality table used was developed based on CalPERS-specific data. The table includes 20 years of mortality improvements using Society of Actuaries Scale 80% of scale MP 2020. For more details on this table, please refer to the 2021 experience study report (based on CalPERS de mographic data from 2000 to 2019) that can be found on the CalPERS website at www.calpers.ca.gov under Forms and Publications.

Discount Rate

The discount rate used to measure the total pension liability was 6.90%. To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets. Theref ore, the current 6.90% discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The long term expected discount rate of 6.90% is applied to all plans in the Public Employees Retirement Fund. The stress test results are presented in a detailed report called “GASB Crossover Testing Report” that can be obtained at CalPERS’ website under the GASB 68 section.

The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expect ed future real rates of return (exp ected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, staff took into account both short-term a nd long-term market return expectations as well as the expected pension fund cash flows. Such cash flows we re developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. The table below reflects long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These geometric rates of return are net of administrative expenses.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

111
Note 11 – Pension Plans (Continued)

C. City Safety Plans (Continued)

Discount Rate (Continued)

Asset Class
New Strategic Allocation Real Return Years
1 - 10 1
Real Return Years
11 + 2
Global equity 50.00% 4.80% 5.98%
Global fixed income 28.00% 1.00% 2.62%
Inflation sensitive assets 0.00% 0.77% 1.81%
Private equity 8.00% 6.30% 7.23%
Real assets 13.00% 3.75% 4.93%
Liquidity 1.00% 0.00% -0.92%
1 An expected inflation of 2.30% was used for this period. 2 An expected inflation of 2.30% was used for this period.

Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate

The following presents the City’s proportionate share of the net pension liability for the City Safety Plan, calculated using the discount rate for the City Safety Plan, as well as what the City’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is one per centage point lower or one percentage point higher than the current rate:

Discount Rate - 1% Current Discount Discount Rate + 1%
(5.90%) Rate (6.90%) (7.90%)
155,202,109$ 108,653,947 $ 70,597,511 $ Plan's Aggregate Net Pension L iability/(Asset)

Pension Plan Fiduciary Net Position

Detailed information about each pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports.

Payable to the Pension Plan

At June 30, 2024, the City reported a payable of $0 for the outstanding amount of contributions to the pension plan required for the year ended June 30, 2024.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

112
Note 12 – Other Postemployment Benefits

A. Summary

Governmental Business-Type
Activities Activities Total
Deferred outflows of resources:

Employer contributions made
subsequent to the measurement date 4,275,712 $ 1,422,269 $ 5,697,981 $ Difference between expected and actual experience 2,608,346 867,638 3,475,984 Changes in assumptions 25,626,142 8,524,255 34,150,397 Total deferred outflows of resources 32,510,200$ 10,814,162 $ 43,324,362 $ Total OPE B liability:

Total OPEB liability 89,577,526 $ 40,315,855 $ 129,893,381 $ Total OPE B liability 89,577,526$ 40,315,855 $ 129,893,381 $ Deferred inflows of Resources:

Difference between expected and actual experience 24,868,967$ 6,867,416 $ 31,736,383 $ Changes in assumptions 32,723,343 9,036,354 41,759,697 Total deferred inflows of resources 57,592,310$ 15,903,770 $ 73,496,080 $ O PEB Expe nse 9,908,489$ 2,272,372 $ 12,180,861 $

B. General Information about OPEB

Plan Description

The City’s administers a defined benefit OPEB plan (Plan), which provides medical insurance benefits to eligible retirees and their spouses in accordance with applicab le Memoranda of Understanding and the California Government Code to all employees who retire from the City. The Plan is an agent single-employer defined benefit OPEB plan administered by the City and is governed by the City Council. No assets are accumulated in a trust that meets the criteria in paragraph 4 of Statement 75.

City’s Funding Policy

The contribution requirements of plan members and the City are established, and may be amended, by City Council.

The contribution required to be made under City Council and labor agreement requirements is based on a pay-as- you go basis (i.e., as medical insurance premiums become due). The City allows retirees to participate in the same medical plan as active employees at the same premium rates. Because the rate is a “blended rate”, payments for the active employees include an implied subsidy of what would normally be a higher rate for retirees if the retirees were in a stand-alone health plan.

GASB Statement No. 75, Accounting and Financial Reporting by Employers for Post-Employment Benefits Other Than Pensions, requires governments to account for other post-employment benefits (OPEB) on an accrual basis, rather than a pay-as-you-go basis. The effect is the recognition of an actuarially determined expense when a future retiree earns their post-employment benefits, rather than when they use their post-employment benefits.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

113
Note 12 – Other Postemployment Benefits (Continued)

B. General Information about OPEB (Continued)

Benefits Provided

After age 65, the City contributes a flat monthly ra te of $397 for those employees who retire under the PERS retirement system, subscribe to the PERS Health Insurance System, and have at least five years of CalPERS service, in accordance with Government Code. This is a perpetual benefit which is available to all PERS retirees including eligible dependents of deceased retirees. Annual increases in the monthly rate are limited to $20 and based upon the annual increase in PERS family premiums. In addition, the City also contributes the entire monthly premium for health insurance for all employees who retire with the City and have a minimum of 15 or 20 years of cumulative service with the City, depending on the particular bargaining units. A summary of benefits provided is shown below:

Employee Group Service Medical Dental Vision
Police (RPOA Members)
Employees hired on or after November 4, 2014
with at least 5 years of CalPERS service $397 per month maximum None None Employees hired on or after November 4, 2014
with at least 15 years of CalPERS service
100% of Least Expensive
Retiree-only Premium
until age 65 and $397 after
100% of Premium
until age 65
100% of Premium
until age 65
Employees hired prior to November 4, 2014
with at least 15 years of City service
100% of Premium &
Medicare Part B for
Lifetime of Retiree and
Spouse
100% of Premium of
Retiree and Spouse
100% of Premium of
Retiree and Spouse
Firefighters (RPFA and RAFME Members)
Employees hired on or after October 16, 2012
with at least 5 years of CalPERS Service $397 per month maximum None None Employees hired on or after October 16, 2012
with at least 15 years of CalPERS Service
100% of Least Expensive
Retiree-only Premium
until age 65 and
PEMHCA MRC after
100% of Premium
until age 65
100% of Premium
until age 65
Employees hired prior to March 11, 2010 with
at least 20 years (15 Years for RAM E
M embers) of City Service
100% of Premium &
Medicare Part B for
Lifetime of Retiree and
Spouse
100% of Premium for
Lifetime of Retiree and
Sp ouse
$225 Maximum
Reimbursement Per Year
for Lifetime of Retiree and
Spouse
Miscellaneous (GEAR, RCSEA, RAMME and RAME* Members)
Employees hired on or after March 11, 2010
with at least 5 years of CalPERS Service $397 per month maximum None None Employees hired on or after March 11, 2010
with at least 10 years of CalPERS Service
100% of Least Expensive
Retiree-only Premium
until age 65 and
PEMHCA MRC after
100% of Premium
until age 65 None
Employees hired prior to March 11, 2010 with
at least 20 years (15 Years for RAM E
M embers) of City Service
100% of Premium &
Medicare Part B for
Lifetime of Retiree and
Spouse
100% of Premium for
Lifetime of Retiree and
Sp ouse
None

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

114
Note 12 – Other Postemployment Benefits (Continued)

B. General Information about OPEB (Continued)

Benefits Provided (Continued)

Miscellaneous (RASME Members)
Employees hired on or after June 2, 2015 with
at least 5 years of CalPERS Service $397 per month maximum None None Employees hired on or after June 2, 2015 with
at least 15 years of CalPERS Service
100% of Least Expensive
Retiree-only Premium
until age 65 and
PEMHCA MRC after
100% of Premium
until age 65 None
Employees hired prior to June 2, 2015 with at
least 15 years of City Service
100% of Premium &
Medicare Part B for
Lifetime of Retiree and
Spouse
100% of Premium &
Medicare for Lifetime of
Retiree and Spouse
100% of Premium for
Lifetime of Retiree and
Spouse
Miscellaneous (RADD Members)
Employees hired on or after January 1, 2009
with at least 5 years of CalPERS Service* $397 per month maximum None None Employees hired prior to January 1, 2009 with
at least 15 years of City Service **
100% of Premium &
Medicare Part B for
Lifetime of Retiree and
Spouse
100% of Premium &
Medicare for Lifetime of
Retiree and Spouse
100% of Premium for
Lifetime of Retiree and
Spouse

Some retirees are eligible for a medical bridge program, in which the City contributes the amount of the maximum of lowest cost single premium rate $397. Eligibility for the medical bridge program is as follows:

RADD 3 years of service
RAME 10 years of service
RPOA, RAFME, RASME 15 years of service
RAMME, RCSEA, Teamsters 20 years of service

Employees Covered

At June 30, 2023, the most recent valuation date, the following current and former employees were covered by the benefit terms under the Plan:

Active employees 507
Retired employees and beneficiaries 373
Total 880

C. Total OPEB Liability, OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB

Total OPEB Liability

The City’s total OPEB liability was measured as of June 30, 2023. The total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valua tion as of June 30, 2023. The total OPEB liability at June 30, 2024 was $129,893,381.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

115
Note 12 – Other Postemployment Benefits (Continued)

C. Total OPEB Liability, OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB (Continued)

Actuarial Assumptions

The total OPEB liability in the June 30, 2023 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified:

Discount Rate
Inflation
Aggregate payroll increases
Expected long-term investment rate of return
Mortality, Termination, and Disability
Mortality Improvement Scale
Healthcare Trend Rate 5.75 to 6.75 percent for 2022-2026, 4.50 to 5.50 percent for 2027- 2031+, and 4.00 percent for 2070 and later years; Medicare ages: 4.50 to 5.50 percent for all years.

4.13%

2.80%

2.80% plus merit increases for Miscellaneous employees based on the 2021 CalPERS Experience Study
n/a
CalPERS 2021 Experience Study
Modified projected fully generational with Scale MP-2021

The actuarial assumptions used in the June 30, 2023 valuation were based on the results of an actuarial experience study for the period July 1, 2022 through June 30, 2023.

Discount Rate

The discount rate used to measure the total OPEB liability 4.13%. The City’s funding policy affects the calculation of liabilities by impacting the discount rate that is used to develop the plan liability and expense. The City is currently financing its OPEB liability on a pay-as-you-go basis, the discount rate used is based on the S&P Municipal Bond 20 Year High Grade Index.

Change in the Total OPEB Liability

Total OPEB
L iability
Balance at June 30, 2022 (Measurement Date) 146,960,265$ Changes Recognized for the M easurement Period:

Service Cost 3,676,645
Interest on the total OPEB liability 6,072,016
Changes of benefit terms 4,078,580
Difference between expected and actual experience (26,395,453) Changes of assumptions (100,889)
Benefit payments (4,397,783)
Net Changes during July 1, 2022 to June 30, 2023 (17,066,884) Balance at June 30, 2023 (Measurement Date) 129,893,381$

Sensitivity of the Total OPEB Liability to Changes in the Discount Rate

The following presents the total OPEB liability of the City, as well as what th e City’s total OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower (3.13 percent) or 1-percentage- point higher (5.13 percent) than the current discount rate:

Discount Rate - 1% Current Discount Discount Rate + 1%
(3.13%) Rate (4.13%) (5.13%)
149,838,778$ 129,893,381 $ 113,794,397 $ Plan's Total OPE B L iability
City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

116
Note 12 – Other Postemployment Benefits (Continued)

C. Total OPEB Liability, OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB (Continued)

Sensitivity of the Total OPEB Liability to Changes in the Health Care Cost Trend Rates

The following presents the total OPEB liability of the City, as well as what th e City’s total OPEB liability would be if it were calculated using healthcare cost trend rates that are 1-percentage-point lower or 1-percentage-point higher than the current healthcare cost trend rates:

Healthcare Cost
-1% Trend Rates +1%
113,077,296$ 129,893,381$ 151,048,718$ Plan's Total OPE B L iability

OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB

For the fiscal year ended June 30, 2024, the City recognized OPEB expense of $12,180,861. At June 30, 2024, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Deferred outflows Deferred inflows
of Resources of Resources
Employer contributions made
subsequent to the measurement date 5,697,981 $ - $ Difference between expected and actual experience 3,475,984 (31,736,383) Changes of assumptions 34,150,397 (41,759,697) Total 43,324,362 $ (73,496,080) $

The difference between projected OPEB plan investment earnings and actual earnings is amortized over a five- year period. The remaining gains an d losses are amortized over the expected average remaining service life. The expected average remaining service life is 10 years, which was determined as of June 30, 2022, the beginning of the measurement period, for employees covered by the OPEB plan benefit terms as of the valuation date.

For the OPEB Plan, $5,697,981 was reported as deferred outflows of resources related to OPEB resulting from City’s contributions subsequent to the measurement date will be recognized as a reduction of the net OPEB liability in the year ended June 30, 2025. Other amounts reported as deferred outflows of resources related to OPEB will be recognized as future OPEB expense as follows:

M easurement Period Deferred Outflows/
Ended June 30 (Inflows) of Resources
2025 (1,413,392)$
2026 (1,291,466)
2027 (2,436,673)
2028 (3,548,465)
2029 (3,548,465)
Thereafter (23,631,238)
(35,869,699)$

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

117
Note 13 – Risk Management

A. Coverage

On June 30, 2024, and throughout 2023-2024, the City was self-insured for the first $1,000,000 per occurrence for commercial general liability and auto mobile liability. The City purchased ex cess liability insurance to provide additional coverage of $10,000,000 per occurrence with a $10,000,000 aggregate. The City also purchased airport liability insurance including commercial general liability, pe rsonal & advertising injury, products completed, and hanger keepers limit in a single limit liability amount of $10,000,000 per occurrence. For workers’ compensation and employer's liability, the City was self-insured for $1,000,000 per occurrence with excess coverage of $25,000,000 for worker's compensation per occurrence with a $25,000,000 aggregate, and $1,000,000 for employer's liability per occurrence.

B. Claims Activity

At June 30, 2024, $4,400,552 and $11,032,921 have been accrued for general liability and workers’ compensation claims, respectively. All funds of the City participate in the worker's compensation program and make payments to the Workers’ Compensation Internal Service Fund based on estimates of the amounts needed to pay prior and current year claims. The Liability Insurance Internal Service Fund receives an annual operating transfer from the General Fund to cover operating costs in cluding payment of claims. The liab ility for unpaid claims for general liability and workers’ compensation is discounted to reflect anticipated future investment earnings, assuming a five percent interest rate. Settled claims have not exceeded the commercial coverage in the past three years.

The accruals indicated above represent estimates of amounts to be paid for reported claims and incurred but not reported claims based upon past experience, modified fo r current trends and information. While the ultimate amounts of losses incurred through June 30, 2024, are dependent on future developments, based upon information provided from the City Attorney, outside counsel and others involved with the administration of the programs, the City's management believes that the aggregate accrual is adequate to cover such losses.

A summary of the changes in claims liabilities for the past three fiscal years follows:

Current Year
Beginning of Claims and Balance at Due in
Fiscal Year Changes in Claim Fiscal Year Due Within M ore than Liability Estimates Payments End One Year One Year
General Liability
2024 4,306,893$ 459,803 $ (366,144) $ 4,400,552 $ 2,200,276 $ 2,200,276 $ 2023 2,595,507 2,374,997 (663,611) 4,306,893 2,153,447 2,153,446 2022 2,433,336 703,762 (541,591) 2,595,507 1,297,754 1,297,753 Workers' Compensation
2024 11,219,000$ 707,740 $ (893,819) $ 11,032,921 $ 5,516,461 $ 5,516,460 $ 2023 12,171,624 185,188 (1,137,812) 11,219,000 5,609,500 5,609,500 2022 9,866,999 3,450,641 (1,146,016) 12,171,624 6,085,812 6,085,812

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

118
Note 14 ‒ Fund Balance and Net Position

A. Fund Balance/Net Position Deficits

At June 30, 2024 the Governmental Activities Statement of Net Position had an unrestricted net position deficit of $(97,862,236).

At June 30, 2024, the following funds had a fund balance (deficit) or unrestricted net position (deficit):

Fund Fund Type Deficit
Transportation Development Act Fund Special Revenue Fund (9,164)$ Disposal Fund Enterprise Fund (4,346,879)
General Liability Self-Insurance Fund Internal Service Fund (3,713,921) Workers' Compensation Self-Insurance Fund Internal Service Fund (7,214,639) Utility Billing Fund Internal Service Fund (2,290,020)

Special Revenue Funds

A net deficit of $9,164 exists in the Transportation Development Act Fund. This fund deficit is a result of the timing of grant reimbursements. This net deficit will be eliminated during the upcoming fiscal year.

Enterprise Funds

A net deficit of $4,346,879 exists in the Disposal Fund as a result of the City’s implementation of GASB Statements No. 68 and 75, which required the reporting of the fund’s proportionate share of the City’s net pension liability and other post-employment benefits liability, respectively. Management expects to continue to carefully monitor this fund and intends to alleviate this net deficit through cost containment measures and continued pension contributions towards its unfunded liability.

Internal Service Funds

A net deficit of $3,713,921 exists in the General Liab ility Self-Insurance Fund due to new and existing claims.

Management expects to continue to carefully monitor this fund and intends to alleviate this net deficit through increased charges to other funds for cost recovery and instituting cost containment measures.

A net deficit of $7,214,639 exists in the Workers’ Compensation Self-Insurance Fund due to new and existing claims. Management expects to continue to carefully monitor this fund and in tends to alleviate this net deficit through increased cost recovery charges, instituting cost containment measures.

A net deficit of $2,290,020 exists in the Utility Billing Fund. This f und deficit is a result of the City’s implementation of GASB Statement No. 68 and 75 which required reporting of the fund’s proportionate share of the City’s net pension liability and ot her post-employment benefits, respectiv ely. This net pension liability and other post-employment benefits created the corresponding net deficit, these will be reduced by continued pension contributions in future years.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

119
Note 14 ‒ Fund Balance and Net Position (Continued)

B. Expenditures Exceeding Appropriations

For the year ended June 30, 2024, expenditures exceeded appropriations in the following funds by function/department:

Excess Expenditures
Fund Function over Appropriations
General Fund General government:

City attorney 69,333 $
Facilities 27,218
Culture and recreation:

Community services 130,676
Capital outlay 2,142,700
Debt service:

Principal 484,987
Open Space Special Revenue Fund Culture and recreation 2,975 Parking Authority Special Revenue Fund General government 1,163 Arterial Street Construction Special Revenue Fund Capital outlay 130,908 PARIS Special Revenue Fund Highway and streets 1,111,109 Public Facilities Development Special Revenue Fund General government 2,925 Debt service:

Interest and fiscal charges 661
Storm Drain Capital Projects Fund General government 5,401

Note 15 – Net Investment in Capital Assets

Net Investment in Capital Assets at June 30 consisted of the following:

Governmental Business-Type
Activities Activities
Net investment in capital assets:

Capital assets, nondepreciable 425,286,189 $ 50,056,282 $ Capital assets, depreciable/amortizable, net 211,889,968 159,566,444 Long-term debt:

I-Bank Sports Park (1,087,564) -
Finance purchase agreement (3,701,646) (262,155) Lease liability (2,941,545) (2,249,119)
Subscription liability (55,044) -
California Recycled Water Project - (356,135) Safe Drinking Water Project - (926,523) Hinckley Water Treatment Plant Upgrade - (5,746,712) I-Bank Solid Waste - (1,897,564) I-Bank City Streets - (2,120,341) Total net investment in capital assets 629,390,358 $ 196,064,177 $ City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

120
Note 16 – Fund Balance Classification

At June 30, 2024, the City reports the following fund balance classifications:

Governmental
Grants Non-major
General Special Revenue Governmental
Fund Fund Funds Total
Nonspendable
Prepaid items 501,110 $ 248,438 $ 14,681 $ 764,229 $ Notes receivable 3,012,822 - - 3,012,822 Endowment - non-expendable - - 30,200 30,200 Total nonspendable 3,513,932 248,438 44,881 3,807,251 Restricted
Donations 635,580 - - 635,580 PEG fees 697,864 - - 697,864 Park and open space acquisition/improvement - - 5,217,214 5,217,214 Street reconstruction/improvement projects - - 7,978,438 7,978,438 Public facilities - - 1,928,937 1,928,937 Public safety - - 677,405 677,405 Police programs and equipment - - 2,020,886 2,020,886 Public art - - 9,867 9,867 Street reconstruction/improvement projects - - 3,756,660 3,756,660 Debt service - - 579,267 579,267 Storm drain improvements - - 2,764,922 2,764,922 Endowment - expendable - - 32,285 32,285 CFD assessment - - 80,284 80,284 Total restricted 1,333,444 - 25,046,165 26,379,609 Committed
Stabilization agreement 9,794,310 - - 9,794,310 Public benefit: parks, recreation, trails,
open space, and improvements 2,437,726 - - 2,437,726 Total committe d 12,232,036 - - 12,232,036 Assigned
Public works 1,853,968 - - 1,853,968 Capital projects 31,737,340 - 2,177,312 33,914,652 Total assigned 33,591,308 - 2,177,312 35,768,620 Unassigned (deficit) 60,505,969 (229,898) (10,346) 60,265,725 Total fund balances 111,176,689$ 18,540$ 27,258,012$ 138,453,241$

Note 17 – Successor Agency Private Purpose Trust for Assets of Former Redevelopment

On December 29, 2011, the California Supreme Court upheld Assembly Bill 1X 26 (“the Bill”) that provides for the dissolution of all redevelopment agencies in the State of Ca lifornia. This action impacted the reporting entity of the City of Redlands that previously ha d reported a redevelopment agency within the reporting entity of the City as a blended component unit.

The Bill provides that upon dissolution of a redevelopment agency, either the city or another unit of local government will agree to serve as the “successor agency” to hold the assets until they are distributed to other units of state and local government. On November 1, 2011, th e City Council elected to become the Successor Agency for the former redevelopment agency in accordance with the Bill.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

121
Note 17 – Successor Agency Private Purpose Trust for Assets of Former Redevelopment (Continued)

After enactment of the law, which occurred on June 28, 2011, redevelopment agencies in the State of California cannot enter into new projects, obligations or commitments. Subj ect to the control of a newly established oversight board, remaining assets can only be used to pay enforceable obligati ons in existence at the date of dissolution (including the completion of any unfinished projects that were subject to legally enforceable contractual commitments).

In future fiscal years, succ essor agencies will only be allocated revenue in the amount that is necessary to pay the estimated annual installment payments on enforceable oblig ations of the former redevelopment agency until all enforceable obligations of the prior redevelopment agency have been paid in full and all assets have been liquidated.

The Bill directs the State Controller of the State of California to review the propriety of any transfers of assets between redevelopment agencies and other public bodies that occurred after January 1, 2011. If the public body that received such transfers is not contractually committed to a third pa rty for the expenditure or en cumbrance of those assets, the State Controller is required to order the available assets to be transferred to the public body designated as the successor agency by the Bill.

In accordance with the timeline set forth in the Bill (as modified by the California Supreme Court on December 29, 2011) all redevelopment agencies in the State of California were dissolved and ceased to operate as a legal entity as of February 1, 2012. After the date of dissolution, the assets and activities of the dissolved redevelopment agency are reported in a fiduciary fund (private-purpose trust fund) in the financial statements of the City.

In order for the Successor Agency to dissolve, HSC Section 34187(b) requires the following:

a. All enforceable obligations have been retired or paid off; b. All real property has been disposed of pursuant to HSC Section 34181 or 34191.4; and, c. All outstanding litigation has been resolved

With all enforceable obligations paid in full, all land disposed of, and all liti gation settled, there is no need for the Agency to continue to exist and the cr iteria to proceed with formally dissolving has been met. On June 10, 2024, the Countywide Oversight Board approved a resolution to formally dissolve the Successor Agency to the Redevelopment Agency of the City of Redlands. July 2, 2024, the state Department of Finance acknowledged the end of the Agency's existence. Final dissolution of the Su ccessor Agency of the Former Redevelopmen t Agency of the City of Redlands took place in the fiscal year ended June 30, 2024.

Note 18 ‒ Tax Abatements – Economic Development Incentives

GASB Statement No. 77, Tax Abatement Disclosures, defines tax abatements as resulting from an agreement between a government and an individual or entity in which the govern ment promises to forgo tax revenues and the individual or entity promises to subsequently take a specific action that contributes to the economic development or otherwise benefits the government or its citizens. According to GASB No. 77, the substance of these agreements meet the definition of “tax abatements” as the revenues received were not available for general municipal services purposes, but rather used to effectively reduce the net tax liability of certain taxpayers per the conditions of an agreement.

The City offers an economic development incentive program to the entities that propose to locate or expand already established businesses within the City. This incentive program is expected to provide a stimulus to the City’s economy, increase the tax base and create jobs. Each of the agreements entered into by the City, provides for a rebate of taxes paid to the City according to formulas contained in the agreements. These limited term agreements provide for a sharing of the taxes (percentage rebates) above certain amounts with a maximum rebate not to ex ceed the cost of a business’ improvements and/or development impact fees. The City generally expects to receive increased revenue as a result of these agreements. These incentive agreements require approval by the City Council.

City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

122
Note 18 ‒ Tax Abatements – Economic Development Incentives (Continued)

The City currently has two of these agre ements in effect. For the fiscal year ended June 30, 2024, under this program the City had abatements of sales tax totaling $107,527. Pursuant to the Sales and Use Tax law (chapter 8 – Article 1 – section 7056), in order to protect the confidential information of sales taxes collected and abatements provided to each of the specific agencies, the City has presented the aggregate amount abated during the current fiscal year.

Note 19 ‒ Endowments

Simonds Endowment

The amount of net appreciation available for expenditure in the Simonds Endowment Fund is $29,272. This available amount is reflected as fund balance. The endowment corpus is $10,000 and is reflected as nonspendable fund balance.

In California, Endowments are subject to the requirements of the Uniform Prudent Management of Institutional Funds Act (UPMIFA), specifically Cal. Probate Code §18504. State law governing the City’s ability to spend the net appreciation provides that the City may appropriate “so much of an endowment fund as the institution determines is prudent for the uses, benefits, purposes, and duration for which the endowment fund is established”. The City’s policy for authorizing and spending the investment income is governed by City Council aut horization and appropriation authority, as well as the agreement of Endowment of the Si monds Parkway, dated December 14, 1985. Provisions of that agreement include, among other things, that interest generated on a per annum basis may be expended for providing maintenance, materials, and equipment solely at the Simonds Parkway.

Pauline Stancliff Memorial Trust

The amount of net appreciation available for expenditure in the Pauline Stancliff Memorial Trust Fund is $3,013. This available amount is reflected as fund balance. The endowment corpus is $20,200 and is reflected as nonspendable fund balance. In California, Endowments are subject to th e requirements of the Uniform Prudent Management of Institutional Funds Act (UPMIFA), specifically Cal. Probate Code §18504. State law governing the City’s ability to spend the net appreciation provides that the City may appr opriate “so much of an endowment fund as the institution determines is prudent for the uses, benefits, purposes, and duration for which the endowment fund is established”. The City’s policy for authorizing and spending the investment income is governed by City Council authorization and appropriation authority, as well as a minute motion on July 26, 2012 establishing a memorial trust fund in the name of Pauline Stancliff to be used for creating programs which fo cus on the goal of improving the quality of life for seniors who attend the Joslyn Senior Center.

Note 20 ‒ Changes to or within the Financial Reporting Entity

The Public Facilities Development Special Revenue Fund was previously reported as a major fund, but due to the forgiveness of the advance payable from the General F und, the fund no longer meets the quantitative threshold requiring the fund to be reported as a major fund for the fiscal year ended June 30, 2024. The changes to or within the financial reporting entity resulted in adjustments to and restatements of beginning fund balance, as follows:

June 30, 2023 Change to or with the June 30, 2023
As Previously Reported Financial Reporting Entity As Restated Governmental Funds
Major Funds:

General Fund 110,957,841$ -$ 110,957,841$ Public Facilities Development Special Revenue Fund (6,161,839) 6,161,839 - Governmental Grants Special Revenue Fund (1,077,326) - (1,077,326) Nonmajor Funds 25,545,526 (6,161,839) 19,383,687 Total Governmental Funds 129,264,202$ -$ 129,264,202$ City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

123
Note 21 – Commitments and Contingencies

A. Litigation

The City is currently a party to various claims and legal proceedings. Although the outcome of these lawsuits is not presently determinable, it is mana gement’s opinion that the ultimate li abilities, if any, resulting from such claims and proceedings will not materially affect the financial position of the City.

B. Sales Tax – Donut Hole

In 1998, the voters of California approved Proposition No. 11 which amended Article XIII, Section 29 of the California Constitution to allow cities and counties to ente r into contracts to apportion sales and use tax revenue, by ordinance or resolution, and upon approval by a two-thir ds vote of the legislative bodies of the parties to the contract. The City has provided in its contract with the County of San Bernardino that the benefit of receiving the sales and use tax revenue generated by businesses located in the unincorporated area of the Donut Hole, in exchange for the City's provision of municipal services, will terminate on December 31, 2003, unless an extension of the term of the contract beyond December 31, 2003, is consented to by a majority vote of the qualified voters of the City. The term has been extended beyond December 31, 2003, under the Ordinance No. 2550. The County of San Bernardino and the City apportion the sales and use tax revenue generated by businesses located in the Donut Hole generally on the basis of ninety percent (90 percent) of such sales and use tax revenue being provided to the City and ten percent (10 percent) of such sales and use tax revenue being provided to the County.

C. Federal and State Grants

The City participates in various federal grant programs, the principal of which are subject to program compliance audits pursuant to the Single Audit act as amended. Acco rdingly, the City’s compliance with applicable grant requirements will be established at a future date. The amount of expenditures which may be disallowed by the granting agencies cannot be determined at this time, alt hough the City anticipates such amounts, if any, will be immaterial.

D. Contractual Commitments

The City has capital contractual commitments for which funds have been encumbered as of June 30, 2024.

Encumbrances related to capital projects are funded throug h the current year appropriated budget, which carries over to the following year.

The following contractual construction commitments existed at June 30, 2024:

Project Title Commitment
General Fund
2023 Alley Paving Improvements - General Fund Portion 237,351$ Bay Doors for Fire Stations 261, 262, & 263 490,205
Community Park Lighting Project 576,469
Fire Station 262 Architectural Design 25,219
Fire Station 262 Remodel 1,404,193
In-Roadway Light System Installation 19,876
Redlads Bowl Improvements 217,512
Texonia Park Renovation 76,245
Total for General Fund 3,047,070
Governmental Grants Special Revenue Fund
Architectural Design of Metal Shelter for HHW Site 12,420 Joslyn Senior Center Renovation 34,343
Library Lower Level Architecture Design 33,491
Total for Governmental Grants Special Revenue Fund 80,254$ City of Redlands
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

124
Note 21 – Commitments and Contingencies (Continued)

D. Contractual Commitments (Continued)

Project Title Commitment
Wate r Fund
2023 CIP Water Pipeline & Highline Replacement 182,974$ Peterbilt CNG Truck with Hydraulic Telescopic Crane - Water Portion 265,456 Tate Water Treatment Plant Influent Line Replacement 176,703 Water Meter Replacement Project 4,515,724
Water SCADA System Upgrade 2,859,549
Total for Water Fund 8,000,406
Solidwaste Fund
Landfill Gas Extraction Construction Quality Assurance $155,308 Solidwaste Vehicles 2,375,512
Total for Solidwaste Fund 2,530,820
W astewater Fund
2022 CIP Sewer Pipeline Replacement $718,201
2023 CIP Sewer Pipeline Replacement 2,485,353
Peterbilt CNG Truck with Hydraulic Telescopic Crane - Wastewater Portion 265,456 Total for Wastewater Fund 3,469,010
Non-Major Funds
2023 Alley Paving Improvements - PARIS Fund Portion 697,199 Cemetery Surveying & Map Update 30,000
Design & Construction Mgmnt of New City Hall - Safety/City Hall Replacement Fund 1,146,503 Design & Construction Mgmnt of a Public Safety Facility - Safety/City Hall Replacement Fund 4,838,622 Redlands Passenger Rail Project Platform Construction-Air Quality Improvement Fund 121,642 WWTP Recycled Water Reservoir Project - Nonpotable Water Fund 79,922 Total for Non-Major Funds 6,913,888
Total for City 24,041,448$

125

REQUIRED SUPPLEMENTARY INFORMATION
(UNAUDITED)

126
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City of Redlands
Required Supplementary Information (Unaudited)
Budgetary Information
For the Year Ended June 30, 2024

127
Budgetary Information

Budgets are legally adopted and formal budgetary integration is employed as a management control device during the year for all governmental fund types. The budget is pr epared in accordance with accounting principles generally accepted in the United States of America. From the effective date of the budget, the amounts stated therein as proposed expenditures become appropriations to the various City departments.

The City Council may amend the budget only during a regular meeting, providing that sufficient monies are available and that expenditures of proceeds of taxes will not be increased beyond the cons titutional appropriation limit as imposed by Article XIIIB of the State Constitution.

The City's formal budgetary process begins at the operating program level. Departmental budgets are comprised of the various operating program budgets. Operating programs do not cross departmental lines. Individual fund budgets consist of the departmental budgets; departmental budgets may cross fund lines.

Individual fund budgets are, in all cases where appropria tions are required, the same as the appropriation amounts. In the case of the Governmental Fund types, unexpended budgeted amounts, except for amounts relating to capital projects, lapse at the end of the budget year. Spending control (legal level) for most funds is established by the amount of expenditures budgeted at the departmental and function levels. Accordingl y, the General Fund expenditures are displayed in the supplementary schedules at the department level and the Special Revenue, Debt Service, Capital Projects, and Permanent Funds expenditures are displayed at the function level. Management control is exercised at the line item level in each operating program. Management can transfer budgeted amounts within operating programs, departments or funds, provided that such transfers do not increase the overall budget. Appropriations that increase the budget require City Council approval.

City of Redlands
Required Supplementary Information (Unaudited) (Continued) Budgetary Comparison Schedules – General Fund
For the Year Ended June 30, 2024

128

Variance with
Final Budget
Actual Favorable/
Original Final Amounts (Unfavorable)
REVENUES :

Property taxes 37,668,615$ 38,977,380$ 41,713,771$ 2,736,391$ Sales and use taxes 46,747,502 48,469,715 47,629,644 (840,071) Other taxes 2,247,940 2,247,940 2,676,553 428,613 Franchise fees 2,567,833 4,499,151 4,471,469 (27,682) Licenses and permits 7,969,963 7,988,380 9,238,592 1,250,212 Fines and forfeitures 146,200 79,560 62,969 (16,591) Intergovernmental 732,500 386,000 780,165 394,165 Charges for services 7,338,869 6,855,094 7,101,106 246,012 Investment income (loss) 200,000 5,800,100 5,647,723 (152,377) Rents and leases 1,724,754 1,562,925 1,167,604 (395,321) Miscellaneous 1,400,440 2,005,223 2,111,512 106,289 Total revenues 108,744,616 118,871,468 122,601,108 3,729,640 EXPENDITURES :

Current:

General government:

City council 422,789 501,243 462,429 38,814 City clerk 453,870 288,080 269,755 18,325 City manager 7,637,449 7,443,523 6,986,773 456,750 Finance 2,845,654 3,172,581 3,076,334 96,247 City attorney 809,834 812,610 881,943 (69,333) Development services 4,490,505 6,333,229 4,847,891 1,485,338 Facilities 5,215,900
6,220,357 6,247,575 (27,218)
Public works engineering 968,724 1,890,030 1,199,709 690,321 Public safety:

Police 34,777,691 35,816,830 34,476,780 1,340,050 Fire 19,991,058 20,484,241 19,049,435 1,434,806 Animal Services 842,379 1,092,662 1,012,118 80,544 Culture and recreation:

Community services 2,184,048 2,010,817 2,141,493 (130,676) Parks 4,981,708 6,017,039 5,795,030 222,009 Highway and streets:

Electrical and streets 4,318,316 5,029,000 4,796,525 232,475 Library 2,999,592 3,585,529 3,580,553 4,976 Capital outlay 4,023,310 12,362,454 14,505,154 (2,142,700) Debt service:

Principal 484,180 3,170,921 3,655,908 (484,987) Interest and fiscal charges 1,535,199 2,152,452 387,035 1,765,417 Total expenditures 98,982,206 118,383,598 113,372,440 5,011,158 REVENUES O VER (UNDER) EXPENDITURES 9,762,410 487,870 9,228,668 8,740,798 Budgeted Amounts

City of Redlands
Required Supplementary Information (Unaudited) (Continued) Budgetary Comparison Schedules – General Fund (Continued) For the Year Ended June 30, 2024

129

Variance with
Final Budget
Actual Favorable/
Original Final Amounts (Unfavorable)
OTH E R F I NA NCI NG SOU R CE S (U SE S):

Inception of finance purchase agreement - - 3,668,445 3,668,445 Inception of lease liability - - 2,546,260 2,546,260 Transfers in 2,450,517 2,468,172 2,850,162 381,990 Transfers out (9,511,084) (16,983,070) (18,074,687) (1,091,617) Total other financing sources (uses) (7,060,567) (14,514,898) (9,009,820) 5,505,078 Net change in fund balance 2,701,843$ (14,027,028)$ 218,848 14,245,876$ FUND BALANCE:

Beginning of year 110,957,841
End of year 111,176,689$
Budgeted Amounts

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City of Redlands
Required Supplementary Information (Unaudited) (Continued) Budgetary Comparison Schedules – Governmental Grants Special Revenue Fund For the Year Ended June 30, 2024

131

Variance with
Final Budget
Actual Favorable/
Original Final Amounts (Unfavorable)
REVENUES :

Intergovernmental -$ 24,489,314$ 14,061,381$ (10,427,933)$ Investment income (loss) - - 1,118 1,118 Total revenues - 24,489,314 14,062,499 (10,426,815) EXPENDITURES:

Current:

General government - 16,716,486 12,008,843 4,707,643 Public safety - 589,113 211,543 377,570 Capital outlay - 7,878,222 683,003 7,195,219 Total expenditures - 25,183,821 12,903,389 12,280,432 REVENUES OVER (UNDER) EXPENDITURES - (694,507) 1,159,110 1,853,617 OTH E R F I NA NCI NG SOU R CE S (U SE S):

Transfers in - - 405 405 Transfers out - - (63,649) (63,649) Total other financing sources (uses) - - (63,244) (63,244) Net change in fund balance -$ (694,507)$ 1,095,866 1,790,373$ FUND BALANCE (DEFICIT):

Beginning of year (1,077,326)
End of year 18,540$
Budgeted Amounts

City of Redlands
Required Supplementary Information (Unaudited) (Continued) Schedule of Changes in the Net Pension Liability and Related Ratios For the Year Ended June 30, 2024

132

Measurement period, year ended 6/30/2023 6/30/2022 6/30/2021 6/30/2020 6/30/2019 T otal pension liability
S ervice cost 4,056,901 $ 3,969,259 $ 3,365,376 $ 3,525,116 $ 3,334,799 $ Interest on total pension liability 13,369,640 12,856,892 12,119,433 12,569,714 11,680,277 Differences between expected and actual
experience 970,748 (1,568,849) 270,034 247,796 419,589 Changes in assumptions - 5,704,014 - - - Changes in benefit terms 330,342 - - - - Benefit payments, including refunds
of employee contributions (11,282,718) (10,197,185) (9,385,911) (9,643,784) (8,930,778) Net change in total pension liability 7,444,913 10,764,131 6,368,932 6,698,842 6,503,887 T otal pension liability - beginning 196,074,708 185,310,577 178,941,645 172,242,803 165,738,916 T otal pension liability - ending (a) 203,519,621$ 196,074,708 $ 185,310,577 $ 178,941,645 $ 172,242,803 $ Plan fiduciary net position
Contributions - employer 6,626,543 6,083,423 5,653,857 5,163,971 4,543,195 Contributions - employee 1,726,746 1,630,007 1,628,531 1,617,023 1,587,404 Investment income (net of
administrative expenses) 8,817,845 (11,815,363) 29,305,630 6,312,755 7,923,614 Benefit payments (11,282,718) (10,197,185) (9,643,784) (9,385,911) (8,930,778) Plan to plan resources - - - - 283 Other (104,916) (97,846) (130,119) (178,655) (86,841) Net change in plan fiduciary net position 5,783,500 (14, 396,964) 26,814,115 3,529,183 5,036,877
Plan fiduciary net position - beginning 142,674,042 157,071,006 130,256,891 126,727,708 121,690,831 Plan fiduciary net position - ending (b) 148,457,542$ 142,674,042 $ 157,071,006 $ 130,256,891 $ 126,727,708 $ Net pension liability - ending (a)-(b) 55,062,079$ 53,400,666$ 28,239,571$ 48,684,754$ 45,515,095$ Plan fiduciary net position as a
percentage of the total pension liability 72.95% 72.77% 84.76% 72.79% 73.58% Covered payroll 24,154,413$ 23,450,886$ 22,767,850$ 22,631,158$ 22,121,385$ Net pension liability as a percentage of
covered payroll 227.96% 227.71% 124.03% 215.12% 205.75% Miscellaneous Plan

City of Redlands
Required Supplementary Information (Unaudited) (Continued) Schedule of Changes in the Net Pension Liability and Related Ratios (Continued) For the Year Ended June 30, 2024

133

Measurement period, year ended 6/30/2018 6/30/2017 6/30/2016 6/30/2015 6/30/2014 T otal pension liability
S ervice cost 3,368,018 $ 3,278,844 $ 2,780,753 $ 2,735,046 $ 2,703,390 $ Interest on total pension liability 11,240,326 10,868,639 10,539,757 10,224,502 9,786,094 Differences between expected and actual
experience 529,928 285,453 (1,148,342) 334,519 - Changes in assumptions (874,625) 8,600,283 - (2,403,446) - Chang es in b enefit terms - - - - - Benefit payments, including refunds
of employee contributions (8,785,537) (8,512,367) (7,929,573) (7,496,594) (7,031,419) Net change in total pension liability 5,478,110 14,520,852 4,242,595 3,394,027 5,458,065 T otal pension liability - beginning 160,260,806 145,739,954 141,497,359 138,103,332 132,645,267 T otal pension liability - ending (a) 165,738,916$ 160,260,806 $ 145,739,954 $ 141,497,359 $ 138,103,332 $ Plan fiduciary net position
Contributions - employer 3,856,431$ 3,706,235$ 3,297,550$ 2,749,274$ 2,614,893$ Contributions - employee 1,444,993 1,461,526 1,324,766 1,219,187 1,378,971 Investment income (net of
administrative expenses) 9,732,163 11,870,046 602,969 2,473,614 16,743,903 Benefit payments (8,785,537) (8,512,367) (7,929,573) (7,496,594) (7,031,419) Plan to plan resources (343,451) - - - - Other (180,708) (158,865) (67,266) (121,971) - Net change in plan fiduciary net position 5,723,891 8,366, 575 (2,771,554) (1,176,490) 13,706,348
Plan fiduciary net position - beginning 115,966,940 107,600,365 110,371,919 111,548,409 97,842,061 Plan fiduciary net position - ending (b) 121,690,831$ 115,966,940 $ 107,600,365 $ 110,371,919 $ 111,548,409 $ Net pension liability - ending (a)-(b) 44,048,085$ 44,293,866$ 38,139,589$ 31,125,440$ 26,554,923$ Plan fiduciary net position as a
percentage of the total pension liability 73.42% 72.36% 73.83% 78.00% 80.77% Covered payroll 19,836,302$ 20,199,995$ 18,953,660$ 17,548,793$ 16,826,776$ Net pension liability as a percentage of
covered payroll 222.06% 219.28% 201.23% 177.37% 157.81% Miscellaneous Plan (Continued)

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City of Redlands
Required Supplementary Information (Unaudited) (Continued) Schedule of Changes in the Net Pension Liability and Related Ratios (Continued) For the Year Ended June 30, 2024

135

Measurement period, year ended 6/30/2023 6/30/2022 6/30/2021 6/30/2020 6/30/2019 Plan's proportion of the
net pension liability (asset) 0.041080% 1.475939% 1.660061% 0.809500% 0.790200% Plan's proportionate share of
the net pension liability (asset) 108,653,947 $ 101,420,265 $ 58,259,612 $ 88,080,547 $ 80,975,102 $ Plan's covered payroll 18,476,389 $ 17,938,242 $ 17,415,769 $ 17,522,750 $ 17,236,908 $ Plan's proportionate share of
the net pension liability as a percentage
of covered payroll 588.07% 565.39% 334.52% 502.66% 469.78% Plan's fiduciary net position 230,662,382$ 223,139,182$ 244,268,089$ 200,216,677$ 195,371,697$ Plan's fiduciary net position as a percentage
of the total pension liability 67.98% 68.75% 80.74% 69.45% 70.70% Plan's proportionate share of aggregate
employer contributions 11,063,552$ 10,344,274$ 9,582,627$ 8,703,374$ 7,448,780$ Measurement period, year ended 6/30/2018 6/30/2017 6/30/2016 6/30/2015 6/30/2014 Plan's proportion of the
net pension liability (asset) 0.779400% 0.746000% 0.748700% 0.737700% 0.689500% Plan's proportionate share of
the net pension liability (asset) 75,109,650$ 73,979,298 $ 64,784,346 $ 50,633,826 $ 42,905,786 $ Plan's covered payroll 14,894,900$ 14,827,015$ 14,604,289$ 14,342,189$ 14,292,490$ Plan's proportionate share of
the net pension liability as a percentage
of covered-employee payroll 504.26% 498.95% 443.60% 353.04% 300.20% Plan's fiduciary net position 188,434,296$ 182,071,554$ 172,261,918$ 178,611,604$ 160,060,272$ Plan's fiduciary net position as a percentage
of the total pension liability 71.50% 71.11% 72.67% 77.91% 78.86% Plan's proportionate share of aggregate
employer contributions 6,211,050$ 5,886,486$ 5,126,655$ 4,246,980$ 4,977,335$ Safety Plan

City of Redlands
Required Supplementary Information (Unaudited) (Continued) Schedule of Contributions – Pension
For the Year Ended June 30, 2024

136

Fiscal Year: 2023-24 2022-23 2021-22 2020-21 2019-20
Contractually determined contribution (actuarially determined) 6,961,999$ 6,627,610 $ 6,077,846 $ 5,676,210 $ 5,159,972 $ Contributions in relation to the actuarially determined contributions (6,961,999) (6,627,610) (6,077,846) (5,676,210) (5,159,972) Contribution deficiency (excess) -$ - $ - $ - $ - $ Covered payroll 24,879,045 $ 24,154,413 $ 23,450,886 $ 22,767,850 $ 22,631,158 $ Contributions as a percentage of covered payroll 27.98% 27.44% 25.92% 24.93% 22.80% Fiscal Year: 2018-19 2017-18 2016-17 2015-16 2014-15
Contractually determined contribution (actuarially determined) 4,472,807$ 3,797,781 $ 3,705,781 $ 3,297,550 $ 2,749,274 $ Contributions in relation to the actuarially determined contributions (4,472,807) (3,797,781) (3,705,781) (3,297,550) (2,749,274) Contribution deficiency (excess) -$ - $ - $ - $ - $ Covered payroll 22,121,385 $ 19,836,302 $ 20,199,995 $ 18,953,660 $ 17,548,793 $ Contributions as a percentage of covered payroll 20.22% 19.15% 18.35% 17.40% 15.67% Notes to Schedule
Methods and assumptions used to determine contribution rates for the fiscal year ended June 30, 2024:

Actuarial cost method Entry Age Normal
Amortization method/period For details, see June 30, 2021 Funding Valuation Report Asset valuation method Actuarial Value of Assets. For details, see June 30, 2021 Funding Valuation Report.

Inflation 2.30%
Salary increases Varies by entry age and service
Payroll growth 2.50%
Investment rate of return 6.90% net of pension plan investment and administrative expenses.

Retirement age
M ortality
Miscellaneous Plan
The actuarial methods and assumption used to set the actuarially determined contributions for Fiscal Year 2024 were derived from the June 30, 2021 funding valuation report.

The probabilities of mortality are based on the the 2021 experience study report. The mortality table was developed based on CalPERS-specific data. The rates incorporate Generational Mortality to capture ongoing mortality improvement using 80% of Scale MP 2020 published by the Society of Actuaries.

The probabilities of retirement are based on the 2021 CalPERS Experience Study for the period from 2000 and 2019.

City of Redlands
Required Supplementary Information (Unaudited) (Continued) Schedule of Contributions – Pension (Continued)
For the Year Ended June 30, 2024

137

Fiscal Year: 2023-24 2022-23 2021-22 2020-21 2019-20
Contractually determined contribution (actuarially determined) 11,753,041$ 11,063,552 $ 10,344,274 $ 9,582,627 $ 8,703,374 $ Contributions in relation to the actuarially determined contributions (11,753,041) (11,063,552) (10,344,274) (9,582,627) (8,703,374) Contribution deficiency (excess) -$ -$ -$ -$ -$ Covered payroll 19,030,681$ 18,476,389 $ 17,938,242 $ 17,415,769 $ 17,522,750 $ Contributions as a percentage of covered payroll 61.76% 59.88% 57.67% 55.02% 49.67% Fiscal Year: 2018-19 2017-18 2016-17 2015-16 2014-15
Contractually determined contribution (actuarially determined) 7,448,780$ 6,211,050$ 5,886,486$ 5,126,655$ 4,246,980$ Contributions in relation to the actuarially determined contributions (7,448,780) (6,211,050) (5,886,486) (5,126,655) (4,246,980) Contribution deficiency (excess) -$ -$ -$ -$ -$ Covered payroll 17,236,908$ 14,894,900 $ 14,827,015 $ 14,604,289 $ 14,342,189 $ Contributions as a percentage of covered payroll 43.21% 41.70% 39.70% 35.10% 29.61% Notes to Schedule
Methods and assumptions used to determine contribution rates for the fiscal year ended June 30, 2024:

Actuarial cost method Entry Age Normal
Amortization method/period For details, see June 30, 2021 Funding Valuation Report Asset valuation method Actuarial Value of Assets. For details, see June 30, 2021 Funding Valuation Report.

Inflation 2.30%
Salary increases Varies by entry age and service
Payroll growth 2.50%
Investment rate of return 6.90% net of pension plan investment and administrative expenses.

Retirement age
Morta l i ty
Safety Plan
The probabilities of mortality are based on the the 2021 experience study report. The mortality table was developed based on CalPERS-specific data. The rates incorporate Generational M ortality to capture ongoing mortality improvement using 80% of Scale MP 2020 published by the Society of Actuaries.

The actuarial methods and assumption used to set the actuarially determined contributions for Fiscal Year 2024 were derived from the June 30, 2021 funding valuation report.

The probabilities of retirement are based on the 2021 CalPERS Experience Study for the period from 2000 and 2019.

City of Redlands
Required Supplementary Information (Unaudited) (Continued) Schedule of Changes in Total OPEB Liability and Related Ratios For the Year Ended June 30, 2024

138

M easurement period, year ending: 6/30/2023 6/30/2022 6/30/2021 6/30/2020 6/30/2019 6/30/2018 6/30/2017 1 Total OPE B liability
Service cost 3,676,645 $ 6,288,802 $ 4,405,809$ 4,371,866$ 4,540,301$ 4,647,747$ 4,517,859$ Interest 6,072,016 4,504,364 3,775,999 4,254,153 4,744,702 4,497,267 4,351,611 Changes of benefit terms 4,078,580 - - - - - Differences between expected and actual experience (26,395,453) (9,975,595) 3,545,600 139,016 4,588,088 - - Changes of assumptions (100,889) (50,693,723) 42,967,302 14,314,382 (4,153,914) (2,485,196) - Benefit payments, including refunds
of member contributions (4,397,783) (5,079,505) (4,960,733) (4,882,065) (4,526,765) (4,525,686) (4,050,613) Net change in total OPE B liability (17,066,884) (54,955,657) 49,733,977 18,197,352 5,192,412 2,134,132 4,818,857 Total OPE B liability - beginning 146,960,265 201,915,922 152,181,945 133,984,593 128,792,181 126,658,049 121,839,192 Total OPEB liability - ending (a) 129,893,381$ 146,960,265$ 201,915,922$ 152,181,945$ 133,984,593$ 128,792,181$ 126,658,049$ OPEB fiduciary net position
2 Contributions - employer 4,397,783$ 5,079,505$ 4,960,733$ 4,882,065$ 4,526,765$ 4,525,686$ 4,050,613$ Net investment income - - - - - - - Benefit payments, including refunds
of member contributions (4,397,783) (5,079,505) (4,960,733) (4,882,065) (4,526,765) (4,525,686) (4,050,613) Administrative expense - - - - - - - Net change in plan fiduciary net position - - - - - - - Plan fiduciary net position - beginning - - - - - - - Plan fiduciary net position - ending (b) -$ -$ -$ -$ -$ -$ -$ Plan net OPEB liability - ending (a) - (b) 129,893,381$ 146,960,265$ 201,915,922$ 152,181,945$ 133,984,593$ 128,792,181$ 126,658,049$ Plan fiduciary net position as a
percentage of the total OPEB liability 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Cove red-empl oyee payroll 36,997,665$ 35,920,063$ 34,958,699$ 35,722,602$ 33,975,526$ 31,410,072$ 32,062,170$ Plan net OPEB liability as a
pe rce ntage of covere d-e mploye e payrol l 351.09% 409.13% 577.58% 426.01% 394.36% 410.03% 395.04% 1 Inform ation only presented from the im plem entation yeargasb

SUPPLEMENTARY INFORMATION
139
Special Revenue Funds:

Emergency Service Fund - This fund is used to account for the collection of a special property tax to be spent on paramedic services.

Household Hazardous Waste Fund - This fund is used to account for revenue collected and expenditures made to properly dispose of household hazardous waste.

State Gas Tax Fund - This fund is used to account for the receipt and subsequent expenditure of the City’s share of the State levied tax on gasoline and other vehicle fuels.

Air Quality Improvement Fund - To account for the collection and subsequent expenditure of AB2766 (District Fees to Implement the California Clean Air Act) monies to be used for pollution reduction.

Traffic Safety Fund - This fund is used to account for the receipt of traffic fines for moving violations within the City limits.

Measure I Fund - This fund is used to account for “new” revenues resulting from a voter-approved renewal of a half -
cent retail transaction and use tax, to be used for transportation improvements and traffic management programs.

Open Space Fund - This fund is used to account for receipt and subsequent expenditure of developer fees collected to acquire open space land in and around the City.

Downtown Redlands Business Area Fund - This fund is used to account for various activities and special events with the intent of attracting business to the downtown area.

Parking Authority Fund - This fund is used to account for receipt and subsequent expenditure of fees collected as a result of a city-wide authority formed to control parking.

Asset Forfeiture Fund - This fund is used to account for receipt and subsequent expenditure of various asset seizure monies.

Supplemental Law Enforcement Fund - To account for receipt and subsequent expenditure of AB1913 monies, which, pursuant to the Citizens’ Option for Public Safety (COPS) Program, must be spent for supplemental law enforcement services.

Park & Open Space Fund - This fund is used to account for the collection and subsequent expenditure of developer fees levied for the purpose of acquiring and developing land for parks and open space.

Arterial Street Construction Fund - To account for the collection and related expenditure of development impact fees designated for arterial street construction projects.

Traffic Signals Fund - This fund is used to account for the collection and related expenditure of development impact fees designated for traffic signal construction projects.

Freeway Interchanges Fund - This fund is used to account for the collection and related expenditure of development impact fees designated for freeway interchange construction projects.

Non-Major Governmental Funds
140
Special Revenue Funds (Continued):

Street Lighting District #1 Fund - This fund is used to account for the maintenance, operation, and service of street lighting facilities financed by assessments collected from landowners within the district.

CFD 2004-1 Assessments Fund - This fund is used to account for the maintenance of landscaping in public right- ofway and easements surrounding tracts within the district.