Budget and Personnel Committee
February 15, 2024

SPECIAL BUDGET MEETING

BUDGET AND PERSONNEL COMMITTEE
THURSDAY, FEBRUARY 15, 2024
2:00 PM
1 1. CALL TO ORDER

2. ROLL CALL

3. COMMUNICATIONS
Members of the Public may address the Budget/Personnel Committee on matters not appearing on the Budget/Personnel Committee Agenda at this time for up to three minutes. In order that the Budget/Personnel Committee Secretary may later identity the speaker in the minutes of the meeting, it is helpful if the speakers state their names.

Public comments regarding items on the scheduled agenda will be heard at the time the item is being considered by the Budget/Personnel Committee.

4. ORDER OF BUSINESS
4A. Approve the Budget and Personnel Committee Special Meeting Minutes for June 15, 2023
Draft Minutes
AGENDA

BUDGET AND PERSONNEL COMMITTEE
Special Budget Meeting - Thursday, February 15, 2024
2:00 PM

THIS MEETING WILL BE HELD VIRTUALLY AND IN PERSON, INS COMPLIANT WITH ASSEMBLY BILL AB 2449, SIGNED INTO LAW ON SEPTEMBER 13, 2022, WHICH AMENDS GOVERNMENT CODE SECTION 54953 TO PROVIDE AUTHORITY FOR PUBLIC

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https://us02web.zoom.us/j/4614728829
Meeting ID: 461 472 8829
Participate telephonically by calling the number below:
(669) 900-6833
Meeting ID: 461 472 8829
If prompted to enter a participant ID, press #
To participate in person:

City Hall, Council Chamber
1 Pendergrass Way
Sand City, CA 93955
2 4B. Review of Fiscal Year 2022-2023 Audited Financial Reports Staff Report
Draft Audit Report

5. CLOSED SESSION

6. ADJOURNMENT
The current agenda is available in PDF format on our website at:
www.sandcity.org
If you have a request for a disability-related modification or accommodation, including auxiliary aids or services, which will allow you to participate in a Sand City public meeting, please call the City Clerk at (831) 394-3054 extension 220, or give your written request to the City Clerk at 1 Pendergrass Way, Sand City, CA 93955 at least 48 hours prior to the scheduled meeting to allow the City Clerk time to arrange for the requested modification or accommodation.
3 AGENDA ITEM
4A.

Approve the Budget and Personnel
Committee Special Meeting Minutes for
June 15, 2023
4 1

MINUTES

BUDGET AND PERSONNEL COMMITTEE
Special Meeting - Thursday, June 15, 2023 8:00 AM
As allowed by Assembly Bill AB2449, this meeting was conducted in person and by teleconference

1. CALL TO ORDER
Mayor Carbone called the meeting to order at 8:00 AM.

2. ROLL CALL

Present: Mayor Carbone
Committee Member Sofer
Staff: Vibeke Norgaard, City Manager
Roberto Moreno, Interim Finance Specialist

3. COMMUNICATIONS
No public comment received.

4. ORDER OF BUSINESS
4A Approve the Budget and Personnel Committee Meeting Minutes for January 12, 2023 and March 17, 2023
No public comment received.

Upon motion by Committee Member Sofer and seconded by Chair Carbone, the Committee approved the January 12, 2023 and March 17, 2023 Budget and Personnel Committee meeting minutes.
4B Discuss and Approve the Proposed Fiscal Year 2023-2024Budget No public comment received.

Roberto Moreno, Interim Finance Specialist provided the Committee a brief overview of the proposed budget for Fiscal Year 2023-2024, the Committee had discussion on the proposed budget.

Upon motion by Committee Member Sofer and seconded by Chair Carbone, the Committee approved the proposed Fiscal Year 2023-2024 Budget directed staff to place the proposed budget on the June 20, 2023 agenda of the City Council for Council’s approval.
5 2

5. ADJOURNMENT
The Committee adjourned the meeting at approximately 8:55 AM. ____________________________
Kerry Lindstrom, City Clerk
6 AGENDA ITEM
4B.

Review of Fiscal Year 2022-2023 Audited
Financial Reports
7 City of Sand City

STAFF REPORT
TO: Budget and Personnel Committee
FROM: Vibeke Norgaard, City Manager & Jennifer Pope, Finance Manager Presentation: Richard Hegner and Rich Gonzales of CliftonLarsonAllen, LLP SUBJECT: Review of FY 2022-2023 Audited Financial Reports DATE: February 15, 2024
_______________________________________________________________________ BACKGROUND/DISCUSSION:

The certified public accounting firm, CliftonLarsonAllen, LLP was engaged by the City Council to perform an audit of the financial statements for the period ending June 30, 2023, for the City of Sand City and Successor Agency.

The auditors have completed their audit and will be giving a presentation of the audited financial report for the Budget and Personnel Committee at the February 15, 2024, meeting. A few financial highlights include the following:
 The assets and deferred outflow of resources of the City exceeded its liabilities and deferred inflows of resources at the close of the year ended June 30, 2023, by $33 million. However, $10.3 million is a net investment in capital assets, and $9.7 million is a non-current receivable due from the Successor Agency.  The City’s total net position increased by $1.9 million.  The assets and liabilities include $542,000 that is due to TAMC in regard to a development project.
 At the close of the year, the City’s governmental funds reported combined ending fund balance of $24.4 million, $9.7 million of which is a non-current receivable.

The net change in fund balances was an increase of $1.8 million.

Additional information will be shared during the auditor’s presentation including highlights of the City’s assets and liabilities and overall financial position. They will also provide information on how the City’s current position compares to the financial position in past years. The auditors will be available for questions after their presentation. 8 FISCAL IMPACT:

There is no fiscal impact associated with approving and recommending approval of the audited financial statements and the auditor’s report to City Council.

RECOMMENDATION:

Staff recommends that the Budget and Personnel Committee review the audited financial statements and Auditor’s Report for fiscal year ending June 30, 2023, and recommend approval to Council.

CEQA:

This action does not constitute a "project" as defined by the California Environmental Quality Act (CEQA) guidelines section 15378.

ATTACHMENTS:

1. Draft Audit Report
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CITY OF SAND CITY

FINANCIAL STATEMENTS AND

SUPPLEMENTARY INFORMATION
YEAR ENDED JUNE 30, 2023
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CITY OF SAND CITY

TABLE OF CONTENTS
YEAR ENDED JUNE 30, 2023
MEMBERS OF THE CITY COUNCIL AND STAFF 1
INDEPENDENT AUDITORS’ REPORT 2
MANAGEMENT’S DISCUSSION AND ANALYSIS 5

BASIC FINANCIAL STATEMENTS

GOVERNMENT-WIDE FINANCIAL STATEMENTS
STATEMENT OF NET POSITION 14
STATEMENT OF ACTIVITIES 15

FUND FINANCIAL STATEMENTS

GOVERNMENTAL FUNDS
BALANCE SHEET 16

RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL
FUNDS TO THE STATEMENT OF NET POSITION 17

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE 18

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES,

AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO
THE STATEMENT OF ACTIVITIES 19

FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET POSITION (DEFICIT) 20
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION (DEFICIT) 21 NOTES TO BASIC FINANCIAL STATEMENTS 22

REQUIRED SUPPLEMENTARY INFORMATION

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL - GENERAL 57
NOTES TO REQUIRED SUPPLEMENTARY INFORMATION 58

SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY – MISCELLANEOUS PLAN 59
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CITY OF SAND CITY

TABLE OF CONTENTS
YEAR ENDED JUNE 30, 2023

SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY – SAFETY PLAN 60
SCHEDULE OF CONTRIBUTIONS – MISCELLANEOUS PLAN 61
SCHEDULE OF CONTRIBUTIONS – SAFETY PLAN 62

SCHEDULE OF CHANGES IN THE NET OPEB LIABILITY/(ASSET) AND RELATED RATIOS 63
SCHEDULE OF CONTRIBUTIONS - OPEB 64

REPORT REQUIRED BY GOVERNMENT AUDITING STANDARDS
INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER

FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS

BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS 66
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CITY OF SAND CITY
JUNE 30, 2023
(1)
Name Office Term Expires
Mary Ann Carbone Mayor December 2024
Jerry Blackwelder Vice Mayor December 2026
Marilee Diaz Council Member December 2024
Gregory Hawthorne Council Member December 2024
Elizabeth Sofer Council Member December 2026
City Staff
Name Office
Vibeke Norgaard City Manager
David Honda Chief of Police
Members of the City Council
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(2)
INDEPENDENT AUDITORS’ REPORT
Honorable Mayor and City Council Members
City of Sand City
Sand City, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the City of Sand City (the City), as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents.

In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the City of Sand City, as of June 30, 2023, and the respective changes in financial position 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 (GAAS) and the standards applicable to financial audits contained in the Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City of Sand 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 of Sand City's ability to continue as a going concern for 12 months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. 14 DRAFT
Honorable Mayor and City Council Members
City of Sand City
(3)
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 auditor's 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 GAAS and Government Auditing Standards (GAS) 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 GAAS and GAS, 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 of Sand 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 of Sand 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.
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Honorable Mayor and City Council Members
City of Sand City
(4)
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, the budgetary comparison schedule, the schedule of proportionate share of the net pension liability, the schedule of contributions pension, the schedule of changes in the net OPEB liability/(asset) and related ratios, and the schedule of contributions – OPEB, as listed in the table of contents, be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information
Management is responsible for the other information included in the annual report. The other information comprises the members of city council and staff schedule 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 REPORT DATE on our consideration of the City of Sand City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City of Sand City’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Sand City’s internal control over financial reporting and compliance.

CliftonLarsonAllen LLP
Roseville, California

REPORT DATE
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CITY OF SAND CITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2023
(5)
The discussion and analysis of the City of Sand City’s (the City) financial performance provides an overview and analysis of the City’s financial activities for the year ended June 30, 2023. It should be read in conjunction with the accompanying basic financial statements.

FINANCIAL HIGHLIGHTS
 The assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of resources at the close of the year ended June 30, 2023, by $33 million. However, $10.3 million is a net investment in capital assets, and $9.7 million is a noncurrent receivable due from the Successor Agency.
 The City’s total net position increased by $1.9 million.  The assets and liabilities include $542,000 that is due to TAMC in regard to a development project.
 At the close of the year ended June 30, 2023 the City’s governmental funds reported combined ending fund balances of $24.4 million, $9.7 million of which is a noncurrent receivable. The net change in fund balances was an increase of $1.8 million.

OVERVIEW OF THE FINANCIAL STATEMENTS
The discussion and analysis service as an introduction to the City’s financial statements are comprised of three components: 1) government-wide financial statements; 2) fund financial statements; and 3) notes to the financial statements. This report also contains required supplementary information in addition to the basic financial statements themselves.

Government-Wide Financial Statements
The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to the private-sector business.

The Statement of Net Position presents information on all of the City’s assets and deferred outflows of resources and liabilities and deferred inflows of resources, with the difference reported as net position.

Over time, increases and decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of net position combines and consolidates governmental funds’ current financial resources (short-term spendable resources) with capital assets and long-term obligations. Other nonfinancial factors should also be taken into consideration, such as changes in the City’s property tax base, and the condition of the City’s infrastructure (i.e., road, drainage improvements, storm and sewer lines, etc.) to assess the overall health or financial condition of the City.

The Statement of Activities presents information showing how the City’s net position changed during the most recent fiscal year. All of the current year’s revenues and expenses are taken into account regardless of when cash is received or paid. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes).
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CITY OF SAND CITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2023
(6)

OVERVIEW OF THE FINANCIAL STATEMENTS (CONTINUED)
Government-Wide Financial Statements (Continued)
The government-wide financial statements include all the governmental activities of the City. The governmental activities of the City include public safety, streets, parks, planning, community development, and general administration. The City does not operate any business-type activities.

The government-wide financial statements can be found on pages 13 and 15 of this report.

Fund Financial Statements
A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. All of the funds of the City can be divided into two categories, governmental funds and fiduciary funds:

Governmental Funds – The focus of governmental funds is narrower than that of government-wide financial statements. It is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements.

By doing so, readers may better understand the long-term effect of the government’s near-term financial decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

Fiduciary Funds – These funds are used to account for resources held for the benefit of parties outside the government. It is in these funds that the City accounts for the former assets and liabilities of the Redevelopment Agency that were transferred to a Successor Agency. Fiduciary funds are not included in the government-wide statements because the resources of those funds are not available to support the City’s own programs. The accounting for fiduciary funds is much like that used for proprietary funds.

The City maintains four individual governmental funds. Information is presented separately in the Balance Sheet and the Statement of Revenues, Expenditures, and Changes in Fund Balances for the General Fund, which is considered to be a major fund. Data from the other governmental funds is presented as other governmental funds.

The fund financial statements can be found on pages 16 to 21 of this report.

Notes to the Financial Statements
The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 22 through 55 of this report.
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CITY OF SAND CITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2023
(7)

GOVERNMENT WIDE FINANCIAL ANALYSIS
As noted earlier, net position may serve over time as a useful indicator of the City’s financial position.

The City’s net position increased by $1.9 million in FY 2022/23 from FY 2021/22. The City’s net investment in assets of $10.3 million is used to provide services to citizens; consequently, these assets are not available for future spending. Another $9.7 million is a noncurrent receivable leaving approximately $11.6 million available for operations.

Summary of Net Position (Rounded to the nearest $1,000) Year Ended June 30
2023 2022 Change
Assets:

Current and Other Assets $ 28,175,000 $ 27,208,000 $ 967,000 Capital Assets 10,429,000 10,335,000 94,000
Total Assets 38,604,000 37,543,000 1,061,000
Deferred Outflows of Resources 3,754,000 1,518,000 2,236,000 Liabilities:

Current and Other Liabilities 972,000 926,000 46,000
Long-Term Liabilities 6,520,000 2,888,000 3,632,000
Total Liabilities 7,492,000 3,814,000 3,678,000
Deferred Inflows of Resources 1,838,000 4,168,000 (2,330,000) Net Position:

Net Investment in Capital Assets 10,349,000 10,271,000 78,000 Restricted for:

Streets and Road 167,000 95,000 72,000
OPEB Funding 1,197,000 30,000 1,167,000
Unrestricted 21,315,000 20,683,000 632,000
Total Net Position $ 33,028,000 $ 31,079,000 $ 1,949,000 Current assets increased due to an increase in cash of $1.3 million.

Capital assets and net investment in capital assets increased due to depreciation of $453,000 offset by net capital additions of $547,000.

Long-term liabilities increased due to an increase in the pension liability of $3.6 million. 19 DRAFT

CITY OF SAND CITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2023
(8)

GOVERNMENT WIDE FINANCIAL ANALYSIS (CONTINUED)
The decrease in deferred inflows of resources is due to a change in the deferred OPEB adjustments and deferred lease revenue.

The increase in unrestricted is due to the excess of revenues over expenses of $1.9 million and the decrease of net investment in capital assets.

The increase in restricted is due to amounts received as part of new grant funding for North of Playa Habitat Conservation.

Change in Net Position (Rounded to the nearest $1,000)
Year Ended June 30
2023 2022 Change
Revenues:

Program Revenues:

Charges for Services $ 1,034,000 $ 1,143,000 $ (109,000) Operating Grants and Contributions 303,000 149,000 154,000 Capital Grants and Contributions 52,000 12,000 40,000
General Revenues:

Property Taxes 304,000 353,000 (49,000)
Sales and Transaction Taxes 7,118,000 6,598,000 520,000 Other Taxes 424,000 321,000 103,000
Investment Earnings (Loss) 255,000 (118,000) 373,000
Miscellaneous 41,000
Gain (Loss) on Disposal of Assets - 150,000 (150,000)
Total Revenues 9,531,000 8,308,000 1,182,000
Expenses:

General Government 1,807,000 1,428,000 379,000
Public Safety 3,803,000 2,797,000 1,006,000
Public Works 1,159,000 1,159,000 -
Planning 570,000 280,000 290,000
Building 40,000 155,000 (115,000)
Community Development 188,000 166,000 22,000
Parks 12,000 7,000 5,000
Interest on Long-Term Debt 3,000 5,000 (2,000)
Total Expenses 7,582,000 5,997,000 1,585,000
Change in Net Position 2,311,000 1,949,000 (403,000)
Net Position - Beginning of Year 31,079,000 28,768,000 2,311,000 Net Position - End of Year $ 31,079,000 33,028,000 $ 1,908,000 $ The decrease of charges for services is due to a decrease in rental income as a result of GASB 87 leases receiving less payments current year.
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(9)

CITY OF SAND CITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2023

GOVERNMENT WIDE FINANCIAL ANALYSIS (CONTINUED)
The growth in Sales and Transaction Use Taxes from FY 2021-2022 to FY 2022-2023 is attributable to several factors: (1) Inflationary impacts increasing the cost of goods and materials; (2) Growth in Sales Taxes and Transaction Use Tax in large part due to revenue generated by the new tax Measure L passed by voters in November 2022 which took effect in April 2023. (3) The City also passed a shortterm rental ordinance in the first quarter of FY 2022-2023, which has resulted in increased revenue from Transient Occupancy Taxes.

The increase in general government expenses compared to the prior fiscal year is due in part to a reduction in expenditures for the prior fiscal year (FY 21-22) due to a savings to the City when the City Attorney, (Now the City Manager) served as Interim City Manager for approximately five months with no salary increase. In addition, due to the abrupt retirement of three main department heads in February of 2023, Planning, Finance and the City Clerk, the City experienced an increased expense from hiring activities as well as new contracted services in finance, city clerk and planning departments as the need to provide urgent services meant that consultants were needed on a temporary emergency basis and those consultants required time to understand the systems that have been in place with little to no assistance from prior department heads.

The increase in investment earnings is due to additional interest earned on the LAIF account.

The City’s expenses in FY 2022-2023 increased compared to FY 2021- 2022 also in part due to supply chain issues in FY 2021-2022, resulting in items purchased in prior fiscal years being delivered in FY 2022-2023, as well as projects that had been moving forward over the past two fiscal years finally entering the construction stage, as well as the added expense of increases in costs associated with construction and labor.

The increase in public safety expense is due to the purchase of multiple patrol vehicles that had been ordered in prior years but due to supply chain issues arrived in FY 22-23 as well as an increase in salaries and benefits to police officers. Also, in the previous fiscal year (FY 2021-2022) expenditures were lower than normal due to the retirement of two police officers which also caused a reduction in compensated absence liability and pension liability. The FY 2022-2023 expenditures are comparable to the FY 2020-2021 expenditures for public safety when there were no major staffing changes in the department.

The increase in planning expenses is due to an increase in contracted service for Planning due to the abrupt departure of key staff and certain planning activities, which were overdue and in need of implementation in FY 2022-2023 such as the sixth cycle Housing Element.

CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets
At June 30, 2023, the City’s net investment in capital assets amounted to $10.3 million (net of accumulated depreciation), a net increase of $78,000 over the prior year due to depreciation offset by equipment purchases, and construction in progress. Capital assets included land, land improvements, infrastructure, buildings, equipment, right-to-use leased equipment, vehicles, furniture and fixtures, and construction in progress.
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CITY OF SAND CITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2023
(10)
Debt Administration
At June 30, 2023, the City had $6.5 million in long-term liabilities. The net change to long-term liabilities was an increase of $3.6 million, this increase in liabilities was due to a negative investment return for CalPERS pension obligations in FY 2021-2022.

FINANCIAL ANALYSIS OF THE GOVERNMENTAL FUNDS
The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements.

At the end of the current fiscal year, the City’s governmental funds reported a total fund balance of $24.4 million. This fund balance includes a noncurrent receivable of $9.7 million. The General Fund has an unassigned fund balance of $14.5 million.

During the current fiscal year, the fund balance of the City’s General Fund increased by $1.8 million.

FUND BUDGETARY HIGHLIGHTS
General Fund
The City amended its budget twice during the fiscal year to reflect changes in projections of revenue and expenditures. Actual general fund revenues were less than those originally budgeted by $329,000 and actual expenditures from the general fund were also under budget by $2.2 million.

ECONOMIC FACTORS AND NEXT YEARS BUDGET
The City’s revenue budget projections for the FY 2023-2024 show a general fund trending towards a budget surplus. This projected budget surplus is a result of an increase in revenues due to a Sales Tax and Transaction and Use Tax measure (Measure L) that was passed by Sand City voters in the November 2022 election. FY 2023-2024 will reflect the first full year of revenue generated by that tax measure.

Measure L raises the City’s Transaction and Use Tax revenue by .5% to 1.5%. The revenue from Measure L is projected to be approximately $4.5 million in FY 2023-2024. The City also passed a short-term rental ordinance in the first quarter of FY 2022-2023, which has resulted in increased revenue from Transient Occupancy Taxes which will continue in FY 2023-2024. Furthermore, the City is projecting an increase in revenues from business licenses in part due to the implementation of online business license administration and tax auditing with HdL, that will take effect in February 2024. Lastly, the City has been actively seeking grants from various state and federal agencies which will result in increased revenue in FY 2023-2024. These projections of increased revenues are despite the City facing a loss of lease payments from California American Water’s lease of the Sand City desalination facility in the amount of $850,000 annually.

The City’s expenses in FY 2023-2024 are expected to increase compared to FY 2022-2023 as the City moves forward to complete several large capital improvement projects that are in the final construction stage, as well as the added expense of increases in costs associated with construction and labor. In addition, long overdue system updates such as new accounting software, improved IT systems, and desire from Council to move towards stronger code
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CITY OF SAND CITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2023
(11)
ECONOMIC FACTORS AND NEXT YEARS BUDGET (Continued)
enforcement will result in an increase in the City’s expenses. Other projected increases in expenses are due to the planning and implementation of new capital improvement projects that have been long contemplated but not initiated in prior fiscal years such as a bike and pedestrian trail on the TAMC right of way and a coastal access trail as well as certain planning department activities that are overdue and in need of being implemented in FY 2023-2024, such as the update of the City’s general plan.

The City has continued to utilize Consultants and Contract Labor in several areas for assistance, in lieu of permanent employee additions to the payroll, such as building, planning, engineering, and information technology.

The South of Tioga project took several key steps forward in FY 2022-2023. Project site demolition commenced in FY 2021-2022 and was fully completed in Q2 of FY 2022-2023, with grading completed also in Q2 of FY 2022-2023, and public improvements close to being accepted by the City in Q3 of FY 2023-2024. The City has processed building permits for the first phase of the project, which consists of the construction of the hotel component. The project, which includes a 216-room hotel and a residential component that includes 356 units will ultimately be a positive revenue generator for the City through increased Transient Occupancy Tax revenue, though the revenue impacts will not be seen until FY 2024-2025, at the earliest.

Two other projects that have been projected to positively impact City revenues, Collections at Monterey Bay (King Ventures) and the Monterey Bay Shores Eco-Resort, are currently not projected to impact the FY 2023-2024 or 2024-2025 budgets. However, the City is confident that at some point these two projects will come to fruition. At this point, no projected revenues or expenses related to the two projects has been included in the 3-year projections.

Looking forward to FY 2023-2024 and 2024-2025, the budget will be developed in a financially uncertain time. The years ahead are difficult to plan due to the impacts from the war in Ukraine, and the middle east. With that in mind, the City’s budgets will communicate what we think is the most fiscally responsible approach to funding operations and capital investments to best serve the Sand City community.

Staff will ensure that a balanced and fiscally responsible budget for FY 2023-2024 and 2024- 2025 that takes into account all information available in ever-changing times. Staff anticipate revenues and expenditures are such that we will have a positive operating reserve. This reserve will be available for operating contingencies, capital improvements, or service changes.

We will continue to monitor revenues and expenditures, and any additional modifications that may need to be made based on new available information. Future proposed budgets and capital improvements will do the following:
 Remain fiscally responsible
 Maintain a safe and healthy community Enhance economic vitality  Deliver exceptional City services
 Invest in well-planned infrastructure and growth
23 DRAFT

CITY OF SAND CITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2023
(12)
ECONOMIC FACTORS AND NEXT YEARS BUDGET (Continued)
Staff will continue to look for opportunities to reduce expenses without impacting the level of service provided. We will continue to look for opportunities to increase revenues including the continued successful development of the South of Tioga project, a retail cannabis ordinance, and the continued investment into the West End and various infill projects.

REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of the City’s finances for all those with an interest. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City of Sand City, 1 Pendergrass Way, Sand City, California 93955.
24 DRAFT
(13)

BASIC FINANCIAL STATEMENTS
25 DRAFT

CITY OF SAND CITY

STATEMENT OF NET POSITION
JUNE 30, 2023
See accompanying Notes to Basic Financial Statements.
(14)
ASSETS
Cash and Cash Equivalents $ 3,296,339
Investments 12,066,054
Receivables 154,988
Prepaids 4,975
Lease Receivable 166,955
Receivables from Other Governments 1,574,051
Loans Due from Successor Agency 9,730,825
Net OPEB Asset 1,181,287
Capital and Right-to-Use Assets, Net:

Nondepreciable 2,441,967
Depreciable and Amortizable 7,986,979
Total Assets 38,604,420

DEFERRED OUTFLOWS OF RESOURCES
PERS Contributions 880,778
Deferred Pension Adjustments 2,333,615
Deferred OPEB Ajdustments 539,594
Total Deferred Outflows of Resources 3,753,987

LIABILITIES
Accounts Payable 391,688
Due to Other Governments 542,222
Accrued Liabilities 12,930
Developer Deposit 25,000
Noncurrent Liabilities:

Due Within One Year 157,434
Due in More Than One Year 6,362,603
Total Liabilities 7,491,877

DEFERRED INFLOWS OF RESOURCES
Deferred Lease Revenue 888,157
Deferred Pension Adjustments 425,364
Deferred OPEB Adjustments 524,302
Total Deferred Inflows of Resources 1,837,823

NET POSITION
Net Investment in Capital Assets 10,349,446
Restricted for:

Streets and Roads 166,735
OPEB Funding 1,196,579
Unrestricted 21,315,947
Total Net Position $ 33,028,707
26 DRAFT

CITY OF SAND CITY

STATEMENT OF ACTIVITIES
YEAR ENDED JUNE 30, 2023
See accompanying Notes to Basic Financial Statements.
(15)
Net Revenue
Operating Capital (Expenses)
Charges Grants and Grants and and Changes
Functions/Programs Expenses for Services Contributions Contributions in Net Position

GOVERNMENTAL ACTIVITIES
General Government 1,807,184 $ 967,385 $ 1,475 $ 51,791 $ $ (786,533) Public Safety 3,803,200 14,318 184,908 - (3,603,974)
Public Works 1,158,950 17,118 17,362 - (1,124,470)
Planning 8,308 570,179 65,000 - (496,871)
Building 27,017 39,951 - - (12,934)
Community Development 187,195 - - - (187,195)
Parks 11,777 - 33,964 - 22,187
Interest on Long-Term Debt 3,340 - - - (3,340)
Total Governmental Activities 7,581,776 $ 1,034,146 $ 302,709 $ 51,791 $ (6,193,130)

GENERAL REVENUES
Taxes:

Property Taxes, Levied for
General Purposes 304,060
Sales Tax 3,622,075
Transaction tax 3,495,665
Transient Occupancy Tax 124,723
Utility User's tax 183,267
Franchise Taxes 117,472
Miscellaneous 41,294
Investment Earnings (Loss) 254,621
Total General Revenues 8,143,177
CHANGE IN NET POSITION 1,950,047
Net Position - Beginning of Year 31,078,660
NET POSITION - END OF YEAR $ 33,028,707
Program Revenues
27 DRAFT

CITY OF SAND CITY

BALANCE SHEET

GOVERNMENTAL FUNDS
JUNE 30, 2023
See accompanying Notes to Basic Financial Statements.
(16)
Other
Governmental
General Funds Total
ASSETS
Cash and Cash Equivalents $ 3,131,173 $ 165,166 $ 3,296,339 Investments 12,066,054 - 12,066,054
Receivables 154,988 - 154,988
Lease Receivable 166,955 - 166,955
Receivables from Other Governments 1,572,596 1,455 1,574,051 Prepaid Expenses 4,975 - 4,975
Loans Due from Successor Agency 9,730,825 - 9,730,825
Total Assets $ 26,827,566 $ 166,621 $ 26,994,187

LIABILITIES, DEFERRED INFLOWS OF

RESOURCES, AND FUND BALANCES

LIABILITIES
Accounts Payable $ 391,688 $ - $ 391,688
Due to Other Governments 542,222 - 542,222
Accrued Liabilities 12,930 - 12,930
Developer Deposit 25,000 - 25,000
Total Liabilities 971,840 - 971,840

DEFERRED INFLOWS OF RESOURCES
Unavailable Revenue 6,670 - 6,670
Deferred Interest on Successor Agency Loans 774,766 - 774,766 Deferred Lease Revenue 888,157 - 888,157
Total Deferred Inflows of Resources 1,669,593 - 1,669,593

FUND BALANCES
Nonspendable 9,735,800 - 9,735,800
Restricted:

Streets and Roads - 166,735 166,735
Unassigned 14,450,333 (114) 14,450,219
Total Fund Balances 24,186,133 166,621 24,352,754
Total Liabilities, Deferred Inflows of
Resources, and Fund Balances $ 26,827,566 $ 166,621 $ 26,994,187 28 DRAFT

CITY OF SAND CITY

RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS

TO THE STATEMENT OF NET POSITION
JUNE 30, 2023
See accompanying Notes to Basic Financial Statements.
(17)

RECONCILIATION TO THE STATEMENT OF NET POSITION
Total Fund Balances - Governmental Funds 24,352,754 $
Amounts reported in the statement of net position are different because:

Capital and Right-to-Use assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. 10,428,946 Amounts paid to the trust for other postemployment benefits in excess of the required contributions, the net OPEB asset, are not financial resources and, therefore, are not reported in the funds. 1,181,287
Other assets are not available to pay for the current period expenditures and, therefore, are deferred in the funds. 781,436
Deferred outflows and inflows of resources associated with net pension and OPEB are not financial resources and, therefore, are not reported in the funds:

Deferred Outflows 3,753,987
Deferred Inflows (949,666)
Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the funds. (6,520,037)
Net Position of Governmental Activities as Reported on the Statement of Net Position $ 33,028,707
29 DRAFT

CITY OF SAND CITY

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE

GOVERNMENTAL FUNDS
YEAR ENDED JUNE 30, 2023
See accompanying Notes to Basic Financial Statements.
(18)
Other
Governmental
General Funds Total

REVENUES
Property Taxes $ 304,060 $ - $ 304,060
Sales Tax 3,622,075 - 3,622,075
Transaction tax 3,495,665 - 3,495,665
Transient Occupancy Tax 124,723 - 124,723
Utility User's tax 183,267 - 183,267
Franchise Taxes 117,472 - 117,472
Business Licenses 655,275 - 655,275
Licenses and Permits 151,877 - 151,877
Fines, Forfeits, and Penalties 5,292 - 5,292
Charges for Current Services 89,288 - 89,288
Developer Reimbursements 53,481 313 53,794
Revenue from Other Agencies 321,915 86,116 408,031
Investment Earnings (Loss) 254,621 - 254,621
Rental Income 78,620 - 78,620
Other Revenue 41,294 - 41,294
Total Revenues 9,498,925 86,429 9,585,354

EXPENDITURES
Current:

General Government 1,781,035 - 1,781,035
Public Safety 3,783,273 312 3,783,585
Public Works 746,729 14,753 761,482
Planning 570,179 - 570,179
Building 39,951 - 39,951
Community Development 214,670 - 214,670
Parks 7,735 - 7,735
Debt Service:

Principal 31,180 - 31,180
Interest and Other Charges 3,340 - 3,340
Capital Outlay 547,288 - 547,288
Total Expenditures 7,725,380 15,065 7,740,445

EXCESS OF REVENUES OVER
EXPENDITURES 1,773,545 71,364 1,844,909
NET CHANGE IN FUND BALANCES 1,773,545 71,364 1,844,909
Fund Balances - Beginning of Year 22,412,588 95,257 22,507,845 FUND BALANCES - END OF YEAR $ 24,186,133 $ 166,621 $ 24,352,754 30 DRAFT

CITY OF SAND CITY

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES

IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2023
See accompanying Notes to Basic Financial Statements.
(19)

RECONCILIATION OF THE STATEMENT OF ACTIVITIES
Net Change in Fund Balances - Governmental Funds 1,844,909 $ Amounts reported in the statement of activities are different because:

Governmental funds report capital outlay as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation/amortization expense.

In the current period these amounts are:

Capital Outlay 546,531
Current Year Depreciation and Amortization (453,072)
Revenues in the statement of activities that do not provide current financial resources are not reported as revenue in the funds. (53,531) The repayment of the principal of long-term debt consumes the current financial resources of governmental funds. However, it has no effect on net assets. In the current period the amount is:

Principal Payments on Long-Term debt 31,180
Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds:

Compensated Absences 109,187
Current Year OPEB Cost Difference 191,522
Current Year Pension Cost Difference (266,679)
Change in Net Position of Governmental Activities as Reported on the Statement of Activities $ 1,950,047
31 DRAFT

CITY OF SAND CITY

STATEMENT OF FIDUCIARY NET POSITION (DEFICIT)
JUNE 30, 2023
See accompanying Notes to Basic Financial Statements.
(20)
ASSETS
Cash and Cash Equivalents 1,233,147 $
Investments 1,293,073
Capital Assets, Net, Nondepreciable 1,100,000
Total Assets 3,626,220

LIABILITIES
Developer Fees Received in Advance 1,455,000
Due to Other Government 127,330
Noncurrent Liabilities:

Due Within One Year 705,000
Due in More Than One Year 11,940,824
Total Liabilities 14,228,154

DEFERRED INFLOWS OF RESOURCES
Deferred ROPS Revenue 575,959

NET POSITION (DEFICIT)
Enforceable Obligations (11,177,893)
Total Net Position (Deficit) $ (11,177,893)
32 DRAFT

CITY OF SAND CITY

STATEMENT OF CHANGES IN FIDUCIARY NET POSITION (DEFICIT) YEAR ENDED JUNE 30, 2023
See accompanying Notes to Basic Financial Statements.
(21)

ADDITIONS
Property Taxes $ 1,391,368
Interest Income 29,999
Total Additions 1,421,367

DEDUCTIONS
Administrative Expenses 3,400
Legal Expenses 106,004
Contract Services 143,996
Interest Expense 99,838
Seaside Settlement 364,522
Total Deductions 717,760
NET INCREASE 703,607
Net Position (Deficit) - Beginning of Year (11,881,500) NET POSITION (DEFICIT) - END OF YEAR $ (11,177,893)
33 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(22)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the City of Sand City (the City), California have been prepared in conformity with accounting principles generally accepted in the United States of America, as applied to government units (hereinafter referred to as generally accepted accounting principles (GAAP). The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The City’s more significant accounting policies are described below.

A. Reporting Entity
The reporting entity of the City consists of all City departments. The City is a Charter City operating under a Mayor-Council-City Manager form of government. As required by GAAP, these financial statements present the City (the primary government) and its component units. The City’s financial statements include one fiduciary component unit – Successor Agency Trust Fund
Assembly Bill 1X 26 (the Bill) provided for the dissolution of all redevelopment agencies in the state of California. As allowed under the Bill, the City elected to serve as the Successor Agency to hold the assets until they are distributed to other units of state and local government. The Successor Agency Trust Fund meets the definition of a fiduciary component unit and is reported as a private-purpose trust fund. Separate financial statements are not available for the Successor Agency Trust Fund.

B. Basis of Presentation and Accounting
The basic financial statements include both government-wide and fund financial statements. The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the City. For the most part, the effect of interfund activity has been removed from these statements.

The statement of activities demonstrates the degree to which the direct expenses of a given function or identifiable activity is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or identifiable activity. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or identifiable activity. Taxes and other items not properly included among program revenues are reported instead as general revenues.

Separate fund based financial statements are provided for governmental funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. The City has no proprietary funds. Major individual governmental funds are reported as separate columns in the fund financial statements. The nonmajor funds are combined in a column in the fund financial statements.
34 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(23)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. Basis of Presentation and Accounting (Continued)
The government-wide focus is more on the sustainability of the City as an entity and the change in aggregate financial position resulting from the activities of the fiscal period.

The focus of the fund financial statements is on the major individual funds. Each presentation provides valuable information that can be analyzed and compared to enhance the usefulness of the information.

C. Measurement Focus and Basis of Accounting
The government-wide and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements have been met.

Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collected within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenue to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures as well as expenditures related to compensated absences and claims and judgments, are recognized only when payment is due. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt are reported as other financing sources.

Ad valorem, franchise, and sales tax revenues are recognized under the susceptible to accrual concept. Licenses and permits, charges for services, fines and forfeitures, contributions, and miscellaneous revenues are recorded as revenues when received in cash as the resulting receivable is immaterial. Investment earnings are recorded as earned since they are measurable and available. In applying the susceptible to accrual concept to intergovernmental revenues, the legal and contractual requirements of the numerous individual programs are used as guidance. There are, however, essentially two types of these revenues. In one, monies must be expended for the specific purpose or project before any amounts will be paid to the City; therefore, revenues are recognized based upon the expenditures recorded. In the other, monies are virtually unrestricted as to the purpose of expenditure and are usually revocable only for failure to comply with the prescribed compliance requirements. These resources are reflected as revenues at the time of receipt or earlier if the susceptible to accrual criteria are met. 35 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(24)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Measurement Focus and Basis of Accounting (Continued) The City reports the following major governmental fund:

General Fund
Accounts for the City’s primary services (Public Safety, Public Works, Parks, etc.) and is the primary operating unit of the City.

Additionally, the City reports the following fund type:

Fiduciary Funds
Fiduciary Funds include the Successor Agency. This fund was established as a result of the dissolution of the Redevelopment Agency and is used to account for assets held by the City in a trustee capacity.

D. Fair Value
The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The City uses valuation techniques that are appropriate under the circumstances and for which sufficient data are available to measure fair value. Valuation techniques maximize the use of relevant observable inputs and minimize the use of unobservable inputs. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. For the fiscal year ended June 30, 2023, the application of valuation techniques applies to the City’s financial statements has been consistent.

E. Cash, Cash Equivalents, and Investments
The City follows the practice of pooling cash and investments of all funds. Investments of the pooled cash consist of deposits with the Local Agency Investment Fund and are accounted for at fair market value. Interest earned as a result of pooling is distributed to the appropriate funds utilizing a formula based on the average daily balance of cash of each fund. The City considers highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

F. Receivables and Deferred Inflows of Resources
Receivables are amounts due representing revenues earned or accrued in the current period. Receivables which have not been remitted within 60 days subsequent to yearend are offset by deferred inflows of resources, and accordingly have not been recorded as revenue in the governmental fund. When the revenue becomes available, the revenue is recognized in the governmental fund.
36 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(25)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) F. Receivables and Deferred Inflows of Resources (Continued) All receivables that historically experience uncollectible accounts are shown net of an allowance for doubtful accounts. The allowance is based on an assessment of the current status of individual accounts. At June 30, 2023, the allowance was estimated to be zero.

G. Capital Assets
Property, facilities, equipment, and infrastructure purchased or acquired is carried at historical cost or estimated historical cost. Contributed fixed assets are recorded at acquisition value at the time received. Capital assets are defined by the City as assets with an initial, individual cost of more than $5,000 for equipment; $25,000 for facilities and improvements; $150,000 for infrastructure and all land; and an estimated useful life in excess of one year.

Property, facilities, equipment, and infrastructure is depreciated using the straight-line method over the following estimated useful lives:

Buildings 40 Years
Improvements 5 to 20 Years
Equipment 5 to 10 Years
Vehicles 8 Years
Furniture and Fixtures 10 Years
Infrastructure 20 to 50 Years
H. Deferred Outflows/Inflows of Resources
In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then.

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

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(26)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) I. Compensated Absences
Unused paid time off (PTO), which includes vacation, sick, and comp time, may be accumulated up to 800 hours and is paid at the time of termination from City employment. Hours accumulated over the 800 hours are paid out as compensation at the end of each calendar year. PTO is accrued when incurred in the government-wide financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements.

J. Interfund Activity
During the course of operations, transactions occur between individual funds that result in amounts owed between funds, which are classified as “Due to/from Other Funds.” Eliminations have been made on the government-wide statements for amounts due to/from within the governmental funds.

K. Long-Term Obligations
In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities. Bond premiums and discounts are deferred and amortized over the life of the bonds. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are recognized in the current period.

In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financial sources. Premiums received on debt issuance are reported as other financing sources while discounts on debt issuance are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

L. Pensions
For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the City’s California Public Employees’ Retirement system (CalPERS) plans and additions to/deductions from the Plans’ fiduciary net position have been determined on the same basis as they are reported by CalPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. 38 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(27)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) M. Other Postemployment Benefits (OPEB)
For purposes of measuring the net OPEB liability/(asset), deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the City’s plan (OPEB Plan) and additions to/deductions from the OPEB Plan’s fiduciary net position have been determined on the same basis. For this purpose, benefit payments are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value.

Generally accepted accounting principles require that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used:

Valuation Date June 30, 2021
Measurement Date June 30, 2022
Measurement Period July 1, 2021 to June 30, 2022
N. Net Position
The statement of net position presents the City’s assets and deferred outflows of resources, liabilities, and deferred inflows of resources with the difference reported as net position. Net position is reported in three categories.  Net investment in capital assets. Consists of capital assets, net of accumulated depreciation and reduced by outstanding balances for bonds, notes, and other debt attributable to the acquisition, construction, or improvement of those assets.
 Restricted net position. Results when constraints placed on net positions use are either externally imposed or imposed by law through constitutional provisions or enabling legislation.
 Unrestricted net position. Consist of net position not meeting the definition of the two preceding categories. Unrestricted net position often has constraints on resources imposed by management which can be removed or modified.

O. Fund Balances
Fund balance classifications are based primarily on the extent to which the City is bound to honor constraints on the use of the resources reported in each governmental fund. 39 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(28)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) O. Fund Balances (Continued)
The City reports the following classifications:
 Nonspendable fund balance. These amounts cannot be spent because they are either (a) not in spendable form, such as long-term receivables or (b) legally or contractually required to be maintained intact, such as a trust that must be retained in perpetuity.
 Restricted fund balance. These amounts are restricted when constraints placed on the use of resources are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments or (b) imposed by law through constitutional provisions or enabling legislation.  Committed fund balance. This represents amounts that can only be used for specific purposes as a result of constraints imposed by the City Council.

Committed amounts cannot be used for any other purpose unless the City Council removes those constraints by taking some type of action (passage of a resolution). Amounts in the committed fund balance classification may be used for other purposes with appropriate due process by the City Council. Committed fund balances differ from restricted balances because the constraints on their use do not come from outside parties, constitutional provisions or enabling legislation.
 Assigned fund balance. Amounts intended to be used for specific purpose, but are neither restricted nor committed. Intent is expressed by (a) the City Administrator or (b) the City Council. The City Council has the authority to remove or change the assignment of the funds with a simple majority vote.  Unassigned fund balance. This fund balance is the residual classification for the General Fund. It is also used to report negative fund balances in other governmental funds.

When restricted and other fund balance resources are available for use, it is the City’s policy to use restricted resources first, followed by committed, assigned, and unassigned amounts, respectively.

P. Leases
Lessee
The City is a lessee for a noncancellable lease of equipment. The City recognizes a lease liability and an intangible right to use lease asset (lease asset) in the governmentwide financial statements. The City recognizes lease liabilities with an initial, individual value of $10,000 or more.
40 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(29)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) P. Leases (Continued)
Lessee (Continued)
At the commencement of a lease, the City initially measures the lease liability 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. The lease asset is initially measured as the initial amount of the lease liability, adjusted for lease payments made at or before the lease commencement date, plus certain initial direct costs. Subsequently, the lease asset is amortized on a straight-line basis over its useful life.

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 the purchase 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 the lease asset and liability if certain changes occur that are expected to significantly affect the amount of the lease liability.

Lease assets are reported 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 noncancellable leases of the desalination facility and cell tower site premises. The City recognizes a lease receivable and a deferred inflow of resources in the government-wide and governmental fund financial statements. 41 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(30)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) P. Leases (Continued)
Lessor (Continued)
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 inflow of resources is 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 inflow of resources is recognized as revenue over the life of the lease term.
 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 circumstances that would require a remeasurement of its lease, and will remeasure the lease receivable and deferred inflows of resources if certain changes occur that are expected to significantly affect the amount of the lease receivable.

Q. Property Tax Levy, Collection, and Maximum Rates
State of California (State) Constitution Article 13 provides for a maximum general property tax rate statewide of $1 per $100 of assessed value. Assessed value is calculated at 100% of market value as defined by the above referenced Article 13. The State Legislature has determined the method of distribution of receipts from $1 tax levy among counties, cities, schools, and other districts. Counties, cities, and school districts may levy such additional tax rates as necessary to provide for voter approved debt service.
42 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(31)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Q. Property Tax Levy, Collection, and Maximum Rates (Continued) The County of Monterey assesses properties, bills for, and collects property taxes, as follows:

Secured Unsecured
Valuation Dates January 1 January 1
Lien/Levy Dates July 1 July 1
Due Dates 50% on July 1
November 1
50% on
February 1
Delinquent as of December 10 August 31
(for November)
April 10
(for February)
The term “unsecured” refers to taxes on personal property other than land and buildings.

These taxes are secured by liens on the property being taxed.

Property tax revenues are recorded in governmental funds as receivables and deferred revenues at the time the tax levy is billed. Current year revenues are those collected within the current period or soon enough thereafter to pay current liabilities, generally within 60 days of year-end. No allowance is provided for delinquent taxes as the lien is considered an enforceable legal obligation.

R. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

S. Adoption of New Accounting Standards
In May 2020, the GASB issued GASB Statement No. 96, Subscription-Based Information Technology Arrangements. This Statement provides guidance on the accounting and financial reporting for subscription-based information technology arrangements (SBITAs) for government end users (governments). This Statement (1) defines a SBITA; (2) establishes that a SBITA results in a right-to-use subscription asset—an intangible asset—and a corresponding subscription liability; (3) provides the capitalization criteria for outlays other than subscription payments, including implementation costs of a SBITA; and (4) requires note disclosures regarding a SBITA.

The adoption of this standard had no significant impact on the financial statements. 43 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(32)
NOTE 2 CASH AND INVESTMENTS
A. Custodial Credit Risk-Deposits with Financial Institutions Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The California Government Code does not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits, other than the provision, which requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law. The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. 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. As of June 30, 2023, $3,334,260 of the City’s bank balances of $3,584,260 was exposed to custodial credit risk as uninsured, but it’s collateralized by the pledging bank’s trust department not in the City’s name.

B. Custodial Credit Risk – Investments
Local Agency Investment Fund and certificates of deposit held with a local financial institution. All investments are recorded at fair value. The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law. The fair value of the pledged securities in the collateral pool must equal 110% of the total amount deposited by the public agencies. The investment of state pooled funds is governed by State law, by policies adopted by the Pooled Money Investment Board (PMIB) and by accepted norms for prudent fiduciary management of investments. PMIB funds may be invested in a wide range of interest-bearing securities, such as Treasury notes, prime commercial paper, certain California municipal and agency obligations, highly rated corporate bonds, obligations of such agencies as Fannie Mae, and negotiable certificates of deposit. Also allowed are time deposits in California banks, savings and loans, and credit unions that have not less than a “satisfactory” CRA rating. The value of each participating dollar equals the fair value divided by the amortized cost.

Investments at June 30, 2023 consisted of the following:

Local Agency Investment Fund $ 10,662,955
Certificates of Deposit 1,403,099
Total $ 12,066,054
44 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(33)
NOTE 2 CASH AND INVESTMENTS (CONTINUED)
B. Custodial Credit Risk – Investments (Continued)
As of June 30, 2023, all of the City’s investments had a maturity of less than one year.

The fair value of the City’s position in the State LAIF pool is the same as the value of the pool shares. The State LAIF pool credit quality is unrated. LAIF is overseen by the Local Agency Investment Advisory Board, which consists of five members, in accordance with State statute.

The State Treasurer’s Office audits the fund annually.

The fair value measurement for the Certificates of Deposit are Level 1.

C. 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. The City has no formal policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates beyond those specified in the statutes.

D. Credit Risk
This is the risk of loss due to the failure of the security issues or backer. The City’s policies to mitigate credit risk include:
 Limiting investment to the safest type of securities. As noted above, the California Government Code limits the investment vehicles available to local agencies. The credit risk of these securities is measured by the assignment of a rating by a nationally recognized statistical rating organization. The table below presents the rating for each investment type as provided by Standard & Poor’s except as noted.
 Pre-qualifying the financial institutions, brokers/dealers, intermediaries, and advisors with which the City will do business.

The following table identifies the Standard & Poor’s credit quality rating for those investments requiring this disclosure as of June 30, 2023:
 Rating A – Negotiable Certificates of Deposit - $1,403,099  Not Rated – State Local Agency Investment Fund - $10,662,955 45 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(34)
NOTE 3 RECEIVABLES
Amounts other than leases receivable are aggregated into a single accounts receivable line.

At June 30, 2023 for the City’s individual major funds and nonmajor fund in the aggregate are as follows:

Other
Governmental
General Funds Total
Receivables:

Accounts 68,960 $ - $ 68,960 $
Interest 86,028 - 86,028
Total 154,988 $ - $ 154,988 $
Other Governments:

Sales Tax 600,712 $ - $ 600,712 $
Transaction Tax 814,529 - 814,529
Gas Tax - 1,455 1,455
Successor Agency 127,330 - 127,330
Grants 30,025 - 30,025
Total 1,572,596 $ 1,455 $ 1,574,051 $
NOTE 4 LOANS DUE FROM SUCCESSOR AGENCY
The Redevelopment Agency (the Agency) received loans from the City to pay its share of administrative expenses, to make payments on non-tax incremental borrowings, and to reimburse the City for payments made on Certificates of Participation in the principal amount of $1,934,012 for the Operating Expenditure Loan and $3,932,931 for the Seaside Loan.

The Operating Expenditure Loan and Seaside Loan balances include $1,934,012 and $3,932,931 of principal and $1,692,046 and $717,068 of accrued interest, respectively.

Upon dissolution of the Agency, these loans became the obligation of the Successor Agency. Balances as of June 30, 2023, are as follows:

Operating Expenses $ 3,626,058
Seaside Agreements 4,650,000
COP Reimbursement 1,454,766
Total $ 9,730,824
46 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(35)
NOTE 5 CAPITAL AND RIGHT-TO-USE ASSETS
Capital and Right-to-Use asset activity for the year ended June 30, 2023 was as follows:

Additions Deletions
Beginning and and Ending
Balance Transfers Transfers Balance
Capital Assets Not Being
Depreciated:

Land $ 1,837,194 $ - $ 1,837,194 -
Construction In Progress 380,385 224,388 604,773 -
Total Capital Assets Not
Being Depreciated 2,217,579 224,388 2,441,967 -
Capital and Right-to-Use Assets
Being Depreciated/Amortized:

Infrastructure 5,209,014 - 5,209,014 -
Land Improvements 441,563 - 441,563 -
Equipment 2,451,563 - 2,451,563 -
Right-to-Use Leased
Equipment 93,621 - 93,621 -
Vehicles 618,199 322,143 940,342 -
Buildings 8,538,775 - 8,538,775 -
Furniture and Fixtures 114,514 - 114,514 -
Total Capital and Right-to-Use
Assets Being Depreciated/
Amortized 17,467,249 322,143 17,789,392 -
Less: Accumulated Depreciation/
Amortization:

Infrastructure 3,023,421 127,729 3,151,150 -
Land Improvements 438,923 2,639 441,562 -
Equipment 2,401,311 30,322 2,431,633 -
Right-to-Use Leased
Equipment 31,207 31,207 62,414 -
Vehicles 571,987 50,526 622,513 -
Buildings 2,767,978 210,649 2,978,627 -
Furniture and Fixtures 114,514 - 114,514 -
Total Accumulated
Depreciation/Amortization 9,349,341 453,072 9,802,413 - Total Capital and Right-to-Use
Assets Being Depreciated
And Amortized, Net 8,117,908 (130,929) 7,986,979 -
Capital and Right-to-Use
Assets, Net $ 10,335,487 $ 93,459 $ 10,428,946 - $
47 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(36)
NOTE 5 CAPITAL AND RIGHT-TO-USE ASSETS (CONTINUED)
Depreciation and amortization expense for the year ending June 30, 2023 was charged to functions/programs of the primary government as follows:

General Government $ 44,526
Public Safety 26,831
Public Works 377,673
Parks 4,042
Total Depreciation Expense $ 453,072
NOTE 6 LEASES
Leases Receivable
The City, acting as lessor, leases the desalination facility to California-American Water Company (CAW) and site premises to control and operate a cell tower on City owned land to Crown Castle International Corp under long-term, noncancelable lease agreements. The leases expire at various dates through June 15, 2038. During the year ended June 30, 2023, the City recognized $65,339 and $5,676 in lease revenue and interest revenue, respectively, pursuant to these contracts. As of June 30, 2023, the City’s receivable for lease payments was $166,955. Also, the City has a deferred inflow of resources associated with these leases that will be recognized over the lease terms. As of June 30, 2023, the balance of deferred inflow of resources was $888,157.

The future minimum lease payments to be received as of June 30, are as follows:

Year Ending June 30, Principal Interest Total
2024 $ 20,413 $ 5,025 $ 25,438
2025 23,218 4,177 27,395
2026 24,100 3,295 27,395
2027 25,017 2,378 27,395
2028 12,208 1,590 13,798
Thereafter 61,999 8,001 70,000
Total $ 166,955 $ 24,466 $ 191,421
Lease Payable
The City leases police radio equipment under long-term, noncancelable lease agreement.

The lease expires August 15, 2023. The annual principal and interest payments are $34,520 with interest at 5.22% per annum.
48 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(37)
NOTE 6 LEASES (CONTINUED)
Lease Payable (Continued)
The future minimum lease payments as of June 30, are as follows Year Ending June 30, Principal Interest Total
2024 $ 32,808 $ 1,712 $ 34,520
Total $ 32,808 $ 1,712 $ 34,520
Right-to-use asset acquired through outstanding leases are shown below:

Equipment $ 93,621
Less: Accumulated Amortization 62,414
Total $ 31,207
NOTE 7 LONG-TERM LIABILITIES
General long-term liability balances and transactions for the fiscal year ended June 30, 2023 are as follows:

Beginning Ending Due Within
Balance Additions Reductions Balance One Year
Lease Payable $ 63,988 $ 31,180 - $ $ 32,808 $ 32,808
Compensated Absences 627,724 50,783 159,970 518,537 124,626 Net Pension Liability 2,352,325 3,616,367 5,968,692 - - Total $ 3,044,037 $ 3,667,150 $ 191,150 $ 6,520,037 $ 157,434 In prior years, the General Fund has been used to liquidate compensated absences.

NOTE 8 PENSION PLAN
General Information about the Pension Plans
A. Plan Descriptions
All qualified permanent and probationary employees are eligible to participant in the City’s separate Safety (police) and Miscellaneous (all other) Employee Pension Plans, cost-sharing, multiemployer defined benefit pension plans administered by the California Public Employees’ Retirement System (CalPERS). Benefit provisions under the Plans are established by State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website. 49 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(38)
NOTE 8 PENSION PLAN (CONTINUED)
General Information about the Pension Plans (Continued) B. Benefits
CalPERS provides service retirement and disability benefits, annual cost-of-living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of fulltime employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for nonduty disability benefits after 10 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost-of-living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law.

The Plan’s provisions and benefits in effect at June 30, 2023, are summarized as follows:

Prior to On or After
Hire Date January 1, 2013 January 1, 2013
Benefit Formula 2.0% @ 55 2.0% @ 62

3.0% @ 60
Benefit Vesting Schedule 5 Years Service 5 Years Service Benefit Payments Monthly for Life Monthly for Life
Retirement Age 50 - 55 52 - 67
Monthly Benefits, as a % of Eligible Compensation 2.0.% - 2.7% 1.0% - 2.5% Required Employee Contribution Rates 7.0% and 8.0% 6.75% Required Employer Contribution Rates 10.880% and 7.590%

15.250%
Miscellaneous
Prior to On or After
Hire Date January 1, 2013 January 1, 2013
Benefit Formula 2.0% @ 50 2.7% @ 57

3.0% @ 55
Benefit Vesting Schedule 5 Years Service 5 Years Service Benefit Payments Monthly for Life Monthly for Life
Retirement Age 50 50 - 57
Monthly Benefits, as a % of Eligible Compensation 3.0% 2.0% - 2.7% Required Employee Contribution Rates 9.0% 13.0%
Required Employer Contribution Rates 19.250% and 13.130%

21.790%
Safety
50 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(39)
NOTE 8 PENSION PLAN (CONTINUED)
General Information about the Pension Plans (Continued) C. Contributions
Section 20814(c) of the California Public Employees’ Retirement Law required that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate.

Funding contributions for both Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees.

For the year ended June 30, 2023, the contributions recognized as part of pension expense for each Plan were as follows:

Miscellaneous Safety
Contributions $ 411,443 $ 469,335
D. Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions
As of June 30, 2023, the City reported net pension liabilities for its proportionate shares of the net pension liability of each Plan as follows:

Miscellaneous Safety
Proportionate Share of Net Pension Liability $ 2,959,247 $ 3,009,445 The City’s net pension liability for each Plan is measured as the proportionate share of the net pension liability. The net pension liability of each of the Plans is measured as of June 30, 2022, 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, 2021 rolled forward to June 30, 2022 using standard update procedures. The City’s proportion of the net pension liability was based on a projection of the City’s long-term share of contributions to the pension plans relative to the projected contributions of all participating employers, actuarially determined. The City’s proportionate share of the net pension liability for each Plan as of June 30, 2023 and 2022, was as follows:

Miscellaneous Safety
Proportion - June 30, 2022 0.02470 % 0.01879 %
Proportion - June 30, 2023 0.02562 0.02605
Change - Increase (Decrease) 0.00092 0.00726
51 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(40)
NOTE 8 PENSION PLAN (CONTINUED)
General Information about the Pension Plans (Continued) D. Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
For the year ended June 30, 2023, the City recognized pension expense of $1,457,457.

Pension expense is allocated to the functions based on full-time equivalents. At June 30, 2023, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Deferred
Outflows of Inflows of
Resources Resources
Difference Between Expected and Actual Experience $ 183,977 $ 72,482 Changes of assumptions 606,680 -
Difference Between Projected and Actual Investment
Earnings 1,017,288 -
Change in Employer's Proportion 525,670 -
Differences Between Employer's Contributions and
Proportionate Share of Contributions - 352,882
Pension Contributions Made Subsequent to
Measurement Date 880,778 -
Total $ 3,214,393 $ 425,364
The $880,778 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2024. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:

Year Ending June 30, Amount
2024 557,763 $
2025 471,152
2026 257,899
2027 621,437
Total 1,908,251 $
52 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(41)
NOTE 8 PENSION PLAN (CONTINUED)
General Information about the Pension Plans (Continued) E. Actuarial Assumptions
The total pension liabilities in the June 30, 2023 actuarial valuations were determined using the following actuarial assumptions:

Miscellaneous and Safety
Valuation Date June 30, 2021
Measurement Date June 30, 2022
Actuarial Cost Method Entry-Age Normal Cost Method
Actuarial Assumptions:

Discount Rate 6.90%
Inflation 2.30%
Salary Increases Varies by Entry Age and Service
Mortality Derived using CalPERS' membership data for all funds. The mortality rate includes 15 years of
projected on-going mortality improvements using
80% scale MP-2020 published by the Society of
Actuaries.

Post Retirement Benefit Increase Contract COLA up to 2.3% until Purchasing Power Protection Allowance Floor on Purchasing Power
applies. 2.5% thereafter.

All other actuarial assumptions used in the June 30, 2021 valuation were based on the results of an actuarial experience study for the period 1997 to 2015, including updates to salary increase, mortality and retirement rates. The Experience Study can be found on the CalPERS website.

F. Discount Rate
The discount rate used to measure the total pension liability was 6.9% for each 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 6.9% discount rate is adequate, and the use of the municipal bond rate calculation is not necessary. The long-term expected discount rate of 6.9% will be applied to all plans in the Public Employees Retirement Fund (PERF). The stress test results are presented in a detailed report that can be obtained from the CalPERS website.

The long-term expected rate of return on pension plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.
53 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(42)
NOTE 8 PENSION PLAN (CONTINUED)
General Information about the Pension Plans (Continued) F. Discount Rate (Continued)
In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Using historical returns of all of the funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11+ 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 rounded 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 equal to the single equivalent rate calculated above and adjusted to account for assumed administrative expenses. The expected real rates of return by asset class are as follows:

Assumed
Asset Real Return
Asset Class Allocation Years 1 - 10
Global Equity - cap-weighted 30 % 4.45 %
Global Equity non-cap-weighted 12 3.84
Private Equity 13 7.28
Treasury 5 0.27
Mortgage-backed Securities 5 0.50
Investment Grade Corporates 10 1.56
High Yield 5 2.27
Emerging Market Debt 5 2.48
Private Debt 5 3.57
Real assets 15 3.21
Leverage (5) (0.59)
Total 100 %
(a) An expected inflation of 2.30% used for this period. 54 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(43)
NOTE 8 PENSION PLAN (CONTINUED)
General Information about the Pension Plans (Continued) G. Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate
The following presents the City’s proportionate share of the net pension liability for each Plan, calculated using the discount rate for each Plan, as well as what the City’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower or 1-percentage-point higher than the current rate:

Miscellaneous Safety
1% Decrease 5.90 % 5.90 %
Net Pension Liability 4,612,481 $ 4,881,000 $
Current Discount Rate 6.90 % 6.90 %
Net Pension Liability 2,959,247 $ 3,009,445 $
1% Increase 7.90 % 7.90 %
Net Pension Liability 1,599,045 $ 1,479,872 $
H. Pension Plan Fiduciary Net Position
Detailed Information about each pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports.

NOTE 9 DEFERRED COMPENSATION PLAN
The City offers its employees a deferred compensation plan created in accordance with IRC Section 457, through the California Public Employee’s Retirement System (CalPERS) 457 Deferred Compensation Program. All employees of the City are eligible for the plan.

Participation in the plan is optional. The funds of the plan are invested by the City, through CalPERS, as directed by and on behalf of the employees in various investment options.

NOTE 10 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) A. Plan Description
The City contracts with the Public Employees Retirement System (PERS) under the PERS Care Health Plan to provide benefits of the Meyer-Geddes State Employees’ Medical and Hospital Care Act per Government Code Section 22850. The Plan provides employees and option members (City Council members and City Attorney) who retire directly from the City under CalPERS continuation of medical insurance benefits for them, one dependent and surviving spouse.
55 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(44)
NOTE 10 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (CONTINUED) A. Plan Description (Continued)
The City participates in the California Employer’s Retiree Benefit Trust (CERBT) Fund, which is administered by CalPERS. CERBT is a tax-qualified irrevocable trust organized under IRC Section 115 and established to prefund retiree healthcare benefits. CERBT, an agent multiemployer trust, issues a publicly available financial report including GASB Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, disclosure information in aggregate with other CERBT participating employers. That report can be obtained from the CalPERS website at www.calpers.ca.gov. The plan provides health benefits to all retired employees.

The Plan can be amended by action of the City Council on passing a resolution. The City pays premiums up to the PEMHCA Other Northern California PERS Care single party non-Medicare and Medicare eligible premiums at 100% for retirees and 50% for dependents and surviving spouses. For the fiscal year 2023, the non-Medicare premium was $995 and the Medicare eligible was $382. Retirees pay blended medical premiums rather than expected medical costs by age and gender and active premiums subsidize non-Medicare eligible retiree medical costs as implied subsidies.

B. Employees Covered
As of the June 30, 2022 actuarial valuation, the following current and former employees were covered by the benefit terms under the plan:

Active Employees 23
Inactive Employees or Beneficiaries Current
Receiving Benefits 9
Inactive Employees Entitled to But Not Yet
Receiving Benefits 16
Total 48
C. Contributions
The obligations of the Plan members and the City are established by action of the City Council pursuant to the passing of a resolution. The annual contribution is based on the actuarially determined contribution, which is paid to the California Employer’s Retiree Benefit Trust Program (CERBT). Cash subsidy and implied subsidy benefit payments and PEMCHA administrative fees are currently paid with City assets on a pay-as-you-go basis and are not reimbursed by CERBT. For the fiscal year ended June 30, 2023 payas-you-go payments were $113,367 and the estimated implied subsidy was $3,435 resulting in total payments of $116,802.
56 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(45)
NOTE 10 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (CONTINUED) D. Net OPEB Liability/(Asset)
The City’s net OPEB liability/(asset) was measured as of June 30, 2022 and the total OPEB liability used to calculate the net OPEB liability/(asset) was determined by an actuarial valuation dated June 30, 2021 based on the following actuarial methods and assumptions:

Discount Rate 6.50%
Inflation 2.75%
Salary Increases 3.00% Annually
Investment Rate of Return 6.75%
Mortality CalPERS 1997-2015 Experience Study
Retirement CalPERS 1997-2015 Experience Study
Healthcare Trend Rate 7.00% Decreasing to 4.00%
The Experience Study Reports may be accessed on the CalPERS website www.calpers.ca.gov under Forms and Publications.

The long-term expected rate of return on OPEB plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Long-Term
Expected
Target Real Rate
Asset Class Allocation of Return
Global Equity 49 % 4.56 %
Fixed Income 23 1.56
TIPS 5 (0.08)
Commodities 3 1.22
REITs 20 4.06
Total 100 %
57 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(46)
NOTE 10 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (CONTINUED) E. Discount Rate
The discount rate used to measure the total OPEB liability was 6.75%. The projection of cash flows used to determine the discount rate assumed that City contributions will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the OPEB plan’s fiduciary net position was projected to be available to make all projected OPEB payments for current active and inactive employees and beneficiaries. Therefore, the long-term expected rate of return on OPEB plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability.

F. Changes in the Net OPEB Liability/(Asset)
The changes in the net OPEB liability/(asset) for the Plan are as follows:

Total OPEB Plan Fiduciary Net OPEB
Liability Net Position Liability/(Asset)
Balances - June 30, 2022 2,468,308 $ 4,608,891 $ (2,140,583) $ Changes Recognized for
Measurement Period:

Service Cost 204,315 - 204,315
Interest 176,460 - 176,460
Difference Between Expected
Changes of Assumptions 76,993 - 76,993
Contributions - Employer - 117,116 (117,116)
Net Investment Income - (617,162) 617,162
Benefit Payments (Outside Trust) (116,802) (116,802) -
Administrative Expense - (1,482) 1,482
Net Changes 340,966 (618,330) 959,296
Balances - June 30, 2023 2,809,274 $ 3,990,561 $ (1,181,287) $ G. Sensitivity of the Net OPEB Liability/(Asset) to Changes in the Discount Rate The following presents the net OPEB liability/(asset) of the City if it were calculated using a discount rate that is 1-percentage-point lower or 1-percentage-point higher than the current rate, for the measurement period ended June 30, 2022:

Current
1% Discount Rate 1%
Decrease (6.5%) Increase
Net OPEB Liability/(Asset) (836,684) $ (1,181,287) $ (1,470,348) $ 58 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(47)
NOTE 10 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (CONTINUED) H. Sensitivity of the Net OPEB Liability/(Asset) to Changes in the Health Care Cost Trend Rates
The following presents the net OPEB liability/(asset) of the City if it were calculated using health care cost trend rates that are 1-percentage-point lower or 1-percentage-point higher than the current rate, for the measurement period ended June 30, 2022:

Current
1% Healthcare Cost 1%
Decrease Trend Rates Increase
Net OPEB Liability/(Asset) (1,393,409) $ (1,181,287) $ (988,901) $ I. OPEB Plan Fiduciary Net Position
CERBT issues a publicly available financial report that may be obtained from California Employer’s Retiree Benefit Trust Program at the CalPERS website.

J. Recognition of Deferred Outflows and Deferred Inflows of Resources Gains and losses related to changes in total OPEB liability and fiduciary net position are recognized in OPEB expense systematically over time. Amounts are first recognized in OPEB expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to OPEB and are to be recognized in future OPEB expense. The recognition period differs depending on the source of the gain or loss:

Net Difference Between Projected and Actual
Earnings on OPEB Plan Investments 5 Years
All Other Amounts Expected average remaining
service lifetime (EARSL)
(6.2 years at June 30, 2021)
K. OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB For the fiscal year ended June 30, 2023, the City recognized OPEB expense/(income) of $(57,050). As of the fiscal year ended June 30, 2023, the City reported deferred outflows/inflows of resources related to OPEB from the following sources:

Deferred Deferred
Outflows of Inflows of
Resources Resources
OPEB Contributions Made Subsequent to $ 134,472 $ -
Measurement Date
Changes of Assumptions 64,161 87,182
Net Difference Between Projected and Actual
Earnings 340,961 -
Difference Between Expected and Actual Experience - 437,120 Total $ 539,594 $ 524,302
59 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(48)
NOTE 10 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (CONTINUED) K. OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB (Continued)
The $134,472 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net OPEB liability in the year ending June 30, 2024. Other amounts reported as deferred inflows of resources related to OPEB will be recognized as expense as follows:

Year Ending June 30, Amount
2024 (121,379) $
2025 (125,159)
2026 (41,581)
2027 159,735
2028 9,204
Total (119,180) $
NOTE 11 JOINTLY GOVERNED ORGANIZATIONS
The City participates on the Boards of Community Human Services, a joint powers agency, Monterey Regional Waste Management District, the Monterey Peninsula Water Management District, Monterey Regional Water Pollution Control Agency, Monterey Peninsula Regional Water Authority, Monterey One Water, Association of Monterey Bay Area Governments, Transportation Agency for Monterey County, Seaside Groundwater Basin Watermaster, Seaside/Sand City Chamber of Commerce, the Monterey Peninsula Chamber of Commerce, League of California Cities, Monterey County Convention and Visitor’s Bureau, Monterey County Business Council, Monterey County Mayor’s Association, and Monterey Bay Area Self Insurance Authority. The Boards of these entities are comprised of representatives from local municipalities, districts, and unincorporated areas.

The City made various disbursements to the organizations in the amount of $642,118 for the fiscal year ended June 30, 2023.

NOTE 12 RISK FINANCING
The City is exposed to various risks of loss related to torts, thefts, damage to, or destruction of assets; errors and omissions; injuries to workers; and natural disasters. These risks are covered by a combination of commercial insurance purchased from independent third parties and participation in the Monterey Bay Area Self Insurance Authority (MBASIA), which is a public entity risk pool. There have not been any significant reductions in insurance coverage as compared to the previous year. Settled claims from these risks have not exceeded commercial coverage for the past three fiscal years. 60 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(49)
NOTE 12 RISK FINANCING (CONTINUED)
MBASIA was formed under a joint powers agreement (JPA) pursuant to California Government Code Section 6500 et seq. effective July 1, 1982. MBASIA is administered by a Board of Directors consisting of thirteen members appointed by the cities participating. The Board controls the operations of the JPA, including selection of management and approval of operating budgets, independent of any influence by member cities beyond their representation on the Board. Each member city pays a premium commensurate with the amount of predicted losses and shares surpluses and deficits proportionate to their participation in the JPA.

NOTE 13 COMMITMENTS AND CONTINGENCIES
In the fiscal year ending June 30, 2023, the City has various service and project contracts totaling $2,691,944, of which $2,176,070 on contract commitments still remained as of June 30, 2023.

NOTE 14 SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER REDEVELOPMENT AGENCY
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 California. This action impacted the reporting entity of the City of Sand City that previously had 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 October 18, 2011, the City Council elected to become the Successor Agency for the former redevelopment agency in accordance with the Bill as part of City resolution number SC-11-104.

Accordingly, the City established the Successor Agency Trust fund, a private-purpose trust fund, which is a fiduciary type fund.

Subject to the control of an established oversight board, remaining assets can only be used to pay enforceable obligations in existence at the date of dissolution. In future fiscal years, successor agencies will only be allocated revenue in the amount that is necessary to pay the estimated annual installment payments on enforceable obligations 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. 61 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(50)
NOTE 14 SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER REDEVELOPMENT

AGENCY (CONTINUED)
Management believes, in consultation with legal counsel, that the obligations of the former redevelopment agency due to the City are valid enforceable obligations payable by the Successor Agency trust under the requirements of the Bill. On November 16, 2022, the Successor Agency filed a petition for writ of mandate against the California Department of Finance for the repayment of a loan to the City that the Successor Agency believes is an enforceable obligation, but which has been denied by the California Department of Finance.

This dispute will be resolved by the court.

Following are disclosures specific to the Successor Agency Trust Funds:

A. Deposits and Investments
Custodial Credit Risk-Deposits
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The California Government Code does not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits, other than the provision, which requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law. The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure District deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. As of June 30, 2023, $983,143 of the Fiduciary Fund’s bank balances of $1,233,143 was exposed to custodial credit risk as uninsured, but it’s collateralized by the pledging bank’s trust department not in the City’s name. All cash held by the Fiduciary Fund must be used to repay enforceable obligations.

Custodial Credit Risk Investments
The Fiduciary Fund investments consist of money market funds and certificates of deposit held with various financial institutions. All investments are recorded at fair value.

The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law. The fair value of the pledged securities in the collateral pool must equal 110% of the total amount deposited by the public agencies. Investments at June 30, 2023 consisted of the following:

Money Market Funds $ 217,551
Certificates of Deposit 1,075,522
Total $ 1,293,073
62 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(51)
NOTE 14 SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER REDEVELOPMENT

AGENCY (CONTINUED)
A. Deposits and Investments (Continued)
Custodial Credit Risk Investments (Continued)
As of June 30, 2023, all of the Fiduciary Fund’s investments had a maturity of less than one year.

The fair value measurement for the Certificates of Deposit are Level 1. The Money Market Funds are not subject to fair value hierarchy.

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. The City has no formal policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates beyond those specified in the statutes.

Credit Risk
This is the risk of loss due to the failure of the security issues or backer. The City’s policies to mitigate credit risk include:
 Limiting investment to the safest type of securities. As noted above, the California Government Code limits the investment vehicles available to local agencies. The credit risk of these securities is measured by the assignment of a rating by a nationally recognized statistical rating organization. The table below presents the rating for each investment.
 Pre-qualifying the financial institutions, brokers/dealers, intermediaries, and advisors with which the City will do business.

The following table identifies the Standard & Poor’s credit quality rating for those investments requiring this disclosure as of June 30, 2023:
 Rating A – Negotiable Certificates of Deposit - $1,075,522  Not Rated – Money Market Fund - $217,551
63 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(52)
NOTE 14 SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER REDEVELOPMENT

AGENCY (CONTINUED)
B. Capital Assets
Beginning Ending
Balance Additions Deletions Balance
Capital Assets Not Being
Depreciated:

Land $ 1,100,000 $ - $ 1,100,000 - $
Capital Assets Being Depreciated:

Land Improvements 182,631 - 182,631 -
Sculpture 40,218 - 40,218 -
Total Capital Assets Being 222,849 - 222,849 -
Depreciated
Less: Accumulated Depreciation
for:

Land Improvements 182,631 - 182,631 -
Sculpture 40,218 - 40,218 -
Total Accumulated
Depreciation 222,849 - 222,849 -
Total Capital Assets Being
Depreciated, Net - - - -
Capital Assets, Net $ 1,100,000 $ - $ 1,100,000 - $
C. Developer Fees Received in Advance
The former Redevelopment Agency entered into a Disposition and Development Agreement (DDA) with a developer that required the developer to pay certain negotiation fees. In the event that the DDA is terminated by either party, the DDA requires a portion of the fees in the amount of $1,455,000 be refunded to the developer. The fees subject to refund will not be earned until the property connected with the DDA is conveyed to the developer, at which time the fees will be recognized as revenue. 64 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(53)
NOTE 14 SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER REDEVELOPMENT

AGENCY (CONTINUED)
D. Long-Term Debt
Taxable Tax Allocation Bonds, 2008 Series B
Taxable Tax Allocation Bonds, 2008 Series B in the amount of $2,135,000 were issued January 30, 2008 at a discount of $50,916, to help finance redevelopment activities within and for the benefit of the Sand City Redevelopment Project. The Bonds consist of Term Bonds as follows: $465,000 at a 4.75% interest rate, due November 1, 2013, $720,000 at a 5.50% interest rate, due November 1, 2018 and $950,000 at a 5.75% interest rate, due November 1, 2023. Interest on the Bonds is payable semi-annually on each May 1 and November 1, commencing May 1, 2008. All Bonds are subject to mandatory redemption, in part by lot, from sinking account payments scheduled to begin November 1, 2010 and ending November 1, 2023 at a redemption price equal to the principal amount thereof to be redeemed, together with interest accrued thereon to the date fixed for redemption. The Bonds are payable solely from tax increment revenue, which has been pledged for repayment of the Bonds.
2017 Subordinate Tax Allocation Refunding Bonds 2017
Subordinate Tax Allocation Refunding Bonds in the amount of $4,690,000 were issued August 10, 2017 to advance refund the Tax Allocation Bonds, 2008 Series A bonds. The Bonds consist of coupon bonds with a price of $115,000 at an interest rate of 2.85%.

Interest on the Bonds is payable semi-annually on each May 1 and November 1, commencing November 1, 2017.

The Bonds are subject to mandatory sinking fund redemption in part by lot on November 1, 2017, and on each November 1st thereafter, to and including November 1, 2027. The Bonds are not subject to optional redemption prior to maturity. The Bonds are payable solely from tax increment revenue, which has been pledged for repayment of the Bonds.

Loans from the City
The former Redevelopment Agency received loans from the City to pay its share of administrative expenses and make payments on non-tax increment borrowings. The City accrued interest at a rate of 7% on these advances. The Successor Agency has prepared a repayment schedule in accordance with Health and Safety Code Section 34191.4, which was submitted to both the Oversight Board for the County of Monterey and the California Department of Finance. In the year ending June 30, 2013, interest on these loans was recalculated based on the average Local Agency Investment Fund rate of return for the period in which the loans existed as required by Assembly Bill 1484, on the principal amount of $1,934,012 for the Operating Expenditure Loan and $3,932,931 for the Seaside Loan. The Operating Expenditure Loan and Seaside Loan balances include $1,934,012 and $3,932,931 of principal and $1,692,046 and $717,068 of accrued interest, respectively.
65 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(54)
NOTE 14 SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER REDEVELOPMENT

AGENCY (CONTINUED)
D. Long-Term Debt (Continued)
Reimbursements Payable
The City issued Certificates of Participation (Certificates) to refinance certain real property legally owned by the former Redevelopment Agency. Under a Reimbursement Agreement with the City, the former Redevelopment Agency agreed to reimburse the City for all the Base Rental Payments made by the City to the Trustee of Certificates.

The Reimbursements were to be made from available monies of the former Redevelopment Agency; therefore, no formal repayment schedule is in place at this time.

Long-term debt balances and transactions for the fiscal year ended June 30, 2023 are as follows:

Beginning Ending Due Within
Balance Additions Reductions Balance One Year
Bonds, Loans, and
Reimbursements:
2008 Series B $ 410,000 $ 200,000 - $ $ 210,000 $ 210,000 2017 Subordinate Tax
Allocation Refunding
Bonds 3,050,000 345,000 - 2,705,000 495,000
Subtotal 3,460,000 545,000 - 2,915,000 705,000
Loans from the City:

Operating Expenditures 3,626,058 - 3,626,058 - -
Seaside 4,650,000 - 4,650,000 - -
Subtotal 8,276,058 - 8,276,058 - -
Reimbursement due to City 1,454,766 - 1,454,766 - -
Total Bonds,
Loans, and
Reimbursements 13,190,824 $ $ 545,000 - $ $ 12,645,824 $ 705,000 Annual debt service requirements to maturity are as follows:

Year Ending June 30, Principal Interest Principal Interest 2024 210,000 $ - $ 495,000 $ 70,039 $
2025 - - 680,000 53,295
2026 - - 695,000 33,701
2027 - - 720,000 13,538
2028 - - 115,000 1,639
Total 210,000 $ - $ 2,705,000 $ 172,212 $
Series B Bonds 2017 Refunding Bonds
66 DRAFT

CITY OF SAND CITY

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
(55)
NOTE 14 SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER REDEVELOPMENT

AGENCY (CONTINUED)
E. Deferred ROPS Revenue
The deferred ROPS revenue represents Real Property Tax Transfer Funds (RPTTF) received in advance for future obligation payments. The revenue will be recognized in the period in which the obligation payments are made. At June 30, 2023, this amount was $575,959.
67 DRAFT
(56)

REQUIRED SUPPLEMENTARY INFORMATION
68 DRAFT

CITY OF SAND CITY
SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL – GENERAL
YEAR ENDED JUNE 30, 2023
See accompanying Notes to Required Supplementary Information. (57)
Actual Variance With
Original Final Amounts Final Budget

REVENUES
Property Taxes $ 148,500 $ 140,700 $ 304,060 $ 163,360
Sales Tax 3,441,000 3,592,000 3,622,075 30,075
Transaction tax 2,922,000 3,321,000 3,495,665 174,665
Transient Occupancy Tax 15,000 120,000 124,723 4,723
Franchise/Users Taxes 255,500 275,500 300,739 25,239
Business Licenses 551,000 660,500 655,275 (5,225)
Licenses and Permits 66,700 29,800 151,877 122,077
Fines, Forfeits, and Penalties 22,870 18,270 5,292 (12,978) Charges for Current Services 75,400 54,600 89,288 34,688 Developer Reimbursements - 53,481 - 53,481
Revenue from Other Agencies 1,038,400 1,297,061 321,915 (975,146) Investment Earnings (Loss) 209,050 32,850 254,621 45,571 Rental Income 17,200 19,000 78,620 59,620
Other Revenue 49,150 90,572 41,294 (49,278)
Total Revenues 8,635,570 9,828,053 9,498,925 (329,128)

EXPENDITURES
Current:

General Government 1,537,240 1,659,780 1,781,035 (121,255) Public Safety 3,775,370 3,933,540 3,783,273 150,267
Public Works 1,597,200 3,288,686 746,729 2,541,957
Planning 298,445 293,970 570,179 (271,734)
Building 105,000 172,600 39,951 65,049
Community Development 360,000 306,250 214,670 91,580
Parks 11,500 11,000 7,735 3,265
Debt Service:

Principal 31,180 - 31,180 -
Interest and Other Charges - 3,340 3,340 -
Capital Outlay 316,800 335,300 547,288 (230,488)
Total Expenditures 8,083,180 9,954,021 7,725,380 2,228,641 NET CHANGE IN FUND BALANCE $ 552,390 $ (125,968) $ 1,773,545 $ 1,899,513 Budget Amounts
69 DRAFT

CITY OF SAND CITY

NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
JUNE 30, 2023
(58)
NOTE 1 BUDGETARY DATA
The City legally adopts an annual budget for the General Fund. The City adopts the budget before June 30 for each ensuing fiscal year.

Budgets submitted to the Council include both proposed appropriations and the means of financing them. A mid-year budget review is performed, and the budget is amended by passage of a resolution. Additional appropriations or interfund transfers not included in the amended budget resolution must be approved by the City Council.

All budgets have been prepared on a basis consistent with generally accepted accounting principles, which is the same basis of accounting as used to reflect actual revenues and expenditures.

Appropriations lapse at each fiscal year end and then are re-budgeted for the coming fiscal year. Encumbrance accounting is not used.
70 DRAFTCITY OF SAND CITY SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY – MISCELLANEOUS PLAN LAST TEN YEARS* (59)
Measurement Period: 2022 2021 2020 2019 2018 2017 2016 2015 2014 Proportion of the Net Pension Liability 0.02562% 0.02470% 0.02435% 0.02470% 0.06325% 0.07161% 0.07225% 0.07699% 0.03280% Proportionate Share of the Net Pension Liability $ 1,335,879 2,959,247 $ 2,648,872 $ 2,531,795 $ 2,383,530 $ 2,823,013 $ 2,516,961 $ 2,112,302 $ $ 2,041,105 Covered Payroll $ 1,162,410 $ 997,179 $ 981,708 $ 980,084 $ 968,615 $ 964,572 $ 973,812 $ 957,621 $ 979,700 Proportionate Share of the Net Pension Liability as a Percentage of Covered Payroll 254.58% 133.97% 269.82% 258.32% 246.08% 292.67% 258.46% 220.58% 208.34% Plan's Fiduciary Net Position $ 18,065,791,524 16,770,671,339 $ 14,702,361,183 $ 13,979,687,268 $ $ 12,074,499,781 13,122,440,092 $ 10,923,476,287 $ $ 10,896,036,068 $ 10,639,461,174 Plan's Fiduciary Net Position as a Percentage of the Total Pension Liability 78.19% 90.49% 77.71% 77.73% 77.69% 75.39% 75.87% 79.89% 81.15% Notes to Schedule:* Fiscal year 2015 was the first year of implementation, therefore, only nine years are shown.**Changes of assumptions:The discount rate to measure net pension liability was 7.5% as of June 30, 2014, 7.65% as of June 30, 2015 and 2016, 7.15% as of June 30, 2017 through 2021, and reduced to 6.90% as June 30, 2022.

The inflation rate to measure the net pension liability was 2.75% as of June 30, 2014, 2015, 2016 and 2017, 2.50% as of June 30, 2018, 2019, 2020, and 2021 and was reduced to 2.30% as of June 30, 2022. 71 DRAFTCITY OF SAND CITY SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY – SAFETY PLAN LAST TEN YEARS* (60)
Measurement Period: 2022 2021 2020 2019 2018 2017 2016 2015 2014 Proportion of the Net Pension Liability 0.02605% 0.01879% 0.02234% 0.02104% 0.03322% 0.03447% 0.04925% 0.03227% 0.02186% Proportionate Share of the Net Pension Liability $ 3,009,445 $ 1,016,446 $ 2,430,990 $ 2,155,679 $ 1,949,412 $ 2,059,738 $ 1,744,395 $ 1,329,846 $ 1,360,244 Covered Payroll $ 1,182,129 $ 1,521,503 $ 1,523,485 $ 1,517,774 $ 1,346,212 $ 1,306,040 $ 1,179,383 $ 1,095,485 $ 1,018,285 Proportionate Share of the Net Pension Liability as a Percentage of Covered Payroll 254.58% 66.81% 159.57% 142.03% 144.81% 157.71% 147.91% 121.39% 133.58% Plan's Fiduciary Net Position $ 21,204,498,824 $ 22,700,862,352 $ 17,199,729,799 18,120,140,152 $ 13,782,056,004 $ $ 13,782,056,004 15,169,595,595 $ $ 13,968,041,341 14,011,269,803 $ Plan's Fiduciary Net Position as a Percentage of the Total Pension Liability 75.53% 86.61% 73.12% 73.37% 72.69% 71.74% 72.69% 77.27% 78.83% Notes to Schedule:* Fiscal year 2015 was the first year of implementation, therefore, only nine years are shown.**Changes of assumptions:The discount rate to measure net pension liability was 7.5% as of June 30, 2014, 7.65% as of June 30, 2015 and 2016, 7.15% as of June 30, 2017 through 2021, and reduced to 6.90% as June 30, 2022.

The inflation rate to measure the net pension liability was 2.75% as of June 30, 2014, 2015, 2016 and 2017, 2.50% as of June 30, 2018, 2019, 2020, and 2021 and was reduced to 2.30% as of June 30, 2022. 72 DRAFTCITY OF SAND CITY SCHEDULE OF CONTRIBUTIONS – MISCELLANEOUS PLAN LAST TEN YEARS* (61)
2023 2022 2021 2020 2019 2018 2017 2016 2015
Actuarially Determined Contribution $ 411,443 $ 409,249 $ 380,620 $ 360,507 $ 322,974 $ 602,399 $ 284,073 $ 272,359 $ 232,159 Contributions in Relation to the Actuarially Determined Contributions 411,443 409,249 380,620 360,507 322,974 602,399 284,073 272,359 232,159 Contribution Deficiency (Excess) - $ - $ - $ - $ - $ - $ - $ - $ - $ Covered Payroll $ 1,066,438 $ 1,162,410 $ 997,179 $ 981,707 $ 980,084 $ 968,615 $ 964,572 $ 973,812 $ 957,621 Contributions as a Percentage of Covered Payroll 38.58% 35.21% 38.17% 36.72% 32.95% 62.19% 29.45% 27.97% 24.24% *This schedule is intended to show information for 10 years. Fiscal year 2015 was the first year of implementation; therefore, only nine years are shown. Additional years' information will be displayed as it becomes available.

Fiscal Year
73 DRAFTCITY OF SAND CITY SCHEDULE OF CONTRIBUTIONS – SAFETY PLAN LAST TEN YEARS* (62)
2023 2022 2021 2020 2019 2018 2017 2016 2015
Actuarially Determined Contribution $ 469,335 $ 435,826 $ 448,851 $ 392,595 $ 367,990 $ 404,055 $ 274,606 $ 213,436 $ 214,913 Contributions in Relation to the Actuarially Determined Contributions 469,335 435,826 448,851 392,595 367,990 404,055 274,606 213,436 214,913 Contribution Deficiency (Excess) - $ - $ - $ - $ - $ - $ - $ - $ - $ Covered Payroll $ 1,216,490 $ 1,182,129 $ 1,521,503 $ 1,523,485 $ 1,517,774 $ 1,346,212 $ 1,306,040 $ 1,179,383 $ 1,095,485 Contributions as a Percentage of Covered Payroll 38.58% 32.01% 29.50% 25.77% 24.25% 30.01% 21.03% 18.10% 19.62% *This schedule is intended to show information for 10 years. Fiscal year 2015 was the first year of implementation; therefore, only nine years are shown. Additional years' information will be displayed as it becomes available.

Fiscal Year
74 DRAFTCITY OF SAND CITY SCHEDULE OF CHANGES IN THE NET OPEB LIABILITY/(ASSET) AND RELATED RATIOS LAST TEN YEARS* (63)
Measurement Period: 2022 2021 2020 2019 2018 2017
Total OPEB Liability:

Service Cost $ 204,315 $ 181,403 $ 180,004 $ 248,439 $ 241,203 $ 234,000 Interest on the Total OPEB Liability 176,460 172,776 158,964 202,924 178,950 157,000 Actual and Expected Experience Difference - (183,940) - (858,688) - - Changes in Assumptions 76,993 - (52,022) (95,578) - -
Changes in Benefit Terms - (37,249) - - - -
Benefit Payments (116,802) (85,858) (81,571) (78,257) (66,192) (83,000) Net Change in Total OPEB Liability 340,966 47,132 205,375 (581,160) 353,961 308,000Total OPEB Liability - Beginning 2,468,308 2,421,176 2,215,801 2,796,961 2,443,000 2,135,000 Total OPEB Liability - Ending (a) 2,809,274 2,468,308 2,421,176 2,215,801 2,796,961 2,443,000 Plan Fiduciary Net Position:

Contributions - Employer 117,116 86,077 81,784 78,451 316,453 2,733,000 Net Investment Income (617,162) 994,521 123,517 203,252 224,625 173,000 Benefit Payments (116,802) (85,858) (81,571) (78,257) (66,192) (83,000) Administrative Expense (1,482) (1,588) (1,951) (900) (5,502) (1,000) Net Change in Plan Fiduciary Net Position (618,330) 993,152 121,779 202,546 469,384 2,822,000 Plan Fiduciary Net Position - Beginning 4,608,891 3,615,739 3,493,930 3,291,384 2,822,000 - Plan Fiduciary Net Position - Ending (b) 3,990,561 4,608,891 3,615,709 3,493,930 3,291,384 2,822,000 Net OPEB Liability/(Asset) - Ending (a)-(b) $ (1,181,287) $ (2,140,583) $ (1,194,533) $ (1,278,129) $ (494,423) $ (379,000)Plan Fiduciary Net Position as a Percentage of the Total OPEB Liability 142.05% 186.72% 149.34% 157.68% 117.68% 115.51%Covered-Employee Payroll $ 2,282,066 $ 2,405,581 $ 2,505,193 $ 2,497,858 $ 2,314,827 $ 2,270,612 Net OPEB Liability/(Asset) as a Percentage of Covered-Employee Payroll 51.76% 88.98% 47.68% 51.17% 21.36% 16.69%Notes to Schedule:*This schedule is intended to show information for 10 years. Fiscal year 2017 was the first year of implementation; therefore, only six years are shown. Additionalyears' information will be displayed as it becomes available. 75 DRAFTCITY OF SAND CITY SCHEDULE OF CONTRIBUTIONS – OPEB LAST TEN YEARS* (64)
2023 2022 2021 2020 2019 2018
Actuarially Determined Contribution $ 29,669 $ 79,024 $ 78,752 $ 239,000 $ 232,000 $ 225,000 Contributions in Relation to the Actuarially Determined Contributions (134,472) (117,116) (86,077) (81,784) (78,451) (83,000) Contribution Deficiency (Excess) $ (104,803) $ (38,092) $ (7,325) $ 157,216 $ 153,549 $ 142,000 Covered Payroll $ 2,639,436 $ 2,282,066 $ 2,405,581 $ 2,505,193 $ 2,497,858 $ 2,314,827 Contributions as a Percentage of Covered Payroll 5.09% 5.13% 3.58% 3.26% 3.14% 3.59% * This schedule is intended to show information for 10 years. Fiscal year 2018 was the first year of implementation; therefore, only six years are shown. Additionalyears' information will be displayed as it becomes available.

Fiscal Year
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REPORT REQUIRED BY

GOVERNMENT AUDITING STANDARDS
77 DRAFT
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INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER

FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS

BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED

IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Honorable Mayor and City Council Members
City of Sand City
Sand City, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the City of Sand City, as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise City of Sand City’s basic financial statements, and have issued our report thereon dated REPORT DATE.

Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered City of Sand City’s internal control over financial reporting (internal control) as basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of City of Sand City’s internal control. Accordingly, we do not express an opinion on the effectiveness of City of Sand City’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified. 78 DRAFT
Honorable Mayor and City Council Members
City of Sand City
(67)
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether City of Sand City’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

CliftonLarsonAllen LLP
Roseville, California

REPORT DATE
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