june 30, 2024
annual
financial
statements
downtown santa monica inc
WITH INDEPENDENT AUDITOR'S REPORT
TABLE OF CONTENTS
Independent Auditor's Report
Statement of Financial Position
Statement of Activities
Statement of Functional Expenses
Statement of Cash Flows
Notes to Financial Statements
1-2
3 4
5 6
7-13
J'on R. Dennis, CPA
Leighton C. Duncan, CPA
6300 Canoga Ave Suite 920
Woodland Hills, California 91367
www.dennisllp.com
INDEPENDENT AUDITOR’S REPORT
To the Board of Directors of
Downtown Santa Monica, Inc.
Opinion
We have audited the financial statements of Downtown Santa Monica Inc. (a California non-profit organization), which comprise the statement of financial position as of June 30, 2024, and the related statements of activities, functional expenses and cash flows for the year then ended, and the related notes to the financial statements.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Downtown Santa Monica Inc. as of June 30, 2024, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally ac-accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the “Auditor’s Re-possibilities for the Audit of the Financial Statements” section of our report. We are required to be independent of Downtown Santa Monica Inc. 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 opinion.
Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in ac-accordance with accounting principles generally accepted in the United States of America (US GAAP), 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 Downtown Santa Monica Inc’s ability to continue as a going concern for within one year after August 30, 2024.
Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. 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 will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Misstatements are considered material if there is a substantial likelihood that, individually or in aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, 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 Downtown Santa Monica Inc.’s internal control. Accordingly, no such opinion is expressed.
INDEPENDENT AUDITOR’S REPORT
(continued)
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 Downtown Santa Monica Inc’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.
Report on Summarized Comparative Information
We have previously audited Downtown Santa Monica Inc’s 2023 financial statements, and we expressed an unmodified audit opinion on those financial statements in our report dated October 17, 2023. In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2023, is consistent, in all material respects, with the audited financial statements from which it has been derived.
Los Angeles, California
August 30, 2024
6300 Canoga Ave Suite 920
Woodland Hills, California 91367
www.dennisllp.com
2024 2023
ASSETS
Current assets
Cash and cash equivalents $ 4,235,335 $ 2,312,159
Restricted cash 569,641 551,548
Accounts receivable, net 506,800 2,241,261
Prepaid expenses 43,613 58,146
Deposits and other assets 4,449 -
Total current assets 5,359,838 5,163,114
Non-current assets
Right of use, operating 722,492 824,734
Property and equipment, net 299,289 394,291
Total non-current assets 1,021,781 1,219,025
TOTAL ASSETS $ 6,381,619 $ 6,382,139
LIABILITIES AND NET ASSETS
Current liabilities
Accounts payable $ 1,372,539 $ 1,239,209
Accrued vacation 75,834 44,036
Property based assessment reserves 618,186 605,815
Current portion of operating lease obligation 164,028 128,778 Total current liabilities 2,230,587 2,017,838
Long-term liabilities
Operating lease obligation, net of current portion 454,415 618,445 Total long-term liabilities 454,415 618,445
Total liabilities 2,685,002 2,636,283
Net assets
Without donor restrictions 3,696,617 3,745,856
With donor restrictions - -
Total net assets 3,696,617 3,745,856
TOTAL LIABILITIES AND NET ASSETS $ 6,381,619 $ 6,382,139
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT
DOWNTOWN SANTA MONICA INC.
Statement of Financial Position
June 30, 2024
Without Donor
Restrictions
With Donor
Restrictions
Total
2024
Total
2023
REVENUE AND SUPPORT
Assessment fees
Property-based assessments $ - $ 5,770,006 $ 5,770,006 $ 5,587,758 Bayside district assessment - 1,154,012 1,154,012 1,182,129 Central business district - 135,365 135,365 137,324
Total assessment fees - 7,059,383 7,059,383 6,907,211
Revenue from services
Ice Rink 296,106 - 296,106 1,085,078
City parks 1,494,480 - 1,494,480 1,324,194
Events 192,844 - 192,844 190,300
Filming 28,343 - 28,343 59,461
Total revenue from services 2,011,773 - 2,011,773 2,659,033 Grants and other revenue
Grants, net of pass-throughs - - - 13,550
Vendors 45,723 - 45,723 32,040
Sponsorships 220,000 - 220,000 12,874
Miscellaneous 196,427 - 196,427 7,643
Total grants and other revenue 462,150 - 462,150 66,107 Net release from restrictions 7,059,383 (7,059,383) - - TOTAL REVENUE AND SUPPORT 9,533,306 - 9,533,306 9,632,351
EXPENSES
Program services
Property-based assessment districts 5,770,006 - 5,770,006 5,587,782 Bayside district 1,334,418 - 1,334,418 1,037,092
Central business district 97,926 - 97,926 114,495
Ice Rink operations 407,338 - 407,338 1,023,449
Parks and others 1,770,798 - 1,770,798 1,154,035
Total program services 9,380,486 - 9,380,486 8,916,853
Management and general 202,059 - 202,059 194,922
TOTAL EXPENSES 9,582,545 - 9,582,545 9,111,775
CHANGE IN NET ASSETS (49,239) - (49,239) 520,576
NET ASSETS, Beginning of year 3,745,856 - 3,745,856 3,225,280 NET ASSETS, End of year $ - 3,696,617 $ $ 3,696,617 $ 3,745,856
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT
DOWNTOWN SANTA MONICA INC.
Statement of Activities
For the year ended June 30, 2024
Property-based
Assessment
Districts
Bayside
District
Central Business
District
Ice Rink
Operations
Parks and
Others
Total
Services
Management and
General 2024 2023
Personnel costs
Salaries and wages $ 517,659 $ 246,547 $ 29,469 $ 79,162 $ 174,505 $ 1,047,342 $ 141,618 $ 1,188,960 $ 958,586 Employer taxes 37,229 17,731 2,119 5,693 12,550 75,322 10,185 85,507 76,243 Employer paid benefits 77,955 37,128 4,438 11,921 26,280 157,722 21,326 179,048 111,471 Total personnel costs 632,843 301,406 36,026 96,776 213,335 1,280,386 173,129 1,453,515 1,146,300 Operational costs
Ambassadors 1,991,110 - - - 1,363,406 3,354,516 - 3,354,516 2,072,297BID maintenance 1,002,198 - - - - 1,002,198 - 1,002,198 2,451,909 Business development 70,109 3,580 5,160 2,762 7,899 89,510 - 89,510 13,227 Education/training 13,330 4,039 1,010 404 606 19,389 808 20,197 4,331 Equipment rental 5,033 1,525 381 153 229 7,321 305 7,626 6,433 Homeless outreach 55,085 - - - 55,085 110,170 - 110,170 133,445 Security 1,382,734 - - - - 1,382,734 - 1,382,734 1,222,771 Insurance 33,803 10,243 2,561 1,024 1,536 49,167 2,049 51,216 47,185 Marketing and promotional 272,345 946,648 22,140 208,697 95,690 1,545,520 157 1,545,677 1,833,188 Membership and dues 5,004 1,517 379 152 228 7,280 303 7,583 7,527 Occupancy 119,898 36,333 9,083 3,633 5,450 174,397 7,267 181,664 169,837 Supplies 13,591 - - - - 13,591 1,076 14,667 10,821Policy and advocacy 65,529 - 10,081 5,041 20,163 100,814 1,973 102,787 101,114Professional fees 68,058 17,207 8,126 4,159 5,019 102,569 213 102,782 160,718 Repair and maintenance - - - - - - 950 950 15,712
Special projects - - - - - - - - 65,418Telephone 10,947 3,317 829 332 498 15,923 664 16,587 10,279 Travel and auto 4,336 1,314 328 131 197 6,306 263 6,569 10,978 Total operational costs 5,113,110 1,025,723 60,078 226,488 1,556,006 7,981,405 16,028 7,997,433 8,337,190 Other costs (gain)
Depreciation 83,345 83,345 11,657 95,002 71,922
Miscellaneous 24,053 7,289 1,822 729 1,457 35,350 1,245 36,595 6,092 Gain on sale of assets - - - (40,000)
Total indirect operational costs 24,053 7,289 1,822 84,074 1,457 118,695 12,902 131,597 38,014 TOTAL COSTS $ 5,770,006 $ 1,334,418 $ 97,926 $ 407,338 $ 1,770,798 $ 9,380,486 $ 202,059 $ 9,582,545 $ 9,521,504 Program services Total Expenses
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT
DOWNTOWN SANTA MONICA INC. Statment of Functional ExpensesFor the year ended June 30, 2024 2024 2023
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from assessments $ 8,806,215 $ 5,102,426
Cash received from service agreements 2,011,773 2,659,033 Cash received from others 462,150 66,107
Cash paid for employees (1,421,717) (1,145,316)
Cash paid to vendors (7,917,152) (7,493,004)
Cash used for operating activities 1,941,269 (810,754)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of assets - 40,000
Purchase of property and equipment - (177,953)
Cash used for investing activities - (137,953)
Net change in cash 1,941,269 (948,707)
CASH AND CASH EQUIVALENTS, Beginning of year 3,812,414 2,863,707 CASH AND CASH EQUIVALENTS, End of year $ 2,863,707 4,804,976 $ Reconciliation of change in net assets to cash provided by (used in) operating activities:
Change in net assets $ 520,576 (49,239) $
Adjustments to reconcile change in net assets:
Depreciation 95,002 71,922
Gain on disposal of assets - (40,000)
Operating right of use asset in exchange for liability (26,538) (67,553) Changes in working capital:
Decrease (increase) in accounts receivable 1,734,461 (1,947,963) Decrease (increase) in prepaids and deposits 10,084 243,751 Decrease (increase) in accounts payable 133,330 264,351 Decrease (increase) in accrued vacation 31,798 984
Decrease in unearned income 12,371 143,718
Net cash used for operating activities $ 1,941,269 $ (810,214)
SUPPLEMENTAL DISCLOSURE OF CASH-FLOW INFORMATION
Unrestricted cash $ 4,235,335 $ 2,312,159
Restricted cash 569,641 551,548
Total cash and cash equivalents $ 4,804,976 $ 2,863,707 Cash paid for operating lease obligation $ 183,758 $ 225,328
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT
DOWNTOWN SANTA MONICA INC.
Statement of Cash Flows
For the year ended June 30, 2024
DOWNTOWN SANTA MONICA INC.
Notes to Financial Statements
For the year ended June 30, 2024
Note 1: Organization and background
Downtown Santa Monica, Inc. (hereinafter referred to as “the Organization”) was originally formed and incorporated as a notfor-profit organization in 1984 named “Third Street Development Corporation”. The Organization’s primary purpose is to promote the economic vitality and community life of the Third Street Promenade and Downtown Santa Monica. The Organization is responsible for programs, projects and services that benefit area merchants, property owners, customers, visitors, and residents.
This includes a Property-Based Assessment District program focusing on increased maintenance, an ambassador program, marketing, and special projects.
Note 2: Summary of significant accounting policies
A summary of the significant accounting policies applied in the preparation of the accompanying financial statements are as follows:
Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues, and expenses as of the date and for the period presented. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Organization defines cash and cash equivalents to be cash on hand and short-term, highly liquid investments with maturities of three months or less.
Property and Equipment
Property and equipment are stated at cost or fair value, if donated to the Organization, less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated useful lives of the assets as follows:
Leasehold improvements 5 to 10 years
Furniture and fixtures 5 to 7 years
Equipment 5 years
Revenue Recognition
The Organization adheres strictly to the principles outlined in the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 606, "Revenue from Contracts with Customers", to recognize revenue from various sources.
The following provides an overview of key revenue recognition policies:
Revenue from Assessment Fees: Recognized upon incurring corresponding expenses, directed by the fees' intent.
Unspent Amounts are classified as a liability on the Statement of Financial Position if unspent at year-end, acknowledging their earmarked nature for future district-specific use. Revenue from Service Contracts: Progressively recognized as services are rendered, ensuring alignment with control transfer to the customer and in line with respective contract stipulations. Payments received in advance result in recognizing a contract liability (deferred revenue), which transitions into recognized revenue upon satisfying the performance obligations.
Revenue from Grants: Government Grants are recognized once conditions are substantially met. If restrictions apply, recognition in restricted net assets occurs, moving to unrestricted net assets upon fulfilling time or purpose constraints.
Private Grants are recognized upon pledge receipt, presuming all eligibility requirements, barring contingencies, are met. If restrictions are met in the recognition period, they account for increases in net assets without donor restrictions; otherwise, increases apply to net assets with donor restrictions.
Transaction Price as defined based on the expected entitlement in exchange for transferring promised services, excluding thirdparty amounts. For contracts with multiple performance obligations, The Organization allocates the transaction price to individual performance obligations, reflecting the expected consideration amount related to satisfying each obligation.
Contract assets are recognized for consideration conditioned on factors beyond time passage (e.g., future performance). In contrast, a contract liability or deferred revenue is recognized when the Organization receives or has an unconditional entitlement to consideration before fulfilling performance obligations by transferring promised services.
DOWNTOWN SANTA MONICA INC.
Notes to Financial Statements
For the year ended June 30, 2024
Note 2: Summary of significant accounting policies (continued) Fair Value Measurements
The Organization measures certain assets and liabilities at fair value on a recurring basis. Fair value is defined under U.S. GAAP, specifically ASC 820, “Fair Value Measurements and Disclosures”, as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To estimate fair value, the Organization uses market participant assumptions, considering market data available at the measurement date. The valuation techniques employed to measure fair value maximize the use of relevant observable inputs and minimize the use of unobservable inputs.
The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:
Level 1: Quoted prices in active markets for identical assets or liabilities. Market price data is generally obtained from exchange or dealer markets.
Level 2: Inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability. Level 3: Inputs that are generally unobservable and typically reflect management's estimates of assumptions that market participants would use in pricing the asset or liability. The unobservable inputs are developed based on the best information available under the circumstances, which might include Downtown Santa Monica Inc's own data.
Leases
The Organization leases certain buildings. The determination of whether an arrangement is a lease is made at the lease’s inception. Under ASC 842, a contract is (or contains) a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control is defined under the standard as having both the right to obtain substantially all of the economic benefits from use of the asset and the right to direct the use of the asset. Management only reassesses its determination if the terms and conditions of the contract are changed.
Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities in our statements of financial position. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in our statements of financial position. ROU assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.
The Organization uses the implicit rate when it is readily determinable. Since most of the Organization’s leases do not provide an implicit rate, to determine the present value of lease payments, management uses the Organization’s incremental borrowing rate based on the information available at lease commencement. Operating lease ROU assets also includes any lease payments made and excludes any lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Organization’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Organization will exercise the option.
Net Assets
Net assets, revenues, gains, and losses are classified based on the existence or absence of donor or regulatory restrictions.
Accordingly, net assets and changes therein are classified and reported as follows:
Without Donor Restrictions: Net assets available for use in general operations and not subject to donor or regulatory restrictions.
With Donor Restrictions: Net assets subject to donor or regulatory imposed restrictions. Some restrictions are temporary in nature, such as those that will be met by the passage of time or other events specified by the donor or regulatory agency. Other imposed restrictions are perpetual in nature, where certain stipulations are in place that resources are to be maintained in perpetuity. Restrictions are released when stipulated time has elapsed, the stipulated purpose for which resource was restricted has been fulfilled, or both.
DOWNTOWN SANTA MONICA INC.
Notes to Financial Statements
For the year ended June 30, 2024
Note 2: Summary of significant accounting policies (continued) It is the Organization’s policy to record restricted support as unrestricted support where the restrictions have been satisfied within the reporting period.
Functional Allocation of Expenses
Costs of providing the Organization’s programs and other activities have been presented in the Statement of Functional Expenses. Certain categories of expenses are attributable to more than one program or supporting function and are allocated on a reasonable basis that is consistently applied.
Income Taxes and Unrelated Business Income
The Organization is exempt from federal and state income tax under the provisions of Section 501(c)(3) of the Internal Revenue Code; therefore, no provision for income taxes has been made in these financial statements. The Organization has also been classified as an entity that is not a private foundation within the meaning of Section 509(a) and qualifies for deductible contributions as provided in Section 170(b)(1)(A)(iv).
Income from certain activities not directly related to the Organization’s tax-exempt purpose is subject to taxation as Unrelated Business Taxable Income (UBTI) under the Internal Revenue Code Section 511(a)(2)(A). The Organization conducts activities that generate income which may not be directly related to its exempt purposes. Income derived from such unrelated business activities, less applicable deductions, is subject to UBTI if it meets three criteria:
It is income from trade or business,
it is regularly carried on, and
It is not substantially related to furthering the exempt purpose of the Organization.
The Organization follows the guidelines outlined under ASC 740, “Income Taxes” in its financial statements. In adherence to ASC 740, the Organization recognizes deferred tax assets and liabilities for the expected future tax consequences of transactions that have been recognized in its financial statements or tax returns. The Organization estimates its annual effective tax rate and applies this rate to the quarterly pre-tax income derived from unrelated business activities. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities, utilizing enacted tax rates in effect for the year in which these items are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
Date of Management’s Review
The financial statements of Downtown Santa Monica Inc. for the year ended June 30, 2024, were authorized for issue by the Company’s Board of Directors on August 30, 2024. Subsequent events have been evaluated up to this date.
Note 3: Concentrations of credit risk
The Organization maintains its operating cash and money market accounts within various highly reputable financial institutions.
These accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000, per account; in which, at times during the year, the Organization may exceed. Any account balances above the FDIC coverage, is considered uninsured.
The Organization’s uninsured balances totaled approximately $2,761,536 at June 30, 2024.
Note 4: Liquidity and availability of resources
The Organization regularly monitors liquidity required to meet its operating needs and other contractual commitments, while also striving to maximize the investment of its available funds. The Organization has various sources of liquidity at its disposal, including cash and cash equivalents, and accounts receivable. For purposes of analyzing resources available to meet general expenditures over a 12-month period, the Organization considers all expenditures related to it ongoing activities and the pattern of income from grants, contracts, and fundraising. The Audit and Finance Committee meets quarterly to review all financial aspects of the Organization and to review results, assess risk, and make recommendations from changes to the Board of Directors as needed.
In addition to financial assets available to meet general expenditures over the next 12 months, the Organization operates with a balanced budget and anticipates collecting sufficient revenue to cover general expenditures. As of June 30, 2024, the following financial assets were readily available within one year of the statement of financial position to meet general expenses:
DOWNTOWN SANTA MONICA INC.
Notes to Financial Statements
For the year ended June 30, 2024
Note 4: Liquidity and availability of resources (continued) Cash and cash equivalents $ 4,235,335
Accounts receivable net realized value 506,800
Less: Held for reserved purposes (618,186)
Financial assets available $ 4,123,949
Note 5: Revenues
Bayside District
The Organization has a service agreement with the City of Santa Monica whereby the Organization provides services to promote economic vitality of the downtown Santa Monica business district. In exchange for services rendered, the Organization receives funding from the City of Santa Monica’s business license department concurrently with the business license fees based upon an operating budget approved by the City.
The current agreement covers a ten-year period expiring in May 2029, and contains a provision for a ten-year extension. The Organization received $1,154,012 as an exchange transaction from the City under the current agreement for the year ended June 30, 2024.
Central Business District
In April 1998, the Board of Directors approved merging the administration of the Central Business District (CBD) into the Organization. The CBD is an assessment district that generates funds for the use of marketing local businesses in the downtown area. During the year ended June 30, 2024, the Organization received assessment fees from the city for promotional activities totaling $135,365.
Santa Monica Ice Rink
During the year ended June 30, 2024, the Organization had a service concession arrangement with the City of Santa Monica to operate the City’s Ice Rink, which qualifies as a service concession arrangement under ASC Topic 853, “Service Concession Arrangements”. Accordingly, the Organization is not considered to be the owner of the City’s Ice Rink for accounting purposes.
Instead, the City of Santa Monica, as the grantor, has provided the Organization, as the operator, with a right and related obligation to earn revenue from third-party users of the City’s Ice Rink.
During the year then ended, the Organization recognized $516,106 in revenues and $407,338 in expenses related to the operation of the City’s Ice Rink, resulting in a net income of $108,768 from this service concession arrangement.
Park Services
The Organization occasionally enters into contractual agreements to provide enhanced services within its geographic operating boundaries or immediately outside its routine operating boundaries. Since 2017, the Organization has provided Ambassador services in Tongva and Palisades Parks, under service contracts with the City of Santa Monica. In 2019, the contract was amended to include Ambassador services in Reed Park. The agreement for services in the three downtown-adjacent parks is renewed annually, subject to budget approval by Santa Monica City Council. For the year ended June 30, 2024, the Organization received $1,494,480 in park services from the City of Santa Monica.
DOWNTOWN SANTA MONICA INC.
Notes to Financial Statements
For the year ended June 30, 2024
Note 6: Property and equipment
Property and equipment, net of accumulated depreciation, consist of the following as of June 30, 2024:
2024
Ice rink $ 411,725
Leasehold improvements 213,297
Furniture and fixtures 91,923
Computer equipment 87,999
Subtotal 804,944
Less: Accumulated depreciation (505,655)
Total $ 299,289
Depreciation expenses for the year ended June 30, 2024, were $95,002.
Note 7: Retirement plans
The Organization has a 403(b) defined contribution pension plan, which covers all employees who work at least 20 hours per week. The Organization matches 50% of the employee contribution up to 5% of the employee’s annual salary or wages.
Contributions totaling $21,846 for the year ended June 30, 2024, were made by the Organization, in addition to the elective deferrals made by employees.
Note 8: Compensated Absences
The Organization provides various types of paid leave to employees, including vacation, sick leave, and other personal time off. In accordance with ASC 710, "Compensation - General," the Organization recognizes the cost of compensated absences when employees render the services that enable them to earn the time off.
Accounting Policy
The liability for compensated absences is recognized when it is probable that the benefit will be utilized, and the amount can be reasonably estimated. It is calculated based on the Organization’s policy, considering factors such as the vesting period, accumulation, and expiration of such leave.
Vacation and Personal Time Off: The Organization accrues the liability for the vested portion of vacation and personal leave based on the employees' current salary level and includes it in the “Accrued Vacation” in the Statement of Financial Position.
Sick Leave: Sick leave does not vest with employees and is expensed as taken, given that the Organization does not expect the total sick leave taken to significantly deviate from past patterns.
Expense and Liability Recognition
During the year ended June 30, 2024, the accrued liability for compensated absences, included under “Accrued Compensation and Benefits” on the Statement of Financial Position, amounts to $75,834 as of June 30, 2024.
Future Utilization
The utilization of compensated absences will result in cash outflows in future periods. The Organization actively manages leave policies and monitors the accrued liabilities to ensure effective management and accurate financial reporting.
DOWNTOWN SANTA MONICA INC.
Notes to Financial Statements
For the year ended June 30, 2024
Note 9: Property-Based Assessment District (PBAD) reserves The Santa Monica PBAD is designed to improve and benefit the downtown properties in the City of Santa Monica. The PBAD boundaries are narrowly drawn and only include properties that directly benefit from the services to be financed from the assessments. Every assessed property within the PBAD receives special benefit from the enhanced safety and maintenance activities, homeless outreach, special projects, and marketing activities. Only those properties within the PBAD receive the special benefit of these proposed activities. The duration of the proposed PBAD is twenty (20) years commencing January 1, 2009. Assessments will be subject to an annual increase of up to 5% per year as determined by the Board of Directors and will vary between 0% and 5% in any given year. Funding for the PBAD improvements and activities shall be derived from a propertybased assessment for each benefitted parcel in the PBAD.
The following are schedules of the activity for the year ended June 30, 2024:
Unspent balance, beginning of year $ 605,815
Cash assessments received 5,782,377
Less: Recognized revenue (5,770,006)
Unspent balance, end of year $ 618,186
Note 10: Leasing Arrangement
The Organization leases certain office space. The Organization assesses whether an arrangement qualifies as a lease (i.e., conveys the right to control the use of an identified asset for a period of time in exchange for consideration) at inception and only reassesses its determination if the terms and conditions of the arrangement are changed. Leases with an initial term of 12 months or less are not recorded on the statement of financial position. Lease expense is recognized for these leases on a straight-line basis over the lease term.
Most leases include one or more options to renew, with renewal terms that can extend the lease term from 1 to 20 years or more. The exercise of lease renewal options is at the Organization’s sole discretion. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term unless there is a transfer of title or purchase option reasonably certain of exercise.
Lease expense
Operating lease expense 157,221 $
Other Information
Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases 183,758
Weighted-average remaining lease term in years for operating leases 5.33 Weighted-average discount rate for operating leases 8.25% Maturity Analysis
June 30, 2025 164,028
June 30, 2026 167,308
June 30, 2027 170,656
June 30, 2028 174,068
June 30, 2029 58,404
Thereafter -
Total undiscounted cash flows 734,464
Less: present value discount (116,021)
Total lease liabilities $ 618,443
DOWNTOWN SANTA MONICA INC.
Notes to Financial Statements
For the year ended June 30, 2024
Note 11: Contingencies
Failure to fulfill funding conditions could result in the return of the funds to the grantors. Although that is a possibility, the Board of the Organization deems the contingency to be remote.
Electrical upgrades made to the Ice Rink costing $411,725 were acquired with City of Santa Monica funds and are considered to be owned by the Organization while used in the servicing of the Ice Rink. These costs are classified as fixed assets on the Organizations Statement of Financial Position. If such a time of termination of the services agreement with City, these assets shall revert to the City.
In the normal course of operations, the Organization is subject to certain loss contingencies, such as litigation. In management’s opinion, the liability, if any, for such contingencies will not have a material effect on the Organization’s financial position.
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