Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The accompanying combining and individual nonmajor fund financial statements, and budgetary comparison information, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements.
The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements and budgetary comparison information are fairly stated, in all material respects, in relation to the basic financial statements as a whole.
Other Information
Management is responsible for the other information included in the annual report. The other information comprises the introductory and statistical sections but does not include the basic financial statements and our auditor’s report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon.
In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 31, 2025, on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering City’s internal control over financial reporting and compliance.
Badawi & Associates, CPAs
Emeryville, California
December 31, 2025
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17 BASIC
FINANCIAL STATEMENTS
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19 GOVERNMENT-WIDE
FINANCIAL STATEMENTS
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20 City of Solvang
Statement of Net Position
June 30, 2025
Governmental
Activities
Business-Type
Activities Total
ASSETS
Current assets:
Cash and investments $ 32,816,965 $ 12,008,658 $ 44,825,623 Taxes receivable 8,949 - 8,949
Accounts receivable 2,048,741 1,191,530 3,240,271
Due from other government 76,502 - 76,502
Lease receivable - 12,466 12,466
Interest receivable 28,479 2,308 30,787
Deposits - 636,970 636,970
Prepayments 21,958 2,206,884 2,228,842
Total current assets 35,001,594 16,058,816 51,060,410
Noncurrent assets:
Loans receivable 15,530 - 15,530
Lease receivable - 150,692 150,692
Capital assets:
Capital assets not being depreciated 3,009,907 1,606,010 4,615,917 Capital assets being depreciated, net 10,967,458 11,587,425 22,554,883 Total capital assets 13,977,365 13,193,435 27,170,800
Total noncurrent assets 13,992,895 13,344,127 27,337,022 Total assets 48,994,489 29,402,943 78,397,432
DEFERRED OUTFLOWS OF RESOURCES
Deferred outflows - pension 1,315,854 438,618 1,754,472 Deferred outflows - OPEB 245,300 81,768 327,068
Total deferred outflows of resources 1,561,154 520,386 2,081,540 Primary Government
See accompanying Notes to Basic Financial Statements.
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21 Governmental
Activities
Business-Type
Activities Total
LIABILITIES
Current liabilities:
Accounts payable 631,013 296,499 927,512
Deposits 64,838 - 64,838
Unearned advances 45,317 - 45,317
Compensated absences, due within one year 30,000 30,000 60,000 Total current liabilities 771,168 326,499 1,097,667
Noncurrent liabilities:
Compensated absences, due in more than one year 144,291 61,045 205,336 Net other post employment benefit liability 678,324 226,107 904,431 Net pension liability 4,506,621 1,502,206 6,008,827
Total noncurrent liabilities 5,329,236 1,789,358 7,118,594 Total liabilities 6,100,404 2,115,857 8,216,261
DEFERRED INFLOWS OF RESOURCES
Deferred inflows - pension 193,725 64,575 258,300
Deferred inflows - OPEB 332,759 110,920 443,679
Deferred inflows - leases - 133,926 133,926
Total deferred inflows of resources 526,484 309,421 835,905
NET POSITION
Net investment in capital assets 13,977,365 13,193,435 27,170,800 Restricted for:
Highways and streets 924,997 - 924,997
Capital improvements and other 3,862,953 - 3,862,953
Total restricted 4,787,950 - 4,787,950
Unrestricted 25,163,440 14,304,616 39,468,056
Total net position $ 43,928,755 $ 27,498,051 $ 71,426,806 Primary Government
See accompanying Notes to Basic Financial Statements.
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22 City of Solvang
Statement of Activities
For the year ended June 30, 2025
Operating Capital
Charges for Grants and Grants and
Functions/Programs Expenses Services Contributions Contributions Total City Government:
Governmental activities:
General government $ 3,700,808 $ 761,764 $ 1,021,623 $ - $ 1,783,387 Public safety 3,186,405 39,880 - - 39,880
Culture and recreation 2,206,597 140,394 65,985 - 206,379 Community development 914,951 275,390 9,156 - 284,546
Public works 3,587,537 357,043 653,819 171,468 1,182,330 Total governmental activities 13,596,298 1,574,471 1,750,583 171,468 3,496,522 Business-type activities:
Water 4,807,146 6,000,885 - 14,241 6,015,126
Wastewater 2,722,922 2,796,919 341,140 - 3,138,059
Transit 1,316,001 58,528 1,237,851 - 1,296,379
Total business-type activities 8,846,069 8,856,332 1,578,991 14,241 10,449,564 Total primary government $ 22,442,367 $ 10,430,803 $ 3,329,574 $ 185,709 $ 13,946,086 General Revenues:
Taxes:
Property taxes
Sales taxes
Transient occupancy taxes
Other taxes
Total taxes
Investment earnings
Miscellaneous
Transfers
Total general revenues and transfers
Change in net position
Net position - beginning of year
Net position - end of year
Program Revenues
See accompanying Notes to Basic Financial Statements.
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23 Governmental Business-Type
Activities Activities Total
$ (1,917,421) $ - $ (1,917,421)
(3,146,525) - (3,146,525)
(2,000,218) - (2,000,218)
(630,405) - (630,405)
(2,405,207) - (2,405,207)
(10,099,776) - (10,099,776)
- 1,207,980 1,207,980
- 415,137 415,137
- (19,622) (19,622)
- 1,603,495 1,603,495
(10,099,776) 1,603,495 (8,496,281)
1,913,649 - 1,913,649
4,617,214 - 4,617,214
7,311,243 - 7,311,243
354,085 - 354,085
14,196,191 - 14,196,191
1,268,527 539,336 1,807,863
136,254 - 136,254
(3,000) 3,000 -
15,597,972 542,336 16,140,308
5,498,196 2,145,831 7,644,027
38,430,559 25,352,220 63,782,779
$ 43,928,755 $ 27,498,051 $ 71,426,806
Primary Government
and Changes in Net Position
Net (Expense) Revenue
See accompanying Notes to Basic Financial Statements.
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25 FUND
FINANCIAL STATEMENTS
Governmental Fund Financial Statements
Proprietary Fund Financial Statements
Fiduciary Fund Financial Statements
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27 GOVERNMENTAL FUND FINANCIAL STATEMENTS
General Fund is the City's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund.
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28 City of Solvang
Balance Sheet
Governmental Funds
June 30, 2025
Non-Major Total
Major Fund Governmental Governmental
General Fund Funds Funds
ASSETS
Cash and investments 26,780,757 $ 4,638,087 $ 31,418,844 $ Receivables:
Taxes receivable 8,949 - 8,949
Accounts receivable 1,902,937 145,804 2,048,741
Due from other government 76,502 - 76,502
Interest receivable 25,074 3,170 28,244
Prepaid items 21,958 - 21,958
Loans and notes receivables - 15,530 15,530
Total assets $ 4,802,591 28,816,177 $ 33,618,768 $
LIABILITIES AND
FUND BALANCES
Liabilities:
Accounts payable 587,944 $ 43,069 $ 631,013 $
Deposits payable 64,838 - 64,838
Unearned revenues 45,317 - 45,317
Total liabilities 43,069 698,099 741,168
Fund Balances:
Nonspendable (Prepaid items) 21,958 - 21,958
Restricted for:
Recycling 5,050 - 5,050
Highways and streets - 3,917,140 3,917,140
Park improvements - 50,884 50,884
Drainage - 321,703 321,703
Affordable housing - 483,805 483,805
Tennis facilities 9,368 - 9,368
Total restricted 14,418 4,773,532 4,787,950
Committed to:
Emergencies 6,179,447 - 6,179,447
Total committed 6,179,447 - 6,179,447
Assigned to:
Encumbrances 170,511 - 170,511
Unassigned 21,731,744 (14,010) 21,717,734
Total fund balances 4,759,522 28,118,078 32,877,600
Total liabilities and fund balances $ 4,802,591 28,816,177 $ 33,618,768 $ See accompanying Notes to Basic Financial Statements.
29 Total Fund Balances - Total Governmental Funds $ 32,877,600 Capital assets used in governmental activities are not current financial resources and therefore are not reported in the funds 13,680,082
The assets and liabilities of the internal service fund are included in the governmental activities in the statement of net position 1,695,639
Pension actuarial deferrals and certain employer contributions are reported as deferred inflows and outflows of resources and are, therefore, not reported in the funds 1,122,129 Net pension liability (NPL) obligations are not due and payable in the current period and are not reported in the funds (4,506,621)
OPEB actuarial deferrals and certain employer contributions are reported as deferred inflows and outflows of resources and are, therefore, not reported in the funds (87,459) The net OPEB liability is not due and payable in the current period and is therefore not reported in the funds (678,324)
Some liabilities, including compensated absences, and claims are not due and payable in the current period and are therefore not reported in the funds (174,291)
Net Position of Governmental Activities $ 43,928,755
Amounts reported for governmental activities in the statement of net position are different City of Solvang
Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Position
June 30, 2025
See accompanying Notes to Basic Financial Statements.
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31 Statement of Revenues, Expenditures and Changes in Fund Balances Major Fund
Non-Major Total
Governmental Governmental
General Fund Funds Funds
REVENUES:
Property taxes $ 1,913,649 $ - $ 1,913,649
Sales taxes 4,617,214 - 4,617,214
Transient occupancy taxes 7,311,243 - 7,311,243
Other taxes 354,085 - 354,085
Special assessments - 234,572 234,572
Licenses and permits 243,260 - 243,260
Fines and forfeits 50 6,369 6,419
Intergovernmental 1,094,810 820,287 1,915,097
Interest 992,882 219,388 1,212,270
Charges for services 1,045,225 44,996 1,090,221
Miscellaneous 143,350 - 143,350
Total revenues 17,715,768 1,325,612 19,041,380
EXPENDITURES:
Current:
General government 3,605,857 - 3,605,857
Public safety 3,146,642 - 3,146,642
Culture and recreation 2,051,560 - 2,051,560
Community development 881,438 - 881,438
Public works 2,300,223 191,790 2,492,013
Capital outlay 368,678 850,298 1,218,976
Total expenditures 12,354,398 1,042,088 13,396,486
REVENUES OVER (UNDER) EXPENDITURES 5,361,370 283,524 5,644,894 OTHER FINANCING SOURCES (USES):
Transfers in 278,172 795,934 1,074,106
Transfers out (269,258) (744,484) (1,013,742)
Total other financing sources (uses) 8,914 51,450 60,364 Net change in fund balances 5,370,284 334,974 5,705,258 FUND BALANCES:
Beginning of year 22,747,794 4,424,548 27,172,342
End of year $ 28,118,078 $ 4,759,522 $ 32,877,600
City of Solvang
Governmental Funds
For the year ended June 30, 2025
See accompanying Notes to Basic Financial Statements.
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32 See accompanying Notes to Basic Financial Statements.
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33 Net Change in Fund Balances - Total Governmental Funds $ 5,705,258 Governmental funds report capital outlays as expenditures, however, in the statement of activities, the cost of those assets are allocated over their estimated useful lives as depreciation expense. This is the amount by which depreciation exceeds capital outlays in the current period. (198,450) Changes in liabilities for other post employment benefits (OPEB) and other related amounts do not provide current financial resources and are therefore not reported in the governmental fund statements. 143,785
Changes in the net pension liability and related deferred amounts do not use or provide current financial resources and are reported in the statement of activities, but not in the governmental fund statements. (270,573)
Some expenses in the statement of activities for noncurrent liabilities such as long-term compensated absences do not require the use of or provide current financial resources and, therefore, are not reported as expenditures in the governmental funds (40,776) Internal service funds are consolidated by charging additional amounts or reducing charges to participating governmental activities to completely cover the internal service fund's costs 158,952
Change in Net Position of Governmental Activities $ 5,498,196 Amounts reported for governmental activities in the Statement of Activities were different City of Solvang
Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-Wide Statement of Activities For the year ended June 30, 2024
See accompanying Notes to Basic Financial Statements.
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35 PROPRIETARY FUND FINANCIAL STATEMENTS
Water Service Enterprise Fund accounts for the activities associated with providing water services.
Wastewater Enterprise Fund accounts for the wastewater treatment plant and wastewater pumping stations and collection systems.
Transit Enterprise Fund is used to account for transit operations.
Vehicle/Equipment Replacement Internal Service Fund is used to account for replacement costs of City vehicles and equipment and accumulate resources for replacement assets.
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36 City of Solvang
Statement of Net Position
Proprietary Funds
June 30, 2025
Water Wastewater
ASSETS
Current assets:
Cash and investments $ 7,028,504 $ 3,181,744
Accounts receivable 706,003 337,344
Interest receivable 1,336 651
Lease receivable 12,466 -
Deposits 632,937 836
Prepayments 2,179,661 27,223
Total current assets 10,560,907 3,547,798
Noncurrent assets:
Lease receivable 150,692 -
Capital assets:
Capital assets not being depreciated 547,736 1,058,274
Capital assets being depreciated 5,321,330 5,699,212
Total capital assets 5,869,066 6,757,486
Total noncurrent assets 6,019,758 6,757,486
Total assets 16,580,665 10,305,284
DEFERRED OUTFLOWS OF RESOURCES
Deferred outflows - pension 175,448 263,170
Deferred outflows - OPEB 32,707 49,061
Total deferred outflows of resources 208,155 312,231
LIABILITIES
Current liabilities:
Accounts payable and other 49,284 159,878
Compensated absences - due within one year 15,000 15,000 Total current liabilities 64,284 174,878
Noncurrent liabilities:
Compensated absences - due in more than one year 20,377 40,668 Net other postemployment benefit liability 90,443 135,664 Net pension liability 600,883 901,323
Total noncurrent liabilities 711,703 1,077,655
Total liabilities 775,987 1,252,533
DEFERRED INFLOWS OF RESOURCES
Deferred inflows - pension 25,829 38,746
Deferred inflows - OPEB 44,368 66,552
Deferred inflows - leases 133,926 -
Total deferred inflows of resources 204,123 105,298
NET POSITION
Net investment in capital assets 5,869,066 6,757,486
Unrestricted 9,939,644 2,502,198
Total net position $ 15,808,710 $ 9,259,684
Enterprise Funds
See accompanying Notes to Basic Financial Statements.
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37 Vehicle/Equipment
Replacement
Internal Service
Transit Total Fund
$ 1,798,410 $ 12,008,658 $ 1,398,121
148,183 1,191,530 -
321 2,308 235
- 12,466 -
3,197 636,970 -
- 2,206,884 -
1,950,111 16,058,816 1,398,356
- 150,692 -
- 1,606,010 -
566,883 11,587,425 297,283
566,883 13,193,435 297,283
566,883 13,344,127 297,283
2,516,994 29,402,943 1,695,639
- 438,618 -
- 81,768 -
- 520,386 -
87,337 296,499 -
- 30,000 -
87,337 326,499 -
- 61,045 -
- 226,107 -
- 1,502,206 -
- 1,789,358 -
87,337 2,115,857 -
- 64,575 -
- 110,920 -
- 133,926 -
- 309,421 -
566,883 13,193,435 297,283
1,862,774 14,304,616 1,398,356
$ 2,429,657 $ 27,498,051 $ 1,695,639
Enterprise Funds
See accompanying Notes to Basic Financial Statements.
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38 City of Solvang
Statement of Revenues, Expenses and Changes in Fund Net Position Proprietary Funds
For the year ended June 30, 2025
Water Wastewater
OPERATING REVENUES:
Sales of water $ 5,910,213 $ -
Service fees - 2,784,045
Miscellaneous 90,672 12,874
Total operating revenues 6,000,885 2,796,919
OPERATING EXPENSES:
Salaries and benefits 872,530 1,048,480
Purchased power 238,811 316,401
Transit operator - -
Services and supplies 1,154,659 874,567
Joint operating expenses 2,167,320 -
Depreciation expense 373,996 483,474
Total operating expenses 4,807,316 2,722,922
OPERATING INCOME (LOSS) 1,193,569 73,997
NONOPERATING REVENUES (EXPENSES):
Grant revenue - 341,140
Operating subsidies - -
Gain on sale of capital assets 170 -
Interest and investment revenue 334,179 137,306
Total nonoperating revenues (expenses) 334,349 478,446
INCOME (LOSS) BEFORE CONTRIBUTIONS
AND TRANSFERS 1,527,918 552,443
Transfers in - -
Transfers out - -
Capital contributions 14,241 -
Net contributions and transfers 14,241 -
Change in net position 1,542,159 552,443
NET POSITION:
Beginning of year 14,266,551 8,707,241
End of year $ 15,808,710 $ 9,259,684
Enterprise Funds
See accompanying Notes to Basic Financial Statements.
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39 Vehicle/Equipment
Replacement
Internal Service
Transit Total Fund
$ - $ 5,910,213 $ -
58,528 2,842,573 126,201
- 103,546 -
58,528 8,856,332 126,201
- 1,921,010 -
3,306 558,518 -
934,360 934,360 -
294,501 2,323,727 -
- 2,167,320 -
83,834 941,304 60,331
1,316,001 8,846,239 60,331
(1,257,473) 10,093 65,870
- 341,140 -
1,237,851 1,237,851 -
- 170 -
67,851 539,336 56,114
1,305,702 2,118,497 56,114
48,229 2,128,590 121,984
3,000 3,000 -
- - (63,364)
- 14,241 100,332
3,000 17,241 36,968
51,229 2,145,831 158,952
2,378,428 25,352,220 1,536,687
$ 2,429,657 $ 27,498,051 $ 1,695,639
Enterprise Funds
See accompanying Notes to Basic Financial Statements.
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40 City of Solvang
Statement of Cash Flows
Proprietary Funds
For the year ended June 30, 2025
Water Wastewater
CASH FLOWS FROM OPERATING ACTIVITIES:
Receipts from customers $ 5,973,661 $ 2,747,723
Payments to suppliers (3,702,178) (1,167,542)
Payments from other funds for services - -
Payments for employees and benefits (851,536) (1,014,219) Net cash provided by (used in) operating activities 1,419,947 565,962 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:
Transfers in - -
Transfers out - -
Grants and operating subsidies - 341,140
Net cash provided by (used in) noncapital financing activities - 341,140 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:
Proceeds from sale of capital assets 170 -
Capital contributions 14,241 -
Purchases of capital assets (280,337) (512,546)
Net cash provided by (used in) capital and related financing activities (265,926) (512,546) CASH FLOWS FROM INVESTING ACTIVITIES:
Investment income 357,126 148,944
Net cash provided by (used in) investing activities 357,126 148,944 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,511,147 543,500 CASH AND INVESTMENTS - Beginning of year 5,517,357 2,638,244 CASH AND INVESTMENTS - End of year $ 7,028,504 $ 3,181,744
RECONCILIATION OF OPERATING INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Operating income (loss) $ 1,193,569 $ 73,997
Adjustments to reconcile operating income
to net cash provided by operating activities:
Depreciation 373,996 483,474
Changes in assets and liabilities:
Decrease (increase) in receivables and related amounts (27,224) (49,196) Decrease (increase) in deposits - -
Decrease (increase) in prepayments (45,192) (21,125)
Increase (decrease) in accounts payable (96,196) 44,551 Increase (decrease) in compensated absences 4,089 8,905 Increase (decrease) in net OPEB liability and related deferred amounts (19,171) (28,758) Increase (decrease) in net pension liability and related deferred amounts 36,076 54,114 Total adjustments 226,378 491,965
Net cash provided by operating activities $ 1,419,947 $ 565,962 Enterprise Funds
See accompanying Notes to Basic Financial Statements.
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41 Vehicle/Equipment
Replacement
Internal Service
Transit Total Fund
$ 58,528 $ 8,779,912 $ -
(1,162,172) (6,031,892) -
- - 126,201
- (1,865,755) -
(1,103,644) 882,265 126,201
3,000 3,000 -
- - (63,364)
1,442,298 1,783,438 -
1,445,298 1,786,438 (63,364)
- 170 -
- 14,241 100,332
- (792,883) (63,364)
- (778,472) 36,968
73,450 579,520 61,229
73,450 579,520 61,229
415,104 2,469,751 161,034
1,383,306 9,538,907 1,237,087
$ 1,798,410 $ 12,008,658 $ 1,398,121
$ (1,257,473) $ 10,093 $ 65,870
83,834 941,304 60,331
- (76,420) -
- - -
2,797 (63,520) -
67,198 15,553 -
- 12,994 -
- (47,929) -
- 90,190 -
153,829 872,172 60,331
$ (1,103,644) $ 882,265 $ 126,201
Enterprise Funds
See accompanying Notes to Basic Financial Statements.
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43 FIDUCIARY FUND FINANCIAL STATEMENTS
Custodial Fund accounts for monies collected and held for the Santa Ynez Business Improvement District.
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44 City of Solvang
Statement of Fiduciary Net Position
Fiduciary Funds
June 30, 2025
Custodial
Fund
ASSETS
Cash and investments $ 44,303
Assessments receivable 57,228
Total assets 101,531
NET POSITION
Restricted for tourism 101,531
Total net position $ 101,531
See accompanying Notes to Basic Financial Statements.
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45 City of Solvang
Statement of Changes in Fiduciary Net Position
Fiduciary Funds
For the year ended June 30, 2025
Custodial
Fund
ADDITIONS:
Special assessments $ 575,454
Total additions 575,454
DEDUCTIONS:
Pass-through payments 579,684
Total Deductions 579,684
Change in net position (4,230)
NET POSITION:
Beginning of year 105,761
End of year $ 101,531
See accompanying Notes to Basic Financial Statements.
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47 NOTES TO BASIC
FINANCIAL STATEMENTS
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49 City of Solvang
Notes to the Basic Financial Statements
For the year ended June 30, 2025
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The basic financial statements of the City of Solvang, California (City) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental agencies. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant of the City’s accounting policies are described below.
A. Financial Reporting Entity
The City of Solvang is a municipal corporation governed by an elected five-member City Council. The accompanying financial statements present the government and its component units, entities for which the government is considered to be financially accountable.
The Solvang Joint Powers Financing Authority is a legally separate corporate entity for which the City is financially accountable and is governed by the elected City Council. The Authority was formed to provide a method of financing public improvements. The financial activities of the Authority are blended with those of the City and are reported in the City's governmental funds, and as capital assets of the City and debt obligations of the City.
Separate financial statements are not available for the Solvang Joint Powers Financing Authority.
B. Basis of Accounting and Measurement Focus
The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity with its own self-balancing set of accounts that comprise its assets, deferred outflows of resources, liabilities, deferred inflows of resources, fund balance, revenues and expenditures or expenses. These funds are established for the purpose of carrying out specific activities or certain objectives in accordance with specific regulations, restrictions or limitations. Governmental resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled.
Government-Wide Financial Statements
The City’s Government-Wide Financial Statements include a Statement of Net Position and a Statement of Activities. These statements present summaries of Governmental and Business-Type Activities for the City accompanied by a total column.
The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. 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 imposed by the provider have been met.
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50 City of Solvang
Notes to the Basic Financial Statements
For the year ended June 30, 2025
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED B. Basis of Accounting and Measurement Focus, Continued Government-Wide Financial Statements, Continued
These financial statements are presented on an “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all of the City’s assets, deferred inflows/outflows of resources, and liabilities, including capital assets, as well as infrastructure assets, and long-term liabilities, are included in the accompanying Statement of Net Position. The Statement of Activities presents changes in net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liabilities are incurred.
Certain types of transactions reported as program revenues for the City are reported in three categories:
Charges for services
Operating grants and contributions
Capital grants and contributions
Certain eliminations have been made in regards to interfund activities, payables, and receivables. All internal balances in the Statement of Net Position have been eliminated except those representing balances between the governmental activities and the business-type activities, which are presented as internal balances and eliminated in the total primary government column. In the Statement of Activities, internal fund transactions have been eliminated; however, those transactions between governmental and business-type activities have not been eliminated. The following interfund activities have been eliminated:
Due to/from other funds
Transfers in/out
The City applies all applicable GASB pronouncements including all NCGA Statements and Interpretations currently in effect.
Governmental Fund Financial Statements
Governmental fund financial statements include a Balance Sheet and a Statement of Revenues, Expenditures and Changes in Fund Balances for all major governmental funds and non-major funds aggregated. An accompanying schedule is presented to reconcile and explain the differences in net position as presented in these statements to the net position presented in the government-wide financial statements. The City has presented all major funds that meet specific qualifications.
All governmental funds are accounted for on a spending or “current financial resources” measurement focus and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the balance sheets. The Statement of Revenues, Expenditures and Changes in Fund Balances present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period.
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51 City of Solvang
Notes to the Basic Financial Statements
For the year ended June 30, 2025
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED B. Basis of Accounting and Measurement Focus, Continued Governmental Fund Financial Statements, Continued
The City reports the following fund as a major governmental fund of the City.
The General Fund is the government’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund.
Revenues are recorded when received in cash, except that revenues subject to accrual (generally those received 60 days after year-end) are recognized when due. The primary revenue sources that have been treated as susceptible to accrual by the City are property taxes, taxpayer-assessed tax revenues (sales taxes, transient occupancy taxes, franchise taxes, etc.), grant revenues and earnings on investments.
Expenditures are recorded in the accounting period in which the related fund liability is incurred.
The Reconciliation of the Fund Financial Statements to the Government-Wide Financial Statements is provided.
Proprietary Fund Financial Statements
Proprietary fund financial statements include a Statement of Net Position, a Statement of Revenues, Expenses and Change in Net Position, and a Statement of Cash Flows for all proprietary funds.
A column representing internal service funds is also presented in these statements. However, internal service balances and activities have been combined with the governmental activities in the GovernmentWide Financial Statements.
Proprietary funds are accounted for using the “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included on the Statement of Net Position. The Statement of Revenues, Expenses and Changes in Net Position present increases (revenues) and decreases (expenses) in total net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which a liability is incurred.
Operating revenues in the proprietary funds are those revenues that are generated from the primary operations of the fund. All other revenues are reported as non-operating revenues. Operating expenses are those expenses that are essential to the primary operations of the fund. All other expenses are reported as non-operating expenses.
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52 City of Solvang
Notes to the Basic Financial Statements
For the year ended June 30, 2025
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED B. Basis of Accounting and Measurement Focus, Continued Proprietary Fund Financial Statements, Continued
The City reports the following major proprietary funds:
The Water Enterprise Fund accounts for the operations of the City's water treatment and distribution system.
The Wastewater Enterprise Fund accounts for the operation of the City's wastewater treatment plant and collection facilities.
The Transit Enterprise Fund accounts for the operation of the City’s transit activities.
Internal service fund balances and activities have been combined with governmental activities in the Government-Wide Financial Statements, and are comprised of the following fund:
Vehicle/Equipment Replacement Fund accounts for charges to the City departments for funding and acquisition of replacement vehicles and equipment.
Fiduciary Fund Financial Statements
Fiduciary fund financial statements consist of a Statement of Fiduciary Net Position. The City has one type of fiduciary fund, a custodial fund. Custodial funds are used to account for fiduciary activities not required to be reported in an investment trust fund, pension trust fund, or private-purpose trust fund.
Fiduciary funds are accounted for using the “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included on the Statement of Fiduciary Net Position. The Statement of Changes in Fiduciary Net Position present increases and decreases in total fiduciary net position The City reported the following custodial fund:
Santa Ynez Valley Tourism Business Improvement District Custodial Fund – accounts for monies held by the City for the Santa Ynez Valley Tourism Business Improvement District.
C. Cash, Cash Equivalents, and Investments
The City pools cash resources from all funds in order to facilitate the management of cash. The balance in the pooled cash account is available to meet current operating requirements. Cash in excess of current requirements is invested in various interest-bearing accounts and other investments for varying terms.
In accordance with GASB Statement No. 40, Deposit and Investment Disclosures (Amendment of GASB No. 3), certain disclosure requirements for Deposits and Investment Risks were made in the following areas:
• Interest Rate Risk
• Credit Risk
o Overall
o Custodial Credit Risk
In addition, other disclosures are specified including use of certain methods to present deposits and investments, highly sensitive investments, credit quality at year-end, and other disclosures.
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53 City of Solvang
Notes to the Basic Financial Statements
For the year ended June 30, 2025
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED C. Cash, Cash Equivalents, and Investments, Continued
In accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, highly liquid money market investments with maturities of one year or less at time of purchase are stated at amortized cost. All other investments are stated at fair value. The City categorizes the fair value measurements of its investments based on the hierarchy established by generally accepted accounting principles. The fair value hierarchy, which has three levels, is based on the valuation inputs used to measure an asset’s fair value: 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. The City does not have any investments that are measured using Level 3 inputs.
The City participates in an investment pool managed by the State of California entitled Local Agency Investment Fund (LAIF) which has invested a portion of the pooled funds in Structured Notes and Asset-Backed Securities. LAIF’s investments are subject to credit risk with the full faith and credit of the State of California collateralizing these investments. In addition, these Structured Notes and AssetBacked Securities are subject to market risk as to the change in interest rates.
Cash equivalents are considered amounts in demand deposits and short-term investments with a maturity date within three months of the date acquired by the City and are presented as “Cash and Investments” in the accompanying Basic Financial Statements.
For the purpose of the statement of cash flows, the City considers all pooled cash and investments (consisting of cash and investments and restricted cash and investments) held by the City as cash and cash equivalents because the pool is used essentially as a demand deposit account from the standpoint of the funds. The City also considers all non-pooled cash and investments (consisting of cash with fiscal agent and restricted cash and investments held by fiscal agent) as cash and cash equivalents because investments meet the criteria for cash equivalents defined above.
D. Receivables and Payables
Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as “due to/from other funds.” Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.” Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable government funds to indicate that they are not available for appropriation and are not expendable available financial resources.
All trade and property tax receivables are not shown net of Draft
an allowance for uncollectible amounts.
54 City of Solvang
Notes to the Basic Financial Statements
For the year ended June 30, 2025
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED D. Receivables and Payables, Continued
Property taxes are levied as of March 1 on property values assessed as of the same date. State statutes provide that the property tax rate be limited generally to one percent of market value, be levied by only the County, and be shared by applicable jurisdictions. The County of Santa Barbara collects the taxes and distributes them to taxing jurisdictions on the basis of assessed valuations subject to voterapproved debt. Property taxes are due on November 1 and March 1, and become delinquent on December 10 and April 10. The City receives property taxes pursuant to an arrangement with the County known as the “Teeter Plan”. Under the plan, the County assumes responsibility for the collection of delinquent taxes and pays the full allocation to the City. The City recognizes property tax revenues in the fiscal year in which they are due to the City.
E. Leases - Lessor
The City is a lessor for a noncancellable lease of land. The City recognizes a lease receivable and a deferred inflow of resources in the government-wide and governmental fund financial statements.
At the commencement of a lease, the City initially measures the lease receivable at the present value of payments expected to be received during the lease term. Subsequently, the lease receivable is reduced by the principal portion of lease payments received. The deferred 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.
E. Inventories and Prepaid Items
All inventories are valued at cost using the first-in/first-out (FIFO) method. Inventories of governmental funds are recorded as expenditures when used or consumed.
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. Such prepayments are accounted for using the consumption method in the governmental funds.
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55 City of Solvang
Notes to the Basic Financial Statements
For the year ended June 30, 2025
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED F. Capital Assets
Capital assets include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items). They are reported in the applicable governmental-type or business-type activities columns in the government-wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $5,000 ($100,000 for infrastructure type assets) and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets, donated works of art and similar items, and capital assets received in a service concession arrangement are reported at acquisition value. Under the GASB 34 Implementation Rules, the City is a Phase 3 entity and was not required to record infrastructure assets existing or acquired prior to July 1, 2002 at the date these new financial reporting standards were implemented. The City has not recorded such assets. The costs of normal maintenance and repairs that do not add to the value of asset or materially extend assets lives are not capitalized.
Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of the business-type activities is included as part of the capitalized value of the assets constructed. Property, plant, and equipment of the City are depreciated using the straight line method over the following estimated useful lives:
G. Compensated Absences
Accumulated vested unused employee vacation and similar compensatory leave balances are recognized as liabilities of the City since the employees’ entitlement to these balances are attributable to services already rendered and it is probable that virtually all of these balances will be liquidated by either paid time off or payments upon termination or retirement. Liquidation of the liability is recorded in the Statement of Net Position based upon the governmental and/or business-type activity to which each employee is allocated. Sick leave benefits are accumulated only to the extent that it is probable that the unused balances will result in termination payments. This is estimated by including in the liability the unused balances of employees currently entitled to receive termination payment, as well as those who are expected to become eligible to receive termination benefits because of continuing their employment with the City. Based on a last in first out flow assumption and evaluation of annual sick leave taken and earned, the remaining balance of unused sick leave are excluded from the liability as their payment is unlikely. Hours potentially used from earned leave as of the end of the year (if any) are expected to be immaterial to the basic financial statements.
H. Long-term Obligations
In the government-wide financial statements, and the proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities or proprietary fund type statement of net position.
Assets Years
Buildings and improvements 7-50
Public domain infrastructure 50
System infrastructure 50
Vehicles and equipment 5-10
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56 City of Solvang
Notes to the Basic Financial Statements
For the year ended June 30, 2025
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED I. Net Position
In the Government-Wide and Proprietary Fund Financial Statements, net position is classified in the following categories:
Net Investment in Capital Assets – This amount consists of capital assets net of accumulated depreciation and reduced by outstanding debt that is attributed to the acquisition, construction, or improvement of the assets.
Restricted – This amount is restricted by external creditors, grantors, contributors, or laws or regulations of governments.
Unrestricted – This amount is all net position that do not meet the definition of “net investment in capital assets” or “restricted net position” as defined above.
When an expense is incurred for purposes for which both restricted and unrestricted net position are available, the City’s policy is to apply restricted net position first.
J. Fund Balances – Governmental Funds
Fund balances for governmental funds are reported in classifications based primarily on the extent to which the City is bound to honor constraints about the specific purposes for which amounts in those funds can be spent. These classifications include (1) nonspendable, (2) restricted, (3) committed, (4) assigned and (5) unassigned amounts.
Nonspendable amounts generally are items not expected to be converted into cash such as inventories and prepaid items.
Restricted amounts include those where constraints placed on the uses of the resources are externally imposed by grantors, contributors, other governments or by laws or regulations.
Committed amounts are those that can only be used for a specific purpose as determined by the City Council. Such committed amounts may be redeployed for other uses only by the direction of the City Council. Commitments are established, modified, or rescinded by the City Council adopting such action by resolution. The City’s reported committed fund balance for emergencies was established by City resolution and can only be accessed during a significant decrease in revenues as defined per the City’s policy.
Assigned amounts are fund balance amounts constrained by the City’s intent to be used for specific purposes as determined by the City Manager or City Administrative Services Director, Unassigned fund balance amounts are the residual amounts reported in only the general fund.
When expenditures are incurred for which both restricted and unrestricted (committed, assigned or unassigned) amounts are available, the City considers restricted amounts to have been spent first. When expenditures are incurred for which any class of unrestricted fund balance could be used, the City considers committed amounts would be reduced first, followed by assigned amounts, and then unassigned amounts.
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57 City of Solvang
Notes to the Basic Financial Statements
For the year ended June 30, 2025
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED K. Pensions
For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the State of California Public Employees Retirement System (PERS) and additions to or deductions from the PERS fiduciary net position have been determined on the same basis as they are reported by the PERS. 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.
L. Postemployment Benefits Other Than Pensions (OPEB)
For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the City’s OPEB Retiree Benefits Plan and additions to/deductions from the Plan’s fiduciary net position have been determined on the same basis as they are reported by the Plan. Investments are stated at fair value. For this purpose, the City’s Plan recognizes benefit payments when due and payable in accordance with the benefit terms. Investments are reported at fair value, except for money market investments and participating interest-earning investment contracts that have a maturity at the time of purchase of one year or less, which are reported at cost.
M. Use of Estimates
The preparation of the Basic Financial Statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. In addition, estimates affect the reported amount of expenses. Actual results could differ from these estimates and assumptions.
N. New Pronouncements
In 2025, the City adopted the new accounting standards to conform to the following Governmental Accounting Standards Board Statements:
GASB Statement No. 101, Compensated Absences - The objective of this Statement is to better meet the information needs of financial statement users by updating the recognition and measurement guidance for compensated absences. That objective is achieved by aligning the recognition and measurement guidance under a unified model and by amending certain previously required disclosures.
GASB Statement No. 102, Certain Risk Disclosures - The objective of this Statement is to provide users of government financial statements with essential information about risks related to a government’s vulnerabilities due to certain concentrations or constraints.
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58 City of Solvang
Notes to the Basic Financial Statements
For the year ended June 30, 2025
2. CASH AND INVESTMENTS
A. Summary of Cash and Investments
Deposits and investments at June 30, 2025 consisted of the following:
B. Deposits
At June 30, 2025, the carrying amount of the City’s cash and cash equivalents were comprised of the general checking account which had a book balance of $14,155,086 and petty cash of $550. The bank balance in the City’s general checking was $13,766,806 fully insured and collateralized with securities held by the pledging financial institutions in the City’s name as discussed below. The difference between the bank balance and the carrying amount represents outstanding checks and deposits in transit.
The California Government Code requires California banks and savings and loan associations to secure the City’s cash deposits by pledging securities as collateral. This Code states that collateral pledged in this manner shall have the effect of perfecting a security interest in such collateral superior to those of a general creditor. Thus, collateral for cash deposits is considered to be held in the City’s name. The fair value of pledged securities must equal at least 110% of the City’s cash deposits. California law also allows institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the City’s total cash deposits. The City’s cash deposit was fully insured up to $250,000 by the Federal Deposit Insurance Corporation. The remaining amount was collateralized with securities held by the pledging financial institutions in the City’s name.
Governmental Business-Type Fiduciary
Activities Activities Funds Total
Cash and investments $ 32,816,965 $ 12,008,658 $ 44,303 $ 44,869,926 Total cash and investments $ 32,816,965 $ 12,008,658 $ 44,303 $ 44,869,926 Government-Wide
Statement of Net Position
City Treasury:
Deposits:
Cash on hand $ 550
Deposits with financial institution 14,155,086
Total cash on hand and deposits 14,155,636
Investments:
Money market 2,467,374
Local Agency Investment Fund (LAIF) 211,881
California CLASS 28,035,035
Total investments 30,714,290
Total cash and investments $ 44,869,926
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59 City of Solvang
Notes to the Basic Financial Statements
For the year ended June 30, 2025
2. CASH AND INVESTMENTS, CONTINUED
B. Deposits, Continued
The City follows the practice of pooling cash and investments of all funds, except for funds required to be held by fiscal agents under the provisions of bond indentures or trust agreements. Interest income earned on pooled cash and investments is allocated to the various funds based on the period-end cash and investment balances. Interest income from cash and investments with fiscal agents or held in trust is credited directly to the related fund.
C. Investments
The City is authorized by State statutes to invest in the following:
* U.S. Treasury and U.S. Agency Issues
* Certificates of Deposit
* California Local Agency Investment Fund (LAIF)
* Government Bonds and Notes
* Passbook Savings
* Bankers Acceptances
* Commercial Paper (Corporations)
* Medium-Term Corporate Notes
* Repurchase Agreements
* Mutual Funds
The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by Code Section 16429 under the oversight of the Treasurer of the State of California. The City’s investments with LAIF at June 30, 2025, include a portion of the pool funds invested in Structured Notes and Asset-Backed Securities. These investments include the following:
Structured Notes – are debt securities (other than asset-backed securities) whose cash flow characteristics (coupon rate, redemption amount, or stated maturity) depend upon one or more indices and/or have embedded forwards or options.
Asset-Backed Securities – the bulk of which are mortgage-backed securities, entitle their purchasers to receive a share of the cash flows from a pool of assets such as principal and interest repayments from a pool of mortgages (such as Collateralized Mortgage Obligations) or credit card receivables.
As of June 30, 2025, the City had $211,627 invested in LAIF, which had invested 3.81% of the pool investment funds in Structured Notes and Asset-Backed Securities as compared to 3.00% in the previous year. The LAIF fair value factor of 1.001198310 was used to calculate the fair value of the investments in LAIF.
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60 City of Solvang
Notes to the Basic Financial Statements
For the year ended June 30, 2025
2. CASH AND INVESTMENTS, CONTINUED
D. Risk Disclosures
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, an investment with a longer maturity date has a greater sensitivity of its fair value to be subject to changes in market interest rates. In accordance with the City’s investment policy, exposure to interest rate risk is mitigated by purchasing a combination of shorter term and longer-term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations.
As a means of limiting its exposure to fair value losses arising from rising interest rates, the City's investment policy limits the City's investment portfolio to maturities of five years or less.
Credit Risk - State law limits investments in various securities to certain level of risk ratings issued by nationally recognized statistical rating organizations. It is the City's policy to comply with State law as regards securities ratings. The City’s investments in the State Investment Pool and money market account are unrated.
Custodial Credit Risk - For an investment, custodial credit risk is the risk that, in the event of the failure of a counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City's investment policy specifies that securities are to be held by a third party, other than the counterparty, in the City's name, whenever possible. The investment in the LAIF is not subject to custodial creditrisk.
E. Investment Valuation
Investments are measured at fair value on a recurring basis. Recurring fair value measurements, are those that Governmental Accounting Standards Board (GASB) Statements require or permit in the statement of net position at the end of each reporting period. Fair value measurements are categorized based on the valuation inputs used to measure an asset’s fair value: Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs, such bond valued by a pricing service that uses matrix pricing, pay-fixed receive-variable interest rate swap based on the Long Interbank Offered Rate (LIBOR) swap rate, three-year option on exchange-traded shares, or valuation multiple; Level 3 inputs are significant unobservable inputs. The City’s investments were not subject to levelling disclosure.
Investment Type Total Less than 1 year
More than 1 year
less than 5 years
Investments:
Money market $ 2,467,374 $ 2,467,374 $ -
Local Agency Investment Fund 211,881 211,881 -
California CLASS 28,035,035 28,035,035 -
Total $ 30,714,290 $ 30,714,290 $ -
Investment Maturities (in years)
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61 City of Solvang
Notes to the Basic Financial Statements
For the year ended June 30, 2025
3. INTERFUND TRANSACTIONS
The composition of interfund transfers for the year ended June 30, 2025 is as follows:
Transfers to non-major governmental funds were to fund various street and other capital project expenditures. Remaining transfers were to fund on-going street, sewer, and transportation activities.
4. LEASES RECEIVABLES
In implementing GASB Statement No. 87 – Leases, the City recognized lease receivables and deferred inflows of resources for the leasing of attachment space for cellular communications. In fiscal year ended June 30, 2024, the City recognized $16,341 in revenues for applicable leases.
City Cell Tower – The City entered into an agreement with a telecommunications company in 1993 to lease space on a telecommunications tower. The lease term is 30 years, made up of an initial 10-year term plus four 5-year options. The City considers each optional term to likely be exercised by the lessee. The monthly payments as of July 1, 2021 were $1,739, and increases annually by 3%. The City used an annual incremental borrowing rate of 7.25%, based on financing quotation. The lease receivable as of June 30, 2025 was $163,158, and related deferred inflow of resources as of June 30, 2025 was $133,926.
Non-Major Transit
General Governmental Enterprise Total
Transfers out: Fund Funds Fund Transfers
General Fund $ - $ 269,258 $ - $ 269,258
Non-Major Governmental Funds 278,172 463,312 3,000 744,484 Internal Service Fund - 63,364 - 63,364
Totals $ 278,172 $ 795,934 $ 3,000 $ 1,077,106
Transfers in
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62 City of Solvang
Notes to the Basic Financial Statements
For the year ended June 30, 2025
4. LEASES RECEIVABLES, CONTINUED
Future minimum rental payments are as follows:
5. CAPITAL ASSETS
Capital asset activity relating to governmental activities for the year ended June 30, 2025 was as follows:
Year Ending
June 30, Principal Interest Total
2026 $ 12,466 $ 11,426 $ 23,892
2027 14,142 10,468 24,610
2028 15,965 9,383 25,348
2029 17,948 8,161 26,109
2030 20,102 6,789 26,891
2031-2033 82,535 10,517 93,052
Total $ 163,158 $ 56,744 $ 219,902
Current $ 12,466 $ 11,426 $ 23,892
Noncurrent 150,692 45,318 196,010
Total $ 163,158 $ 56,744 $ 219,902
Beginning Decreases/ Ending
Governmental activities: Balance Increases Reclassification Balance Capital assets, not being depreciated
Land $ 2,721,866 $ - $ - $ 2,721,866
Construction in progress 104,322 183,719 - 288,041
Total capital assets, not being depreciated 2,826,188 183,719 - 3,009,907 Capital assets, being depreciated:
Buildings 4,015,895 - - 4,015,895
Machinery and equipment 1,028,131 - - 1,028,131
Internal service fund – vehicles/equipment 1,129,039 63,364 - 1,192,403 Improvements 6,914,715 - - 6,914,715
Infrastructure-street system 13,336,163 548,852 - 13,885,015 Total capital assets being depreciated 26,423,943 612,216 - 27,036,159 Less accumulated depreciation for:
Buildings (2,185,606) (88,437) - (2,274,043)
Machinery and equipment (775,731) (32,891) - (808,622)
Internal service fund (834,789) (60,331) - (895,120)
Improvements (4,411,264) (196,751) - (4,608,015)
Infrastructure-street system (6,869,959) (612,942) - (7,482,901) Total accumulated depreciation (15,077,349) (991,352) - (16,068,701) Total capital assets, being depreciated, net 11,346,594 (379,136) - 10,967,458 Governmental activities capital assets, net $ 14,172,782 $ (195,417) $ - $ 13,977,365 Draft
63 City of Solvang
Notes to the Basic Financial Statements
For the year ended June 30, 2025
5. CAPITAL ASSETS, CONTINUED
Capital asset activity relating to business-type activities for the year ended June 30, 2025 was as follows:
Depreciation and amortization expense was charged to functions/programs of the City as follows:
Beginning Decreases/ Ending
Business-type activities: Balance Increases Reclassification Balance Capital assets, not being depreciated
Land $ 191,208 $ - $ - $ 191,208
Construction in progress 713,727 701,075 - 1,414,802
Total capital assets, not being depreciated 904,935 701,075 - 1,606,010 Capital assets, being depreciated:
Buildings and bus stop facilities 8,362,355 - 550,072 8,912,427 Distribution and collection systems 12,244,966 5,966 (550,072) 11,700,860 Infrastructure 10,171,040 39,700 - 10,210,740
Vehicles 949,617 - - 949,617
Equipment 2,403,794 46,142 - 2,449,936
Total capital assets being depreciated 34,131,772 91,808 - 34,223,580 Less accumulated depreciation for:
Buildings (7,130,119) (158,648) (506,733) (7,795,500)
Distribution and collection systems (9,155,743) (267,154) 506,733 (8,916,164) Infrastructure (3,053,449) (357,989) - (3,411,438)
Vehicles (823,959) (56,209) - (880,168)
Equipment (1,531,581) (101,304) - (1,632,885)
Total accumulated depreciation (21,694,851) (941,304) - (22,636,155) Total capital assets, being depreciated, net 12,436,921 (849,496) - 11,587,425 Business-type activities capital assets, net $ 13,341,856 $ (148,421) $ - $ 13,193,435 Governmental activities:
General government $ 61,439
Public safety 6,250
Culture and recreation 121,524
Public works 741,808
Vehicles- internal service fund 60,331
Total depreciation expense-governmental activities $ 991,352 Business-type activities:
Water $ 373,996
Wastewater 483,474
Transit 83,834
Total depreciation expense-business-type activities $ 941,304 Draft
64 City of Solvang
Notes to the Basic Financial Statements
For the year ended June 30, 2025
6. LONG-TERM OBLIGATIONS
Long-term liability activity for the 2025 fiscal year was as follows:
The general fund is typically used to liquidate the liability for compensated absences applicable to the City’s governmental activities.
7. RISK MANAGEMENT
The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters for which the City carries insurance. The City is a member of the California Joint Powers Insurance Authority (California JPIA). The California JPIA provides general liability insurance to the City with a $50 million per occurrence and $50 million per year aggregate limit. The City also participates in the Insurance Authority’s workers compensation insurance program. The risk of loss is transferred to the California JPIA. The City is subject to retrospective premium adjustments under the arrangement.
The uninsured risk retained by the City is $50,000 per incident for workers compensation claims, $20,000 per incident for general liability claims, and $5,000 per property damage claim. The Insurance Authority purchases commercial insurance for claims in excess of its deductible amounts which is $5 million for liability and $500,000 for workers compensation. Insurance transactions are accounted for in the general fund. Liabilities of the City are reported in the statement of net assets for the governmental activities when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported (IBNRs). The result of the process to estimate the claims liability is not an exact amount as it depends on many complex factors, such as inflation, changes in legal doctrines, and damage awards. Accordingly, claims are reevaluated periodically to consider the effects of inflation, recent claim settlement trends (including frequency and amount of payouts), and other economic and social factors. The estimate of the claims liability also includes amounts for incremental claim adjustment expenses related to specific claims and other claim adjustment expenses regardless of whether allocated to specific claims. Estimated recoveries, for example from salvage or subrogation, are another component of the claims liability estimate. Settlements have not exceeded coverage for each of the past three fiscal years. There were no changes in the balances of claims liabilities during the past two years.
Net Due in
Beginning Increase Ending Due Within More Than
Balance (Decrease) Balance One Year One Year
Governmental
Activities:
Compensated absences $ 133,515 $ 40,776 $ 174,291 $ 30,000 $ 144,291 Total $ 133,515 $ 40,776 $ 174,291 $ 30,000 $ 144,291
Business-type
Activities:
Compensated absences $ 78,051 $ 12,994 $ 91,045 $ 30,000 $ 61,045 Total $ 78,051 $ 12,994 $ 91,045 $ 30,000 $ 61,045
Draft
65 City of Solvang
Notes to the Basic Financial Statements
For the year ended June 30, 2025
8. CONTINGENCIES AND COMMITMENTS
Litigation. The City is involved in litigation incurred in the normal course of conducting City business.
Although the outcome of these lawsuits is not presently determinable, in the opinion of the City's counsel the resolution of these matters will not have a material adverse effect on the financial condition of the City.
Grants and allocations. Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally the federal and state government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures that may be disallowed by the grantor cannot be determined at this time, although the City expects such amounts, if any, to be immaterial.
Encumbrances. As of June 30, 2025, the City had the following outstanding encumbrances:
Expense
General
Fund
Non-Major
Gov'l Funds Water Fund
Wastewater
Fund
Grand
Total
Alisal Emergency $ 13,571 $ - $ - $ - $ 13,571
Assistance for FEMA Applications 11,929 - - - 11,929
Cannon Utility Department Assistance - - 18,854 18,854 37,707 Complete Lot 5 EV Parking Lot Design - 8,395 - - 8,395
Facilities Master Plan - 59,417 - - 59,417
Fema Alisal 1,046 - - - 1,046
FY 2022-23 Professional Services 27,000 - - - 27,000
FY 2023-24 Concrete Repairs - 472,215 - - 472,215
General Pln Update Contract 54,876 - - - 54,876
Grant Services 28,286 - - - 28,286
HCA Middle Well - - 371,858 - 371,858
Improvement Studies - - - 149,189 149,189
Islay Events FY 2023-24 14,105 - - - 14,105
Lead Service Line Inventory - - 22,068 - 22,068
Nyborg Waterline Replacement - - 192,902 - 192,902
Recruiting Services - Utility Director 16,492 - - - 16,492 Res 1 Roof - - 15,500 - 15,500
River Wells Project - - 23,935 - 23,935
Sewer Line Replacement Project - - - 47,800 47,800
Stiletto Events 17,043 - - - 17,043
Tom Jones & Associates, Inc. 30,316 - - - 30,316
Urban Planning FY 2023-24 57,823 - - - 57,823
WWTP O&M Manual - Climate Change - - - 67,188 67,188
WWTP Upgrades Grant Writing - - - 105,492 105,492
Grand Total
Draft
$ 272,486 $ 540,028 $ 645,117 $ 388,522 $1,846,152
66 City of Solvang
Notes to the Basic Financial Statements
For the year ended June 30, 2025
9. OPERATING AGREEMENTS
Water Supply Agreement. The City has an agreement with the Santa Ynez River Water Conservation District, Improvement District One, wherein the District and The Central Coast Water Authority constructed and operate a joint water treatment facility and water conveyance system. The Authority financed the plant and system by selling revenue bonds, and in 1997, issued $198 million in refunding revenue bonds. The agreement is a take-or-pay obligation, and the City is obligated to pay amounts specified in the agreement whether or not water is treated or delivered. The amounts paid by the City are pledged by the Authority for repayment of the Authority's debt obligations. The City records these payments as operating expenses in its water enterprise fund.
10. PENSION PLANS
A. Plan Description
All qualified permanent and probationary employees are eligible to participate in the Public Agency Cost-Sharing Multiple-Employer Defined Benefit Pension Plan (Plan) administered by the California Public Employees’ Retirement System (CalPERS). The Plan consists of individual rate plans (benefit tiers) within a safety risk pool (police and fire) and a miscellaneous risk pool (all other.) Plan assets may be used to pay benefits for any employer rate plan of the safety and miscellaneous risk pools.
Accordingly, rate plans within the safety or miscellaneous pools are not separate plans under GASB Statement No. 68. Individual employers may sponsor more than one rate plan in the miscellaneous or safety risk pools. The City sponsors two miscellaneous rate plans and three safety rate plans. Benefit provisions under the Plan are established by State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plan regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website.
CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 55 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 Employee’s Retirement Law.
Draft
67 City of Solvang
Notes to the Basic Financial Statements
For the year ended June 30, 2025
10. PENSION PLANS, CONTINUED
B. Benefits Provided
The rate plan provisions and benefits in effect at June 30, 2025 are summarized as follows:
Contributions – Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for all public employers be determined on an actuarial basis, annually and is effective on July 1 following notice of a change in the rate. Funding contributions for the Plan 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. The General Fund has typically been used to liquidate pension liabilities for governmental funds.
The City’s contributions to the Plan for the measurement period ended June 30, 2024 were $$564,190.
The City’s contributions to the Plan for the fiscal year ended June 30, 2025 recorded as deferred outflows of resources were $705,399.
As of June 30, 2025, the City reported a net pension liability for its proportionate share of the net pension liability of the Plan of $6,008,827.
Miscellaneous
PEPRA
Miscellaneous
Safety
Hire date Prior to January
1, 2013
On or after
January 1, 2013
Prior to January
1 2013
Benefit formula 2.5% @ 55 2.0% @ 62 2% @ 50
Benefit vesting schedule 5 years service 5 years service 5 years service Benefit payments monthly for life monthly for life monthly for life Retirement age 50 - 55 50 - 55 50 - 55
Monthly benefits, as a % of eligible compensation 2.0% to 2.5% 2.0% 2.0% Required employee contribution rates 8.000% 7.250% 0.000% Required employer contribution rates 14.990% 8.180% 0.000% Required unfunded liability payment $ 467,717 $ 3,403 $ 14,412 Rate Plan
Draft
68 City of Solvang
Notes to the Basic Financial Statements
For the year ended June 30, 2025
10. PENSION PLANS, CONTINUED
C. Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions
The City’s net pension liability for the Plan is measured as the proportionate share of the total net pension liability of the Plan. The net pension liability of the Plan is measured as of June 30, 2024, and the total pension liability for the Plan used to calculate the net pension liability was determined by actuarial valuations as of June 30, 2023 rolled forward to June 30, 2024 using standard update procedures. The City’s proportionate share of the net pension liability was based on the City’s plan liability and assetrelated information where available, and proportional allocations of individual plan amounts as of the valuation date where not available.
The City’s proportionate share of the net pension liability for each Plan as of measurement dates June 30, 2023 and 2024 were as follows:
For the year ended June 30, 2025, the City recognized pension income of $1,066,162. At June 30, 2025, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:
$705,399 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 ending June 30, 2026.
Proportion - June 30, 2023 0.048508%
Proportion - June 30, 2024 0.049550%
Change - Increase (Decrease) 0.001042%
Differences between expected and actual
experience $ 519,097 $ 20,209
Changes in assumptions 154,347 -
Net difference between projected and actual
earnings on pension plan investments 345,120 -
Changes in proportions 30,509 18,748
Differences between expected and actual contributions - 219,343 Pension contributions subsequent to the
measurement date 705,399 -
Totals $ 1,754,472 $ 258,300
Draft
69 City of Solvang
Notes to the Basic Financial Statements
For the year ended June 30, 2025
10. PENSION PLANS, CONTINUED
C. Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions, Continued
Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:
Actuarial Assumptions – The total pension liability in the June 30, 2023 actuarial valuations were determined using the following actuarial assumptions:
The mortality table used was developed based on CalPERS-specific data. The table includes 15 years of mortality improvements using Society of Actuaries Scale 80% of scale MP 2020. Further details of the December 2021 Experience Study can be found on the CalPERS website www.calpers.ca.gov.
Discount Rate – The discount rate used to measure the total pension liability was 6.90% for the Plan.
To determine whether the municipal bond rate should be used in the calculation of a discount rate for the Plan, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets. Therefore, the current 6.90 percent discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The long term expected discount rate of 6.90 percent 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.
Fiscal Year
Ended June 30
2026 $ 223,909
2027 705,653
2028 (20,523)
2029 (118,266)
Valuation Date June 30, 2023
Measurement Date June 30, 2024
Actuarial Cost Method Entry-Age Normal Cost Method
Actuarial Assumptions:
Discount Rate 6.90%
Inflation 2.30%
Projected Salary Increase Varies by entry age and service Investment Rate of Return (1) 6.90%
Mortality Derived by CalPERS membership
data for all funds
(1) Net o f pension pla n investment expens es.
Draft
70 City of Solvang
Notes to the Basic Financial Statements
For the year ended June 30, 2025
10. PENSION PLANS, CONTINUED
C. Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions, Continued
The long-term expected rate of return on pension plan investments was determined using a buildingblock method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.
In determining the long-term expected rate of return, CalPERS took into account long-term market return expectations as well as the expected pension fund cash flows. Projected returns for all asset classes are estimated and, combined with risk estimates, are used to project compound (geometric) returns over the long term. The discount rate used to discount liabilities was informed by the long-term projected portfolio return.
The expected real rates of return by asset class are as follows:
Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate – The following presents the City’s proportionate share of the net pension liability for the Plan, calculated using the discount rate for the 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:
New
Strategic Real
Asset Class Allocation Return(a)(b)
Global Equity - Cap-Weighted 30.00% 4.45%
Global Equity - Non-Cap-Weighted 12.00% 3.84%
Private Equity 13.00% 7.28%
Treasury 5.00% 0.27%
Mortgage-Backed Securities 5.00% 0.50%
Investment Grade Corporates 10.00% 1.56%
High Yield 5.00% 2.27%
Emerging Market Debt 5.00% 2.48%
Private Debt 5.00% 3.57%
Real Assets 15.00% 3.21%
Leverage -5.00% -0.59%
Total 100.00%
(a) An expected inflation of 2.3% used for this period. (b) Figures are based on the 2021-22 Asset Liability Management study. 1% Current 1%
Decrease Discount Rate Increase
5.90% 6.90% 7.90%
Net Pen
Draft
sion Liability $ 9,199,473 $ 6,008,827 $ 3,382,931
71 City of Solvang
Notes to the Basic Financial Statements
For the year ended June 30, 2025
10. PENSION PLANS, CONTINUED
C. Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions, Continued
Pension Plan Fiduciary Net Position – Detailed information about each pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports.
Payable to the Pension Plan
At June 30, 2025, the City reported no payable for outstanding amount of contributions to the pension plan required for the year ended June 30, 2025.
11. OTHER POST- EMPLOYMENT BENEFITS
A. Plan Description.
The City’s defined benefit OPEB Plan provides OPEB for all eligible full-time general and public safety employees of the City. The City entered into an agreement with CalPERS to participate in the CERBT, an agent multiple-employer other postemployment benefits plan, to fund the City’s OPEB. CERBT is administered by CalPERS, which is managed by an appointed board not under the control of the City Council. CEBT issues a publicly available financial report that can be found on the CalPERS website at www.calpers.ca.gov.
Benefits Provided.
The City’s OPEB plan provides healthcare benefits to eligible retirees and their dependents. Benefits are provided through third party insurers, and the full cost of the benefits is provided by the Plan. The City’s OPEB Plan provides for automatic or ad hoc post-employment benefit changes.
Employees Covered by the Benefit Terms.
At June 30, 2025, the following employees were covered by the benefit terms:
The City’s OPEB Plan is closed to new entrants.
Inactive employees or beneficiaries current receiving benefits 24 Inactive employees entitled to but not yet receiving benefit payments - Active employees 33
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57 72
City of Solvang
Notes to the Basic Financial Statements
For the year ended June 30, 2025
11. OTHER POST- EMPLOYMENT BENEFITS, CONTINUED
A. Plan Description, Continued
B. Contributions
The City’s plan is affiliated with the State of California PERS in so far as the City’s health insurance premium payments are paid to the PERS. The PERS through an aggregation of single employer plans pools administrative functions in regard to purchases of commercial health insurance policies and coverages. City regulations grant authority to the City Council to establish and amend contribution requirements. Employees are not required to contribute to the plan. The amount contributed for the measurement period ended June 30, 2024 was $213,814 which amount was based on the City’s decision to prefund its obligation. The General Fund has typically been used to liquidate OPEB liabilities for governmental funds. The City’s contribution for fiscal year 2025 was $224,755.
C. Net OPEB Liability
The City’s net OPEB liability was measured as of June 30, 2024 and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation as of June 30, 2024.
D. Actuarial Assumptions
The total net OPEB liability in the June 30, 2024 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement unless otherwise specified:
Mortality rates were based on the 2017 CalPERS Mortality for Miscellaneous and Schools Employees.
Inflation 2.50 percent
Salary increases 2.75 percent, average, including inflation Investment rate of return 6.25 percent, net of OPEB plan investment expense Healthcare cost trend rates 4.0 percent per year
Draft
73 City of Solvang
Notes to the Basic Financial Statements
For the year ended June 30, 2025
11. OTHER POST- EMPLOYMENT BENEFITS, CONTINUED
D. Actuarial Assumptions, Continued
The long-term expected rate of return on OPEB plan investments was determined using a buildingblock method in which best-estimate ranges of expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return weighing the expected future real rates of return by target asset allocation 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 below:
E. Discount Rate
The discount rate used to measure the total OPEB liability was 6.25 percent. 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 and active employees. 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.
Percentage of Assumed Gross
Asset Class Portfolio Return
All Equities 34% 7.2500%
All Fixed Income 41% 4.2500%
Real Estate Investment Trusts 17% 7.2500%
All Commodities 3% 7.2500%
Treasury Inflation Protected Securities (TIPS) 5% 3.0000% Draft
74 City of Solvang
Notes to the Basic Financial Statements
For the year ended June 30, 2025
11. OTHER POST- EMPLOYMENT BENEFITS, CONTINUED
F. Net OPEB Liability
The following presents the Net OPEB liability of the City, as well as what the City’s net OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower (5.25 percent) or 1- percentage point higher (7.25 percent) than the current discount rate.
The following presents the Net OPEB liability of the City, as well as what the City’s net OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower (3 percent) or 1- percentage point higher (5 percent) than the current healthcare cost trend rate.
Total Plan Net
OPEB Fiduciary Net OPEB
Liability Position Liability
(a) (a) (a) – (b)
Balances at 6/30/2023 (Measurement Date) $ 2,301,248 $ 1,081,546 $ 1,219,702 Changes for the year:
Service cost 27,475 - 27,475
Interest 140,063 - 140,063
Differences between expected and actual experience (179,364) - (179,364) Contributions – employer - 213,814 (213,814)
Net investment income - 89,986 (89,986)
Benefit payments (143,814) (143,814) -
Administrative expenses - (355) 355
Net changes (155,640) 159,631 (315,271)
Balances at 6/30/2024 (Measurement Date) $ 2,145,608 $ 1,241,177 $ 904,431 Increase (Decrease)
1% Decrease Discount Rate 1% Increase
5.25% 6.25% 7.25%
Net OPEB Liability (Asset) $ 1,155,916 $ 904,431 $ 696,279 Healthcare
1% decrease Cost Trend 1% increase
to Rate to
3.00% 4.00% 5.00%
Net OPEB Liability (As
Draft
set) $ 678,968 $ 904,431 $ 1,178,144
75 City of Solvang
Notes to the Basic Financial Statements
For the year ended June 30, 2025
11. OTHER POST- EMPLOYMENT BENEFITS, CONTINUED
G. OPEB Plan Fiduciary Net Position
Detailed information about the OPEB plan’s fiduciary net position is available in the separately issued financial report.
H. OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB
For the year ended June 30, 2025, the City recognized OPEB expense of $33,041. At June 30, 2025, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:
$224,755 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 ending June 30, 2026. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized as pension expense as follows:
Deferred
Outflows
Deferred
Inflows of
of Resources Resources
OPEB contributions subsequent to the
measurement date $ 224,755 $ -
Differences between expected and actual experience 5,420 378,026 Changes in assumptions 35,106 65,653
Net difference between projected and actual
earnings on OPEB plan investments 61,787 -
Totals $ 327,068 $ 443,679
Fiscal Year
Ended June 30
2026 $ (66,760)
2027 (45,476)
2028 (86,791)
2029 (60,439)
2030 (31,056)
Draft
Thereafter (50,844)
76 This page intentionally left blank
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77 REQUIRED SUPPLEMENTARY
INFORMATION
Draft
78 City of Solvang
Required Supplementary Information
For the year ended June 30, 2025
1. DEFINED BENEFIT PENSION PLAN
A. Schedule of the City's Proportionate Share of the Net Pension Liability - Last 10 Years Fiscal year: 2025 2024 2023 2022
Measurement date: 6/30/2024 6/30/2023 6/30/2022 6/30/2021 Proportion of the net pension liability 0.04955% 0.04851% 0.04851% 0.04800% Proportionate share of the net pension liability $ 6,008,827 $ 6,051,532 $ 5,603,171 $ 2,596,064 Covered payroll $ 2,569,159 $ 2,369,911 $ 1,840,839 $ 1,617,922 Proportionate share of the net pension liability as a
percentage of covered payroll 233.88% 255.35% 304.38% 160.46% Plan's share of fiduciary net position as a percentage
of total pension liability 78.08% 76.21% 76.68% 88.29%
The CalPERS discount rate was increased from 7.5% to 7.65% in fiscal year 2016, and then decreased from 7.65% to 7.15% in fiscal year 2018. The discoun to 6.9% in 2023.
The CalPERS mortality assumptions were adjusted in fiscal year 2019.
Draft
79 2021 2020 2019 2018 2017 2016
6/30/2020 6/30/2019 6/30/2018 6/30/2017 6/30/2016 6/30/2015
0.04316% 0.04206% 0.04086% 0.04040% 0.03943% 0.03911%
$ 4,695,870 $ 4,310,393 $ 3,937,533 $ 4,006,588 $ 3,411,989 $ 2,684,713 $ 2,090,447 $ 2,588,376 $ 2,271,637 $ 2,247,735 $ 2,212,540 $ 2,413,263 224.63% 166.53% 173.33% 178.25% 154.21% 111.25%
75.10% 75.26% 75.26% 73.31% 74.06% 78.40%
fiscal year 2018. The discount rate was decreased
Draft
80 City of Solvang
Required Supplementary Information
For the year ended June 30, 2025
1. DEFINED BENEFIT PENSION PLAN, CONTINUED
B. Schedule of Employer Pension Contributions - Last 10 Years Fiscal year 2025 2024 2023 2022
Contractually required contribution (actuarially
determined) $ 705,399 $ 564,190 $ 544,960 $ 471,400
Contribution in relation to the actuarially
determined contributions (705,399) (564,190) (544,960) (471,400) Contribution deficiency (excess) $ - $ - $ - $ -
Covered payroll $ 3,211,222 $ 2,569,159 $ 2,369,911 $ 1,840,839 Contributions as a percentage of covered payroll 21.97% 21.96% 22.99% 25.61% Note to Schedule
Methods and assumptions used to determine contribution rates:
Valuation date: 6/30/2022 6/30/2021 6/30/2020 6/30/2019 Actuarial cost method: Entry Age Entry Age Entry Age Entry Age Amortization method: (1) (1) (1) (1)
Assets valuation method: Market Value Market Value Market Value Market Value Inflation: 2.63% 2.63% 2.63% 2.63%
Salary increases: (2) (2) (2) (2)
Investment rate of return: 7.00% 7.00% 7.00% 7.00%
Retirement age: (3) (3) (3) (3)
Mortality: (4) (4) (4) (4)
(1) Level percentage of payroll, closed
(2) Depending on age, service, and type of employment
(3) 50 for all plans, with the exception of 52 for Miscellaneous PEPRA 2%@62 (4) Mortality assumptions are based on mortality
rates resulting from the most recent CalPERS
Draft
81 2021 2020 2019 2018 2017 2016
$ 400,915 $ 369,421 $ 339,043 $ 279,932 $ 267,856 $ 275,424 (400,915) (369,421) (339,043) (279,932) (267,856) (275,424) $ - $ - $ - $ - $ - $ -
$ 1,617,922 $ 2,090,447 $ 2,588,376 $ 2,271,637 $ 2,247,735 $ 2,212,540
24.78% 17.67% 13.10% 12.32% 11.92% 12.45%
6/30/2018 6/30/2017 6/30/2016 6/30/2015 6/30/2014 6/30/2013 Entry Age Entry Age Entry Age Entry Age Entry Age Entry Age (1) (1) (1) (1) (1) (1)
Market Value Market Value Market Value Market Value Market Value Market Value
2.63% 2.63% 2.75% 2.75% 2.75% 2.75%
(2) (2) (2) (2) (2) (2)
7.00% 7.25% 7.375% 7.50% 7.50% 7.50%
(3) (3) (3) (3) (3) (3)
(4) (4) (4) (4) (4) (4)
Draft
82 City of Solvang
Required Supplementary Information
For the year ended June 30, 2025
2. OTHER POSTEMPLOYMENT BENEFITS
A. Schedule of Changes in the Net OPEB Liability and Related Ratios - Last 10 Years* Fiscal Year 2025 2024 2023
Measurement Period 2024 2023 2022
Total OPEB Liability
Service Cost $ 27,475 $ 26,740 $ 27,601
Interest on the total OPEB liability 140,063 139,224 148,855 Differences between expected and actual experience (127,404) 5,044 (173,598) Changes of assumptions (51,960) - -
Benefit payments (143,814) (162,892) (150,797)
Net change in total OPEB liability (155,640) 8,116 (147,939) Total OPEB liability - beginning 2,301,248 2,293,132 2,441,071 Total OPEB liability - ending (a) $ 2,145,608 $ 2,301,248 $ 2,293,132 Plan Fiduciary Net Position
Contributions - employer $ 213,814 $ 232,892 $ 220,385
Net investment income 89,986 35,498 (138,627)
Benefit payments (143,814) (162,892) (150,797)
Administrative expense (355) (284) (271)
Net change in plan fiduciary net position 159,631 105,214 (69,310) Plan fiduciary net position - beginning 1,081,546 976,332 1,045,642 Plan fiduciary net position - ending (b) $ 1,241,177 $ 1,081,546 $ 976,332 Net OPEB liability/(asset) - ending (a) - (b) $ 904,431 $ 1,219,702 $ 1,316,800 Plan fiduciary net position as a
percentage of the total OPEB liability 57.85% 47.00% 42.58% Covered-employee payroll $ 2,569,159 $ 2,369,911 $ 1,885,073 Net OPEB liability as a percentage of
covered-employee payroll 35.20% 51.47% 69.85%
Notes to Schedule
* - Fiscal year 2018 was the 1st year of implementation.
Change of assumptions: Mortality assumptions were updated in fiscal year 2021.
Actuarially determined contributions are not calculated for the plan.
Draft
83 2022 2021 2020 2019 2018
2021 2020 2019 2018 2017
$ 25,300 $ 17,469 $ 17,001 $ 16,546 $ 14,390
151,678 174,097 169,714 164,529 275,096
- (397,078) - - -
67,026 (49,124) - - -
(144,130) (134,647) (117,453) (86,041) (121,194)
99,874 (389,283) 69,262 95,034 168,292
2,341,197 2,730,480 2,661,218 2,566,184 2,397,892
$ 2,441,071 $ 2,341,197 $ 2,730,480 $ 2,661,218 $ 2,566,184 $ 214,130 $ 204,647 $ 187,453 $ 159,080 $ 174,832
161,140 39,698 48,299 30,282 27,989
(144,130) (134,647) (117,453) (86,041) -
(299) (633) (545) (446) (121,194)
230,841 109,065 117,754 102,875 81,627
814,801 705,736 587,982 485,107 403,480
$ 1,045,642 $ 814,801 $ 705,736 $ 587,982 $ 485,107
$ 1,395,429 $ 1,526,396 $ 2,024,744 $ 2,073,236 $ 2,081,077
42.84% 34.80% 25.85% 22.09% 18.90%
$ 1,773,026 $ 2,412,314 $ 2,639,268 $ 2,275,881 $ 2,539,234
78.70% 63.28%
Draft
76.72% 91.10% 81.96%
84 City of Solvang
Required Supplementary Information
For the year ended June 30, 2025
3. BUDGETS AND BUDGETARY ACCOUNTING
A. Budgeting Procedures
Annual budgets are adopted on a basis consistent with generally accepted accounting principles for all governmental funds, except repayments of internal balances in the general fund are budgeted as an expenditure for budgetary purposes. Appropriations lapse at fiscal yearend. The appropriated budget is prepared by fund, function and department. The City Manager may make transfers of appropriations within a department. Transfers between departments and other changes require City Council approval.
The legal level of control is the department and fund level. The Council made supplemental appropriations during the fiscal year. Encumbrance accounting is not employed in governmental funds.
Draft
85 City of Solvang
Required Supplementary Information
For the year ended June 30, 2025
3. BUDGETS AND BUDGETARY ACCOUNTING, CONTINUED
B. Budgetary Comparison Schedule - General Fund
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
Fund Balance, July 1 $ 22,747,794 $ 22,747,794 $ 22,747,794 $ - Resources (inflows):
Property taxes 1,567,871 1,567,871 1,913,649 345,778
Sales taxes 3,710,564 3,710,564 4,617,214 906,650
Transient occupancy taxes 4,754,000 5,754,000 7,311,243 1,557,243 Other taxes 302,000 302,000 354,085 52,085
Licenses and permits 140,000 140,000 243,260 103,260
Fines and forfeits - - 50 50
Intergovernmental 434,355 434,355 1,094,810 660,455
Interest 480,000 854,000 992,882 138,882
Charges for services 1,025,910 1,025,910 1,045,225 19,315 Miscellaneous 16,400 16,400 143,350 126,950
Transfers in 281,172 281,172 278,172 (3,000)
Amounts available for charges to appropriations 35,460,066 36,834,066 40,741,734 3,907,668 Charges to appropriations:
General Government:
Nondepartmental:
City council 37,200 37,200 36,700 500
Other 183,819 183,819 94,658 89,161
OPEB 169,520 169,520 181,959 (12,439)
Community support 977,778 977,778 869,040 108,738
Administration:
Legal 250,000 410,000 582,372 (172,372)
General administration 2,046,154 2,069,646 1,841,128 228,518 Transfers out - - 269,258 (269,258)
Public Safety:
Sheriff contract 2,993,503 3,064,926 3,064,932 (6)
Animal control 51,539 51,539 51,532 7
Mental health & 211 program 3,000 3,000 2,698 302
Fire safety 40,000 40,000 27,480 12,520
Culture and Recreation:
Tourism 742,023 742,023 705,026 36,997
Parks and recreation 1,289,150 1,365,150 1,161,679 203,471 Library 184,855 184,855 184,855 -
Community Development:
City planning, building, development 1,070,155 1,370,155 881,438 488,717 Public works:
Public works, streets, engineering 3,238,615 3,702,476 2,668,901 1,033,575 Total charges to appropriations 13,277,311 14,372,087 12,623,656 1,748,431 Fund Balance, June 30 $ 22,182,755 $ 22,461,979 $ 28,118,078 $ 5,656,099 Budget Amounts
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87 SUPPLEMENTARY INFORMATION
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88 This page intentionally left blank
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89 Impact Fee Fund accounts for impact fees paid by developers restricted for various capital improvement projects.
Traffic Safety Fund accounts for fines, forfeitures, and other monies restricted for traffic safety.
Gas Tax Fund accounts for funds from the State of California under the Street and Highway Code Sections 2103, 2105, 2106, 2107 and 2107.5. The use of funds is restricted to street related projects, which can include related public facilities for non-motorized traffic, e.g. bike and pedestrian paths.
Local Transportation Fund accounts for monies restricted by the State of California Transportation Development Act.
Measure A Fund accounts for Measure A Funds (Santa Barbara County) restricted for road repair, traffic relief, and transportation safety projects and programs.
Skytt Mesa Landscape and Lighting Fund accounts for special assessments restricted for the Skytt Mesa Landscape and Lighting District.
City Capital Projects Fund accounts for monies committed and restricted for City capital projects.
NON-MAJOR GOVERNMENTAL FUNDS
SPECIAL REVENUE FUNDS
CAPITAL PROJECTS FUNDS
Draft
90 City of Solvang
Combining Balance Sheet
Non-Major Governmental Funds
June 30, 2025
Traffic Local
Impact Fee Safety Gas Tax Transportation
ASSETS
Cash and investments $ 1,748,939 $ 6,548 $ 309,647 $ 492,425 Receivables:
Accounts receivable 16,604 188 41,895 1,104
Interest receivable 316 2 92 95
Loans Receivables 15,530 - - -
Total assets $ 1,781,389 $ 6,738 $ 351,634 $ 493,624
LIABILITIES
AND FUND BALANCES
Liabilities:
Accounts payable $ - $ - $ - $ -
Total liabilities - - - -
Fund Balances:
Restricted for highways and streets 924,997 6,738 351,634 493,624 Restricted for park improvements 50,884 - - -
Restricted for drainage 321,703 - - -
Restricted for affordable housing 483,805 - - -
Unassigned - - - -
Total fund balances 1,781,389 6,738 351,634 493,624
Total liabilities and
fund balances $ 1,781,389 $ 6,738 $ 351,634 $ 493,624
Special Revenue Funds
Draft
91 Skytt Mesa City Projects
Landscape Capital
Measure A and Lighting Projects Fund Totals
$ 1,477,175 $ 582,622 $ 20,731 $ 4,638,087
86,013 - - 145,804
2,557 108 - 3,170
- - - 15,530
$ 1,565,745 $ 582,730 $ 20,731 4,802,591
$ - $ 8,328 $ 34,741 43,069
- 8,328 34,741 43,069
1,565,745 574,402 - 3,917,140
- - - 50,884
- - - 321,703
- - - 483,805
- - (14,010) (14,010)
1,565,745 574,402 (14,010) 4,759,522
$ 1,565,745 $ 582,730 $ 20,731 $ 4,802,591
Special Revenue Funds
Draft
92 City of Solvang
Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-Major Governmental Funds
For the year ended June 30, 2025
Traffic Local
Impact Fee Safety Gas Tax Transportation
REVENUES:
Special assessments - $ - $ - $ - $
Fines and forfeitures - 6,369 - -
Intergovernmental - - 323,846 6,281
Interest 71,634 375 16,348 22,766
Charges for services 44,996 - - -
Total revenues 6,744 116,630 340,194 29,047
EXPENDITURES:
Current:
Public works
Highways and streets - - 169 -
Capital outlay - - 24,026 -
Total expenditures - - 24,195 -
REVENUES OVER
(UNDER) EXPENDITURES 6,744 116,630 315,999 29,047
OTHER FINANCING SOURCES (USES):
Transfers in - - - -
Transfers out - (5,050) (200,756) (35,000)
Total other financing
sources (uses) (5,050) - (200,756) (35,000)
Net change in fund balances 1,694 116,630 115,243 (5,953) FUND BALANCES:
Beginning of the year 1,664,759 5,044 236,391 499,577
End of year 1,781,389 $ 6,738 $ 351,634 $ 493,624 $
Special Revenue Funds
93 Skytt Mesa City Projects
Landscape Capital
Measure A and Lighting Projects Fund Totals
$ 234,572 - $ - $ 234,572 $
- - - 6,369
- 490,160 - 820,287
23,906 84,359 - 219,388
- - - 44,996
258,478 574,519 - 1,325,612
191,621 - - 191,790
- 30,338 795,934 850,298
191,621 30,338 795,934 1,042,088
66,857 544,181 (795,934) 283,524
- - 795,934 795,934
- (503,678) - (744,484)
- (503,678) 795,934 51,450
66,857 40,503 - 334,974
507,545 1,525,242 (14,010) 4,424,548
$ 574,402 1,565,745 $ (14,010) $ 4,759,522 $
Special Revenue Funds
94 City of Solvang
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Impact Fee Special Revenue Fund
For the year ended June 30, 2025
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:
Interest $ 38,424 $ 68,174 $ 71,634 $ 3,460
Charges for services 20,171 20,171 44,996 24,825
Total revenues 58,595 88,345 116,630 28,285
EXPENDITURES:
Capital outlay 10,000 10,000 - 10,000
Total expenditures 10,000 10,000 - 10,000
Net change in fund balances $ 48,595 $ 78,345 116,630 $ 38,285 FUND BALANCES:
Beginning of the year 1,664,759
End of year $ 1,781,389
Budget Amounts
Draft
95 City of Solvang
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Traffic Safety Special Revenue Fund
For the year ended June 30, 2025
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:
Fines and forfeitures $ 5,000 $ 5,000 $ 6,369 $ 1,369
Interest 50 263 375 112
Total revenues 5,050 5,263 6,744 1,481
OTHER FINANCING SOURCES (USES):
Transfers out (5,050) (5,050) (5,050) -
Total other financing sources (uses) (5,050) (5,050) (5,050) - Net change in fund balances $ - $ 213 1,694 $ 1,481
FUND BALANCES:
Beginning of the year 5,044
End of year $ 6,738
Budget Amounts
Draft
96 City of Solvang
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Gas Tax Special Revenue Fund
For the year ended June 30, 2025
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:
Intergovernmental $ 318,018 $ 318,018 $ 323,846 $ 5,828 Interest 3,950 14,150 16,348 2,198
Total revenues 321,968 332,168 340,194 8,026
OTHER FINANCING SOURCES (USES):
Transfers out (118,122) (118,122) (200,756) (82,634)
Total other financing sources (uses) (118,122) (118,122) (200,756) (82,634) Net change in fund balances $ 203,846 $ 190,723 115,243 $ (75,480) FUND BALANCES:
Beginning of the year 236,391
End of year $ 351,634
Budget Amounts
Draft
97 City of Solvang
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Local Transportation Special Revenue Fund
For the year ended June 30, 2025
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:
Intergovernmental $ 86,141 $ 86,141 $ 6,281 $ (79,860)
Interest 12,522 21,022 22,766 1,744
Total revenues 98,663 107,163 29,047 (78,116)
OTHER FINANCING SOURCES (USES):
Transfers out (35,000) (35,000) (35,000) -
Total other financing sources (uses) (35,000) (35,000) (35,000) - Net change in fund balances $ 63,663 $ 72,163 (5,953) $ (78,116) FUND BALANCES:
Beginning of the year 499,577
End of year $ 493,624
Budget Amounts
Draft
98 City of Solvang
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Measure A Special Revenue Fund
For the year ended June 30, 2025
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:
Intergovernmental $ 490,374 $ 490,374 $ 490,160 $ (214) Interest 30,000 59,750 84,359 24,609
Total revenues 520,374 550,124 574,519 24,395
EXPENDITURES:
Current:
Public works
Capital outlay - - 30,338 (30,338)
Total expenditures - - 30,338 (30,338)
REVENUES OVER
(UNDER) EXPENDITURES 520,374 550,124 544,181 (5,943)
OTHER FINANCING SOURCES (USES):
Transfers out (123,000) (123,000) (503,678) (380,678)
Total other financing sources (uses) (123,000) (123,000) (503,678) (380,678) Net change in fund balances $ 397,374 $ 427,124 40,503 $ (386,621) FUND BALANCES:
Beginning of the year 1,525,242
End of year $ 1,565,745
Budget Amounts
Draft
99 City of Solvang
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Skytt Mesa Landscape and Lighting Special Revenue Fund
For the year ended June 30, 2025
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:
Special assessments $ 219,024 $ 219,024 $ 234,572 $ 15,548 Interest 9,500 18,000 23,906 5,906
Total revenues 228,524 237,024 258,478 21,454
EXPENDITURES:
Current:
Public works
Highways and streets 221,780 221,780 191,621 30,159
Capital outlay 13,000 13,000 - 13,000
Total expenditures 234,780 234,780 191,621 43,159
Net change in fund balances $ (6,256) $ 2,244 66,857 $ 64,613 FUND BALANCES:
Beginning of the year 507,545
End of year $ 574,402
Budget Amounts
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100
City of Solvang
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual City Projects Capital Projects Fund
For the year ended June 30, 2025
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:
Interest $ 4,000 $ 4,000 $ - $ (4,000)
Total revenues 4,000 4,000 - (4,000)
EXPENDITURES:
Capital outlay - 2,353,028 795,934 1,557,094
Total expenditures - 2,353,028 795,934 1,557,094
REVENUES OVER
(UNDER) EXPENDITURES 4,000 (2,349,028) (795,934) 1,553,094 OTHER FINANCING SOURCES (USES):
Transfers in - - 795,934 795,934
Total other financing sources (uses) - - 795,934 795,934 Net change in fund balances $ 4,000 $ (2,349,028) - $ 2,349,028 FUND BALANCES:
Beginning of the year (14,010)
End of year $ (14,010)
Budget Amounts
Draft
101
City of Solvang
Presentation to the City Council
January 12, 2026
102
2025 Audit of
City of Solvang
103
Agenda
• Deliverables and Scope of the Audit
• Areas of Primary Audit Risk
• Auditor’s Report
• Required Communications
• New Accounting Standards
• Conclusion & Discussion/Questions
3 104
Deliverables and
Scope of the
Audit
105
Deliverables and Scope of the Audit
5 • Independent Auditor’s Report on the City of Solvang’s Basic Financial Statements (BFS). • Independent Auditor’s Reports on Internal Control Over Financial Reporting and on Compliance and Other Matters.
• Single Audit
• Agreed-Upon Procedures on Appropriation Limit Schedule. • Communications with Those Charged with Governance.
• Letter used to summarize communication of various significant matters to those charged with governance.
• Annual Street Report to State Controller’s Office
• Annual Financial Transactions Reports to State Controller’s Office for City and Public Finance Authority
106
Areas of Primary
Audit Risk
107
Areas of Primary Audit Risk
7 The risk of management override of controls is addressed by the following procedures:
• Assignment of audit staff based on consideration of audit risk. • Procedures to incorporate an element of unpredictability in the audit from period to period.
• Consideration of the selection and application of significant accounting principles. • Examination of journal entries.
• Review of accounting estimates for bias.
• Evaluation of business rationale for unusual transactions. • Evaluation of the appropriateness of fraud-related inquiries performed.
Revenues & Receivables (Taxes, Grants, Notes, etc.) – Improper Revenue Recognitions:
• Governmental Funds: Confirm/validate property taxes, sales taxes, transient occupancy taxes, franchise taxes & other significant revenues/receivables. • Enterprise Funds: Perform analytical procedures
108
Auditor’s Report
109
Auditor’s Report
9 • Audit performed in accordance with Generally Accepted Auditing Standards
• Audit performed in accordance with Government Auditing Standards • Audit performed in accordance with the Uniform Guidance Auditing Standards
• Financial statements are fairly presented in all material respects • Significant accounting policies have been consistently applied • Estimates are reasonable
• Disclosures are properly reflected in the financial statements Unmodified opinion
110
Required
Communications
111
Required Communications
11 Auditor’s Responsibilities
Opinion on whether financial statements are fairly
stated in accordance with U.S. GAAP
Evaluate internal control over financial reporting
including tone at the top
Evaluate compliance with laws, contracts, and
grants.
Ensure financial statements are clear and
transparent
Communicate with the governing body
Management’s Responsibilities
Management is responsible for the financial
statements
Establish and maintain internal control over
financial reporting
Making all financial records available to us
Establish internal control to prevent and detect
fraud
Inform us of all known and suspected fraud
Comply with laws and regulations
Take corrective action on audit findings
112
Required Communications
12 • It is our responsibility to maintain independence
• We will maintain our independence by strict adherence to the AICPA and the Board of Accountancy rules and regulations
• No services performed that could affect our independence other than preparing the financial statements.
Independence
• Within the time frame communicated to the City in our engagement letters.
Timing of the Audit
• The City adopted the following new pronouncements during the year:
• GASB Statement No. 101 – Compensated Absences
• GASB Statement No. 102 – Certain Risk Disclosures
Significant Accounting Policies and Unusual Transactions 113
Required Communications
13 • Capital assets depreciation and useful life
• Pension and OPEB related estimates
Management Judgment and Accounting Estimates
• No difficulties encountered.
Difficulties Encountered in Performing the Audit
• Management has posted all proposed audit adjustments.
Significant Audit Adjustments and Unadjusted
Differences
• No material weaknesses identified during our audit.
Deficiencies in Internal Control over Financial Reporting 114
New Accounting Standards
14 2026
• GASB Statement No. 103 – Financial Reporting Model Improvements • GASB Statement No. 104 – Disclosure of Certain Capital Assets 2027
• GASB Statement No. 105 – Subsequent Events
115
Thank You for Allowing us to
Provide Audit Services to the
City of Solvang.
116