Twentynine Palms City Council
November 8, 2022

CITY OF TWENTYNINE PALMS

CITY COUNCIL
RESOLUTION NO. 22-___

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TWENTYNINE

PALMS, CALIFORNIA, MAKING EXPRESS FINDINGS AND DETERMINATION THAT MODIFICATIONS TO THE 2022 CALIFORNIA BUILDING STANDARDS

CODE ARE REASONABLY NECESSARY BECAUSE OF LOCAL CLIMATIC, GEOLOGICAL OR TOPOGRAPHICAL CONDITIONS.

WHEREAS, Health and Safety Code Section 17958 provides that the Twentynine Palms shall adopt Ordinances and regulations imposing the same or modified or changed requirements as are contained in the regulations adopted by the State pursuant to Health and Safety Code Section 17922; and, WHEREAS, the State of California is mandated by Health and Safety Code Section 17922 to impose the same requirements as are contained in the most recent edition of the California Administrative Code, the California Building Code, the California Existing Building Code, The California Plumbing Code, the California Mechanical Code, the California Electrical Code, the California Residential Code and the California Green Building Standards Code (herein after referred to collectively as “Building Codes”); and WHEREAS, Health and Safety Code Section 17958.5(a) permits the City to make modifications or changes to the Codes, which are reasonably necessary because of local climatic, geological or topographic conditions; and WHEREAS, Health and Safety Code Section 17958.7 requires that the City Council, before making any modifications or changes to the Codes, shall make an express finding that such changes or modifications are reasonably necessary because of local climatic, geological or topographic conditions; and WHEREAS, the Building Official has recommended that changes and modifications be made to the Codes and have advised that certain said changes and modifications to the 2022 California Building Code and the 2022 California Residential Code are reasonably necessary due to local conditions in the City of Twentynine Palms; and
WHEREAS, Title 8 of the Municipal Code (the “Code”) of the City of Twentynine Palms (the “City”) has provided minimum standards to safeguard life or limb, health, property and public welfare by regulating the construction, quality of materials, use, and occupancy, location and maintenance of all buildings and structures within this jurisdiction and certain equipment; and
WHEREAS, Title 8 - Building and Construction has not been comprehensively updated since January 1, 2019; and

WHEREAS, it is deemed to be in the best interest of the City to update and amend a portion of Title 18 of the Code to incorporate the newly adopted standards adopted by the State of California Building Standards Commission and to account for the new building construction standards; and
WHEREAS, the 2022 California Building Standards Code, contained in the California Code of Regulations, Title 24, parts 1-12, incorporate public health, life safety, and general welfare standards used in the design and construction of buildings in California. The California codes incorporate the latest national standards for construction, including the 2018 International Building Code, the 2018 International Residential Code, the International Fire Code, the 2017 National Electrical Code, the 2018 Uniform Plumbing Code, the 2015 Uniform Mechanical Code and the California Green Building Standards Code; and
WHEREAS, the City also desires to make certain amendments to the above State codes based on local climatic, geologic and topographic conditions as outlined in the resolution accompanying this ordinance; and
WHEREAS, Government Code Section §50022.1, et seq., provides that ordinances and codes of the Federal, State, or any agency of either of them, may be adopted by reference, provided that prior to such adoption by reference a notice public hearing has been held.

WHEREAS, Government Code sections 50022.1 et. Seq., provide that ordinances and codes of the federal, state or any agency of either of them may be adopted by reference, provided that prior to such adoption by reference a noticed public hearing has been held.

WHEREAS, Pursuant to Section 17958.5 of the Health and Safety Code of the State of California, The City Council of the City of Twentynine Palms hereby finds that the amendments of the building standards contained in the California Building Code, Volumes 1, 2, 2022 Edition are necessary to address local conditions.

NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Twentynine Palms, California finds and determines as follows:

SECTION 1. The City Council hereby specifically finds that all of the facts set forth in the recitals of this Resolution are true and correct.

A. The City is subject to extremely strong winds, commonly known as “Santa Ana Winds” which can reach speeds in excess of 90 miles per hour.

Extensive damage frequently accompanies these winds, such as blowing sand and debris, downed power lines, fallen trees, overturned vehicles and structural damage to buildings. These conditions result in increased demand for fire services, blocked or delayed emergency vehicle access and impaired water supplies and building emergency systems.

B. During the summer months, the Santa Ana Winds may produce periods of extremely low humidity, thereby reducing the fuels moisture and increasing the possibility and severity of fire from dry vegetation and other common combustibles.

C. During the summer months, much of the City experiences prolonged periods of temperatures in excess of 100°F. When coupled with sustained severe Santa Ana Winds, an increase in the threat from rapidly moving wildfires exists.

D. During the winter months, heavy rains routinely cause damage to roadways rendering them completely impassible, or with limited access, sometimes for extended periods.

E. During winter months, heavy snow and ice conditions exist in the mountain areas resulting in increased demand for fire services and limiting or delaying emergency vehicle access. In some cases, emergency vehicle access roads are completely impassible, or have limited access, sometimes for extended periods.

LOCAL GEOLOGICAL CONDITIONS:

A. The City is subject to moderately strong to severe shaking and surface ruptures resulting from known earthquake faults located within or near the City. These local earthquake faults have the potential to cause severe personal and property damage, utility interruptions, fire hazards and hazardous materials releases. Additionally, significant roadway, bridge structure, water supply and communications systems are subject to failure, thereby causing a detriment to emergency services response.

B. Unstable slopes in several areas throughout the City have experienced soil movement as a result of heavy or soaking rains, resulting in damage to roadways, structures and utilities.

LOCAL TOPOGRAPHICAL CONDITIONS:

A. The City encompasses an area with limited access routes connecting areas developed with street and utility infrastructure from underdeveloped areas. This distance, combined with these limited access routes, results in delays in the reallocation of resources to emergency scenes.

B. The topography of the City is exceptionally diverse, ranging from relatively flat desert and valley areas, to foothill areas, and canyon areas. This results in some areas that are inaccessible to radio communications, which hampers emergency response capabilities.

C. The diverse topography of the City, combined with numerous areas of lacking infrastructure, results in many areas having limited, and unreliable or unavailable water supplies available for firefighting purposes.

PUBLIC HEARING:

A. The following shall hereby be incorporated and adopted by reference and amending Part 1 of Title 24 of the California Code of Regulations, compromising the 2022 California Administrative Code of Regulations, compromising the 2022 California Building Code Volumes 1 & 2, with appendices and Chapter 1 Division II; Part 2.5 of the Title 24 of the California Code of Regulations, compromising the 20122 California Residential Code with appendices; Part 3 of Title 24 of the California Code of Regulations, comprising the 2022 California Electrical Code; Part 4 of Title 24 of the California Code of Regulations, comprising the 2022 California Mechanical Code; Part 5 of Title 24 of the California Code of Regulations comprising the 2022 California Plumbing Code, with appendix H; Part 6 of the Title 24 of the California Code of Regulations, comprising the 2022 California Energy Code; Part 8 of Title 24 of the California Code of Regulations, comprising the 2022 Historic Building Code; Part 9 of Title 24 of the California Code Regulations, comprising the 2022 California Fire Code with Chapter 4 appendices; Part 10 of Title 24 of the California Code of Regulations, comprising the 2022 California existing Building Code; Part 11 of Title 24 of the California Code of Regulations, comprising the 2022 California Green Building Standards Code; Part 12 of Title 24 of the California Code of Regulations, comprising the 2022 California Referenced Standards Code; the 2021 Edition of the International Property Maintenance Code and Appendix H; the 2021 Edition of the Uniform Code for Solar Energy Installations, with appendices thereto, including amendments, additions and deletions; and amending the Twentynine Palms Municipal Code.

B. Pursuant to Section 17958.5 of the Health and Safety Code of the State of California, The City Council of the City of Twentynine Palms hereby finds that the amendments of the building standards contained in the California Building Code, Volumes 1, 2, 2022 Edition are necessary do to past earthquakes (Landers 1992) and the inherent run off problems incurred with severe thunderstorm activity and flooding due to the City’s desert location.

C. Copies of these codes and standards are on file with the Building Official fifteen days prior to the noticed hearing. Location is at 6136 Adobe Road, Twentynine Palms California 92277.

D. A noticed public hearing shall be held by the City Council, at which time all

interested persons had the opportunity to appear and be heard on the matter of adopting by reference the current editions of certain model codes, as follows:

SECTION 2. The City Clerk is hereby directed to file this Resolution and a copy of the new Building Code Ordinance, Ordinance No. ____ with the California Building Standards Commission and to preserve said Resolution and Ordinance as public records.

PASSED, APPROVED AND ADOPTED on the _____ day of November, 2022. _____________________________________
Karmolette O’Gilvie, Mayor
ATTEST:
____________________________
Cindy Villescas, CMC City Clerk
I, do hereby certify that the foregoing Resolution No. 22-____ was duly adopted by the City Council of the City of Twentynine Palms at a regular meeting thereof held on the _____ day of November, 2022 by the following vote:

AYES: COUNCILMEMBER:

NOES: COUNCILMEMBER:

ABSENT: COUNCILMEMBER:

ABSTAIN: COUNCILMEMBER:
_____________________________
Cindy Villescas CMC, City Clerk

STAFF REPORT
TO: City Council
FROM: Community Development Director
FOR MEETING: Nov 08 2022
SUBJECT: Elimination of Issuance Fees for Water Heaters and Swamp Coolers.

RECOMMENDATION:

The City Council conduct the Public Hearing, consider public comment, find the project exempt from CEQA and adopt the Resolution, approving the elimination of issuance fees for water heaters and swamp coolers.

ORDER OF PROCEDURE:

Request Staff Report (Community Development Director
Presenting)
Council Questions of Staff
Open the Public Hearing
Receive Public Comment
Close the Public Hearing
Council Discussion
Motion/Second
Discussion on Motion
Call the Question
BACKGROUND:

As far back as 2010, it has been the City's practice to not collect issuance fees on swamp coolers or water heaters.

This was to encourage customers to get permits for these items, since it is difficult for the city to know when those items are replaced.

However, this practice was never codified. Currently, the City’s fee schedule for Building Permits includes a $70.55 issuance fee that is added to each building permit. City Staff is requesting that the fee ordinance be modified to reflect the practice of not charging for the issuance of water heaters and swamp coolers. As such, the table for building fees would read as follows, with the new text in red:
# Description Unit Fee
General Fees
1 Issuance Fee* each $70.55
Permit Issuance Fee: (In addition to the fees prescribed in the Electric, Mechanical, Plumbing and Solar energy schedules for each permit on a single application form). *Indicates those permit types exempt from this fee Page 315 of 885
160
For each evaporative cooler other than portable type i.e. swamp cooler. 10% of fee for each additional fixture.*
each $100.49
171 Water heater and/ or vent* each $100.49
ENVIRONMENTAL:

The project is exempt from the California Environmental Quality Act.

ALTERNATIVES:

The City Council could choose to:

1. Accept the fee reduction; or

2. Deny the fee reduction and keep the fees the same.

FISCAL IMPACT:

None

STAFF REPORT
TO: City Council
FROM: Finance Director
FOR MEETING: Nov 08 2022
SUBJECT: Annual Comprehensive Financial Report (ACFR) for FY 2021/22.

RECOMMENDATION:

The City Council receive and file.

ORDER OF PROCEDURE:

Request Staff Report (City Manager Presenting)
Council Questions of Staff
Request Public Comment
Council Discussion
Motion/Second
Discussion of Motion
Call the Question
ATTACHMENTS:
• 2022 Annual Comprehensive
Financial Report (ACFR)
• 2022 Final GAGAS Letter -
Independent Auditor's Report
• 2022 Final SAS114 -
Management Letter
BACKGROUND:

The City’s Fiscal Year runs from July 1 through June 30. Rogers, Anderson, Malody, & Scott (RAMS), independent auditors who specialize in governmental audits, audited the City’s books for Fiscal Year ending June 30, 2022. They assisted City Staff in preparing the City’s Annual Comprehensive Financial Report (ACFR).

The City has received an unmodified opinion from RAMS. This means the ACFR represents fairly the financial position of the City; it is the highest opinion given by an auditor.

The City’s ACFR is prepared in accordance with generally accepted accounting principles (GAAP) as promulgated by the Government Accounting Standards Board (GASB). The ACFR reports on the financial activities of the City and includes the Independent Auditors Report from RAMS, the City’s certified public accountants.

Financial Highlights
• The General Fund is the chief operating fund of the City of Twentynine Palms. At the end of the current fiscal year, the total unrestricted fund balance was $6,948,162 or 67% of total General Fund Expenditures, which is within the City's fund policy of 60-65% of operating expenditures.

• The General Fund's fund balance increased by $601,469 during the current fiscal year, primarily due to increased tax revenue and revenues from building permits. General Fund revenues for the fiscal year ended June 30, 2022, increased by $645,725, or 5.4%, over the prior year. The overall increase was due to the following factors:
• Tax revenues increased by $1,010,807 from the prior year, largely due to a $553,750 increase in transient occupancy taxes from short-term vacation rentals. Sales and use taxes also increased by $140,604 due to a combination of higher demand in fuel and food and rising inflation. Property assessed values increased by 5.7%, which resulted in an increase of $97,932 in property tax revenue. Property taxes In lieu of Vehicle License Fee (VLF) also increased by $185,349 as a result of the increase in assessed valuations.

ENVIRONMENTAL:

N/A
ALTERNATIVES:

N/A
FISCAL IMPACT:

N/A

Twentynine Palms, California

Annual Comprehensive Financial Report
For the fiscal year ended June 30, 2022
Prepared by the Finance Department

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City of Twentynine Palms
Table of Contents
June 30, 2022
Page

INTRODUCTORY SECTION
Letter of Transmittal ................................................................................................................................. i Directory of City Officials ........................................................................................................................ v Organizational Chart .............................................................................................................................. vi Certificate of Achievement for Excellence in Financial Reporting ......................................................... vii

FINANCIAL SECTION
Independent Auditor’s Report ....................................................................................................................... 1 Management’s Discussion and Analysis ....................................................................................................... 4 Basic Financial Statements:

Government-wide Financial Statements:

Statement of Net Position ..................................................................................................................... 13 Statement of Activities .......................................................................................................................... 14 Fund Financial Statements:

Governmental Funds
Balance Sheet ................................................................................................................................ 16 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position .................................................................................................. 18 Statement of Revenues, Expenditures and Changes in Fund Balances ....................................... 19 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities ................ 21 Proprietary Funds
Statement of Net Position .............................................................................................................. 22 Statement of Changes in Net Position ........................................................................................... 23 Statement of Cash Flows ............................................................................................................... 24 Fiduciary Funds - Private Purpose Trust Fund
Statement of Fiduciary Net Position ............................................................................................... 25 Statement of Changes in Fiduciary Net Position ........................................................................... 26 Notes to the Basic Financial Statements................................................................................................ 27 Required Supplementary Information:

Budgetary Comparison Schedule - General Fund ............................................................................... 63 Budgetary Comparison Schedule - CDBG Special Revenue Fund ..................................................... 64 Budgetary Comparison Schedule - Project Phoenix Special Revenue Fund ...................................... 65 Budgetary Comparison Schedule - ARPA Special Revenue Fund ...................................................... 66 Schedule of the City’s Proportionate Share of the Plan’s Net Pension Liability and Related Ratios as of the Measurement Date .......................................................................... 67 Schedule of Plan Contributions ............................................................................................................ 68 Schedule of Changes in the Net OPEB Liability and Related Ratios ................................................... 69 Schedule of OPEB Contributions ......................................................................................................... 70 Notes to Required Supplementary Information .................................................................................... 71

City of Twentynine Palms
Table of Contents
June 30, 2022
Page
Other Supplementary Information:

Description of Funds ............................................................................................................................. 72 Nonmajor Funds
Combining Balance Sheet ............................................................................................................. 74 Combining Statement of Revenues, Expenditures and Changes in Fund Balances .................... 78 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual:

Traffic Safety Special Revenue Fund ...................................................................................... 82 Gas Tax Special Revenue Fund ............................................................................................. 83 Lighting and Landscape A.D. Special Revenue Fund ............................................................. 84 Public Access Programming Special Revenue Fund .............................................................. 85 Recycling Special Revenue Fund ........................................................................................... 86 Measure I 2011 Special Revenue Fund .................................................................................. 87 Article 8 Special Revenue Fund .............................................................................................. 88 Business Tourism Special Revenue Fund .............................................................................. 89 SB 1 - Road Maintenance Rehab Special Revenue Fund ...................................................... 90 Curb, Gutter, Sidewalk Impact Fee Capital Projects Fund ...................................................... 91 Streets Capital Projects Fund .................................................................................................. 92 Major Funds
Capital Improvements Capital Projects Fund - Major Fund ........................................................... 93 City Bonds Proceeds Capital Projects Fund - Major Fund ............................................................ 94

STATISTICAL SECTION
Net Position by Component - Last Ten Fiscal Years .................................................................................. 95 Changes in Net Position - Last Ten Fiscal Years ....................................................................................... 97 Governmental Activities - Tax Revenues by Source - Last Ten Fiscal Years .......................................... 101 Fund Balances of Governmental Funds - Last Ten Fiscal Years ............................................................. 102 Changes in Fund Balances of Governmental Funds - Last Ten Fiscal Years .......................................... 104 General Government Revenues by Source - Last Ten Fiscal Years ........................................................ 106 Assessed Value and Estimated Actual Value of Taxable Property - Last Ten Fiscal Years .................... 108 Direct and Overlapping Property Tax Rates - Last Ten Fiscal Years ....................................................... 109 Property Tax Levies and Collections - Last Ten Fiscal Years .................................................................. 110 Ratio of Outstanding Debt by Type - Last Ten Fiscal Years ..................................................................... 111 Legal Debt Margin Information - Last Ten Fiscal Years ........................................................................... 112 Pledged Revenue Coverage - Last Ten Fiscal Years ............................................................................... 113 Demographic and Economic Statistics - Last Ten Calendar Years .......................................................... 114 Full-Time Equivalent City Government Employees by Function - Last Ten Fiscal Years ........................ 115 Capital Asset Statistics by Function - Last Ten Fiscal Years .................................................................... 116 Operating Indicators by Function - Last Ten Fiscal Years ........................................................................ 118 Memo - Statistical Section ......................................................................................................................... 119

INTRODUCTORY SECTION

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CITY OFFICES: COUNCILMEMBERS
6136 ADOBE ROAD Karmolette O’Gilvie, Mayor
TWENTYNINE PALMS, CA 92277 McArthur Wright, Mayor Pro Tem (760) 367-6799 Steven Bilderain
Fax (760)367-4890 Joel Klink
www.29palms.org                                                                                                            Daniel L Mintz, Sr.

CITY MANAGER
Frank J. Luckino, MPA
i
November 1, 2022
To the Honorable Mayor and City Council
of the City of Twentynine Palms
We are pleased to present the annual comprehensive financial report (ACFR) of the City of Twentynine Palms (City) for the fiscal year ended June 30, 2022. It is submitted with this letter fulfilling the requirements of the State of California. The basic financial statements have been presented in conformity with generally accepted accounting principles (GAAP) and are audited in accordance with generally accepted auditing standards by an independent firm of licensed certified public accountants.

This report consists of management’s representations concerning the finances of the City. Consequently, management assumes full responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making these representations, management has established a comprehensive system of internal controls that are designed to both protect the City’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City’s financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the City’s internal control systems have been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects.

The City’s basic financial statements have been audited by Rogers, Anderson, Malody & Scott, LLP, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City for the fiscal year ended June 30, 2022, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures on the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall presentation of the financial statements. Based upon their audit, the independent auditor concluded that there was reasonable basis for rendering an unmodified opinion that the City’s financial statements for the fiscal year ended June 30, 2022, are fairly presented in conformity with GAAP. The independent auditor’s report is presented as the first component of the financial section of this report.

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

The City of Twentynine Palms’ MD&A can be found immediately following the report of the independent auditors.

ii
Profile of the City of Twentynine Palms, California
The City of Twentynine Palms, California was incorporated as a general law city on November 23, 1987 and is located in south-central San Bernardino County (a part of the Morongo Basin). The City limits cover an area of approximately 58 square miles, with a population of approximately 28,000. The City is empowered by state statute to extend its corporate limits by annexation, which occurs periodically when deemed appropriate by City Council.

The City operates under the council-manager form of government. Policy-making and legislative authority are vested in the City Council consisting of five members elected at large to four-year terms. The City Council is responsible, among other things, for passing ordinances, adopting the budget, appointing committees or commissions and hiring both the City Manager and City Attorney. The City Manager is responsible for carrying out the policies and ordinances of the City Council, for overseeing the day-to-day operations of the City, and for appointing the heads of the various departments.

The City provides a full range of services, including police (provided by the San Bernardino County Sheriff’s Department); construction and maintenance of streets and other infrastructure; recreational activities and cultural events; sanitation services; street lighting; planning and zoning; and general administrative services. The Twentynine Palms Water District provides water services for the City.

Economic development activities which, in the past, were provided through a legally separate Twentynine Palms Redevelopment Agency (Agency). The activities of the Agency were included as an integral part of the City’s basic financial statements through January 31, 2012. All Redevelopment Agencies in the State of California ceased to exist on that date. The activity of closing the Twentynine Palms Redevelopment Agency passed to the City as “Successor Agency.”
The annual budget serves as the foundation for the City’s financial planning and control. In March, department heads submit requests for the following year to the City Manager. The City Manager and Assistant Finance Director estimate revenue and determine how much is available to cover the requested expenditures. A preliminary draft budget is submitted to the City Council. The City Manager conducts a study session with the Council. Changes directed by the Council are incorporated into the final draft, and the budget is approved by the Council at one of their regular meetings in June.

Budget-to-actual comparisons are provided in this report for each individual governmental fund for which an appropriated annual budget has been adopted.

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

Local economy
The local economy showed some resiliency through the COVID-19 financial impact to our Community.

The General Fund financial statements show an increase of $601,469 in revenues this year.

Unemployment in the City was at 7.8% for 2021 compared with 9.2% for 2020. 2022 data is unavailable.

Sixteen single family residential building permits were issued during the year. Property valuations rose by

5.7% to $1,023,303,791.

The economy of the City is affected by two major sources: 1) The Marine Corps Air Ground Combat Center “Base”; and 2) tourism, much of which is generated by the presence of Joshua Tree National Park which adjoins the City on the south. Tourists are also drawn to the area by the desert location with its clean air and moderate wintertime temperatures.

iii
Long-term financial planning
The City has prioritized long term planning that envisions necessary, as well as desired, improvements for the community. There are specific projects with their recommended funding sources laid out for the next five years, and more general plans beyond that period. That plan would include new infrastructure such as parks, roads, and additions and improvements to existing facilities.

The accomplishment of these plans depends on continuance of current Federal, State and County grant programs, and City Funds as they become available.

Relevant financial policies
The General Fund balance has increased by $601,469 for fiscal year 2021-2022. The change is primarily attributed to increases in property taxes, sales taxes, Transient Occupancy taxes, and building permits, which are the City’s major revenue sources. A reasonable minimum unrestricted (unassigned) Fund Balance is maintained for the following purposes:

1. Provide sufficient working capital to meet daily cash flow requirements and to avoid the need to borrow through tax anticipation notes and other short-term loans.

2. Provide stable tax rates and charges for services.

3. Provide a reserve to absorb emergency expenditures caused by natural disasters such as earthquakes, floods, fire, or other situations that were not reasonably predictable.

4. Mitigate current and future financial risks, such as unanticipated revenue shortfalls, State revenue raids or reduction in revenue caused by economic contractions or other conditions.

5. Take advantage of unanticipated one-time opportunities to leverage City financial resources to promote economic development, construct infrastructure, and provide matching funds for State and Federal grants or to take advantage of some other opportunity as determined by the City Council.

The General Fund balance is used to fund ongoing annual operating expenditures. When the unrestricted (unassigned) General Fund balance exceeds the level established by the City Council, monies are transferred to the General Capital Projects Fund to be used for one-time capital purchases or capital projects.

The City seeks to acquire grant revenue from Federal, State or County sources. The City uses these onetime and non-recurring Federal, State and County Grant revenues for capital projects or major capital equipment purchases. Revenues from grants are not to be used for maintenance and operation expenses, to expand programs or increase staffing levels because the City may not be in the financial position to support the activity or staff if the grant revenue ceases to exist. The City only projects the receipt of intergovernmental revenues during the period of time that the Federal, State or County authorization exists.

The City participates in the California Public Employees Retirement System (PERS). The plan covers all full-time City employees and provides 2.5% of salary for each year of service at age 55. Due to the Public Employees’ Pension Reform Act of 2013 (PEPRA), starting after January 1, 2013, all new miscellaneous full-time members will be provided 2% of salary for each year of service at age 62. The City also pays a portion of each employee’s medical premiums under the PERS medical plan after retirement. The City has begun to fund these post-employment benefits through PERS. For a full discussion of the pension plan, its cost and benefits see Note 11 to the financial statements.

iv
Major Initiatives
The City continues to increase its resurfacing efforts in Fiscal Year 2021-2022 in spite of rising cost of materials. The City generated cost savings by performing the bulk of application of overlays with in-house staff and equipment. The revitalization of the City's downtown Project Phoenix and adjoining roads were completed in early 2022, which was .56 miles of overlay. The remaining budget was utilized to overlay two major arterial roads using City staff and equipment. These two roads were Valle Vista and Raymond Way which combined were 1.36 miles of highly traveled roadway. The City Council approved the construction of 1.2 miles of Bike path on Amboy Rd. from Utah Trail to Sunmore Ave. This project and the two overlays were completed in March of 2022. During FY 2022-2023, the City entered into a cooperative agreement with San Bernardino County Department of Public Works to Chip seal 4.26 miles of shared roadway bordering the City which is scheduled for completion in FY2022-2023. The City Public Works staff is scheduled to overlay 4.47 miles of roadway throughout the City based on engineering recommendation, PCI, PMS, and staff evaluation of repair and traffic trend data. The City has engaged Civil Engineers in the subsequent Fiscal Year.

Awards and Acknowledgments
The City has applied for and been awarded the Certificate of Achievement for Excellence in Financial Reporting from the GFOA for the fiscal year ended June 30, 2021.

The preparation of this report could not have been accomplished without the dedicated efforts of the Finance Department and the assistance of the City’s auditors, Rogers, Anderson, Malody & Scott, LLP.

We would also like to thank the Mayor and the members of the City Council for their support and commitment to fiscal integrity and financial leadership.

City of Twentynine Palms
Directory of City Officials
June 30, 2022
v
Karmolette O'Gilvie Mayor
McArthur Wright Mayor Pro Tem
Daniel L. Mintz, Sr. Council Member
Joel A. Klink Council Member
Steven Bilderain Council Member
Cindy Villescas City Clerk
Frank J. Luckino, MPA, ICMA-CM City Manager
Travis Clark Community Development Director
Abigail Hernandez Conde Finance Director
Craig Stacey Public Works Superintendent
Kary Minatrea Recreation Division Manager
Rick Boyd Animal Control Supervisor
Elijah Marshall Information Services Director
Patrick Munoz City Attorney
Richard Pedersen City Engineer
Lucas Niles Chief of Police

CONTRACTORS

MANAGEMENT

APPOINTED OFFICIALS

ELECTED OFFICIALS

City of Twentynine Palms
Organizational Chart June 30, 2022
vi
City Council
Karmolette O’Gilvie – Mayor
McArthur Wright - Mayor Pro Tem
Daniel L. Mintz Sr. Councilmember
Joel A. Klink - Councilmember
Steven Bilderain - Councilmember
City Manager
Frank Luckino - City Manager
Vanessa Cabrera - Executive Assistant
Chayanne Ryan – Office Assistant I
City Attorney
Patrick Munoz
Public Works
Craig Stacey – Superintendent James Thompson - MWIII Roads John Ferrier - MWIII Roads Corey Sullivan - Lead MW Roads Brian Soster - MWII/Street Sweeper Roads Clint Humphreville – MWII Roads Frank Romo - Lead MW Parks Steven Brannon - MWII Parks Andrew Smith - MWI Parks Jorge Muro – MWI Nathan Yantes – MWI Parks/Project Phoenix Community Services
Kary Minatrea – Recreation Division Manager Haywood Adams - Rec Program Supervisor Jonas Childs - Rec Coordinator Jakub Kusmieruk – Rec Coordinator Christina Benton – Comm. Events Coordinator Scott Clinkscales – Comm. Events Coordinator Nokomis Cabrera – Rec Coordinator Jimmy Shragge – Rec Coordinator Finance
Abigail Hernandez Conde - Finance Director Cindy Keniry – Sr. Finance Tech Adessa Bigler – Finance Tech II Animal Control
Rick Boyd – A/C Supervisor Matthew Klink - AC Officer Morgan Cole - AC Tech Community Development
Travis Clark – Community Development Director Diane Olsen - Assistant Planner Shelley Green - Office Assistant II Robert Carper - Bldg & Safety Inspector Chris Giunta - Code Enforcement Officer Sabrina Olsen – Code Enforcement/ AC Officer Richard Pedersen – Engineer City Clerk
Cindy Villescas - City Clerk /PIO
Citizens of
Twentynine Palms
Planning Commission
Leslie Paahana - Chair
Jason Dickson - Vice Chair
Jim Krushat - Commissioner
Greg Mendoza - Commissioner
Max Walker - Commissioner
PoliceLucas Niles - Captain
Human
Resources
Jacqueline Palmer - Human Resources Manager
Information Services
Elijah Marshall - Director

vii

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FINANCIAL SECTION

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735 E. Carnegie Dr. Suite I 00
San Bernardino, CA 92408
909 889 087 1 T
909 889 536 1 F
ramscpa. net

PARTNERS
Terry P. Shea. CPA
Scott W. Manno. CPA. CGMA
Leena Shanbhag, CPA. MST. CGMA
Brad ferd A. Weleb1r. CPA. MBA. CGMA
Jenny W. Liu , CPA. MST
Brenda L. Od le. CPA. MST (Panne,· Emeritus)

MANAGERS/ STAFF
Ga,·denya Duran, CPA, CGMA
Brianna Schultz, CPA, CGMA
Seong-Hyea Lee, CPA MBA
Evelyn Mo,·entin-Barcena, CPA
Vernnica Hernandez. CPA
Laura Arvizu, CPA
Xinlu Zoe Zhang, CPA MSA
John Maldonado, CPA, MSA
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Independent Auditor’s Report
The Honorable City Council
City of Twentynine Palms, California
Report on the Audit of the Financial Statements
Opinions
We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Twentynine Palms (the City), as of and for the year ended June 30, 2022, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.

In our opinion, the accompanying financial statements present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City, as of June 30, 2022, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

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

Other Matters
As discussed in Note 1 to the financial statements, in the year ended June 30, 2022, the City adopted new accounting guidance under Governmental Accounting Standards Board (GASB) Statement No. 87, Leases. Our opinions are not modified with respect to this matter.

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

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

Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS, we:
 Exercise professional judgment and maintain professional skepticism throughout the audit.  Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
 Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, no such opinion is expressed.
 Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
 Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time.

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

Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, and those schedules as listed in the table of contents be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing

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standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The combining and individual nonmajor fund financial statements, and the budgetary comparison schedules are presented for purposes of additional analysis and are not a required part of the basic financial statements.

The combining nonmajor fund financial statements and the budgetary comparison schedules are the responsibility of management and were derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such 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 information contain therein is 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 financial statements and our auditor’s report thereon. Our opinions on the 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 financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the 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 November 1, 2022, 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.

San Bernardino, California
November 1, 2022

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Management’s Discussion and Analysis
As management of the City of Twentynine Palms, we offer readers of the City of Twentynine Palms’ financial statements this narrative overview and analysis of the financial activities of the City of Twentynine Palms for the fiscal year ended June 30, 2022. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages i-iv of this report.

Financial highlights
 The assets and deferred outflows of resources of the City of Twentynine Palms exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $61,416,142 (net position). Of this amount, $17,432,708 (unrestricted net position) may be used to meet the City’s ongoing obligations to citizens and creditors.  As of the close of the current fiscal year, the City of Twentynine Palms’ governmental funds reported combined ending fund balances of $19,699,804, an increase of $1,636,613 in comparison with the prior year. Approximately 33%, or $6,420,149, of the ending fund balance is available for spending at the City’s discretion (unassigned fund balance).  At the end of the current fiscal year, unassigned fund balance for the General Fund was $6,948,162, or 67% of the General Fund expenditures.
 The City of Twentynine Palms’ total long-term liabilities decreased by $148,648 during the current fiscal year mainly as a result of a changes in the City’s net pension liability.

Overview of the financial statements
This discussion and analysis is intended to serve as an introduction to the City of Twentynine Palms’ basic financial statements. The City’s basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves.

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

The Statement of Net Position presents information on all the City’s assets and deferred outflows of resources as well as liabilities and deferred inflows of resources, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating.

The Statement of Activities presents information showing how the government’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., earned but unused vacation leave).

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Both of the government-wide financial statements distinguish functions of the City of Twentynine Palms that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, highways and streets, economic development, and culture and recreation. The businesstype activities of the City of Twentynine Palms include the City’s Sewer.

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

Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Twentynine Palms, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into two categories:
governmental funds and fiduciary funds.

Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

The City of Twentynine Palms maintains nineteen individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund, the Community Development Block Grant Fund, the Project Phoenix State Grant Fund, the American Rescue Plan Act (ARPA) Fund, the Capital Improvements Fund, and the City Bond Proceeds Fund all of which are considered to be major funds. Data from the other thirteen governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report.

The City of Twentynine Palms adopts an annual appropriated budget for its General Fund. A budgetary comparison statement has been provided for the General Fund to demonstrate compliance with this budget. The basic governmental fund financial statements can be found on pages 16-21 of this report.

Proprietary fund. The City of Twentynine Palms maintains one type of proprietary fund: enterprise fund.

Enterprise funds are used to report the same functions presented as business-type activities in the Government-wide Financial Statements. The City uses enterprise funds to account for its Sewer operations.

Proprietary funds provide the same type of information as the Government-wide Financial Statements, only in more detail.

The proprietary fund financial statements can be found on pages 22-24 of this report.

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Fiduciary fund. The City of Twentynine Palms maintains one fiduciary fund. The private purpose trust fund accounts for the activities of the Successor Agency to the City of Twentynine Palms Redevelopment Agency. The fund’s primary purpose is to expedite the dissolution of the former Agency’s net position in accordance with California law as stated in ABx1 26 and AB 1484. These statements can be found on pages 25-26.

Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 27-62 of this report.

Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City’s budget versus actual results for the General Fund and any Special Revenue Major Fund, the City’s proportionate share of their pension plan’s liability and related ratios as of the measurement date, the City’s schedule of plan contribution, and the City’s schedule of changes in Net OPEB liability and the schedule of OPEB contributions. Required supplementary information can be found on pages 63-71 of this report.

The combining statements referred to earlier in connection with non-major governmental funds are presented immediately following the required supplementary information. Combining and individual fund statements and schedules can be found on pages 72-94 of this report.

Government-wide financial analysis
The government-wide financial statements provide information about the City’s overall financial picture from the perspective of all the City’s governmental and business-type funds combined together. This form of financial reporting is intended to provide a perspective similar to that found in the private sector with its basis in full accrual accounting and elimination or reclassification of internal activities. The governmentwide financial statements provide long-term and short-term information about the City’s overall financial condition. This analysis addresses the financial statements of the City as a whole.

Statement of Net Position. As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of the City of Twentynine Palms, assets and deferred outflows of resources exceeded liabilities and deferred inflows by $61,416,142 at the close of the most recent fiscal year.

A large portion of the City’s net position (65%) reflects its investment in capital assets (e.g., land, buildings, machinery, and equipment); less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

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2022 2021 2022 2021 2022 2021
Current and other assets 21,977,146 $ 19,880,683 $ 244,297 $ (18,750) $ 22,221,443 $ 19,861,933 $ Capital assets 39,570,136 33,119,513 1,478,017 923,579 41,048,153 34,043,092 Intangible assets 9,857 - - - 9,857 -
Total assets 61,557,139 53,000,196 1,722,314 904,829 63,279,453 53,905,025 Deferred outflows of resources 4,562,341 1,353,168 - - 4,562,341 1,353,168 Other liabilities 1,325,676 1,893,852 151,052 175,375 1,476,728 2,069,227 Long-term liabilities 1,857,029 2,331,320 - - 1,857,029 2,331,320

Total liabilities 3,182,705 4,225,172 151,052 175,375 3,333,757 4,400,547 Deferred inflows of resources 3,091,895 3,351,491 - - 3,091,895 3,351,491 Net position:

Net investment in capital assets 38,345,205 31,856,477 1,478,017 923,579 39,823,222 32,780,056 Restricted 4,160,212 9,281,303 - - 4,160,212 9,281,303
Unrestricted 17,339,463 5,638,921 93,245 (194,125) 17,432,708 5,444,796 Total net position 59,844,880 $ 46,776,701 $ 1,571,262 $ 729,454 $ 61,416,142 $ 47,506,155 $ Statement of Net Position
Governmental Activities Business-Type Activities Total
An additional portion of the City of Twentynine Palms’ net position (7%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position, $17,432,708 may be used to meet the government’s ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City of Twentynine Palms is able to report positive balances in all three categories of net position. The same situation held true for the prior fiscal year. 2022 2021 2022 2021 2022 2021
Revenues:

Program revenues:

Charges for services 1,665,029 $ 1,254,033 $ 5,218 $ - $ 1,670,247 $ 1,254,033 $ Operating grants and contributions 5,474,903 2,791,174 - - 5,474,903 2,791,174 Capital grants and contributions 7,367,880 1,644,374 475,437 209,218 7,843,317 1,853,592 Property taxes 2,578,043 2,480,111 - - 2,578,043 2,480,111 Other taxes 8,554,598 7,479,648 - - 8,554,598 7,479,648 Investment earnings (179,141) 40,917 - - (179,141) 40,917 Other 145,565 131,888 - - 145,565 131,888
Transfers in (out) (623,487) 623,487 - -
Total revenues 24,983,390 15,822,145 1,104,142 209,218 26,087,532 16,031,363 Expenses:

General government 1,811,690 2,815,709 - - 1,811,690 2,815,709 Public safety 4,026,069 6,008,474 - - 4,026,069 6,008,474 Public works 1,231,982 1,879,159 262,334 83,356 1,494,316 1,962,515 Community development 4,259,566 1,144,676 - - 4,259,566 1,144,676 Economic development 223,036 - - - 223,036 -
Health and sanitation 41,618 124,465 - - 41,618 124,465 Community services 696,557 593,713 - - 696,557 593,713
Interest on long-term debt 40,939 40,625 - - 40,939 40,625 Total expenses 12,331,457 12,606,821 262,334 83,356 12,593,791 12,690,177 Change in net position 12,651,933 3,215,324 841,808 125,862 13,493,741 3,341,186 Net position, beginning of year, as restated 47,192,947 43,561,377 729,454 603,592 47,922,401 44,164,969 Net position, end of year 59,844,880 $ 46,776,701 $ 1,571,262 $ 729,454 $ 61,416,142 $ 47,506,155 $ Change in Net Position
Governmental Activities Business-Type Activities Total

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The City’s net position increased by $13,493,741 during the current fiscal year. The increase is mainly attributed to increases in tax revenue and grant revenue. Tax revenues for the year increased primarily due to increased sales taxes and Transient Occupancy Taxes, which grew by 20% as a result of lifted stay-at-home orders and travel restrictions due to the COVID-19 pandemic. Grant revenues increased primarily due to the City receiving a $3.1 million grant from the U.S Department of Treasury as part of the COVID relief funding provided under the American Rescue Plan Act of 2022. As part of the City's downtown revitalization project, Project Phoenix, the City received two grants from the State of California Natural Resources Agency totaling $8M, of which 75%, or $6M, was earned and recognized in fiscal year 2022.

Expenses and program revenues - Governmental Activities Revenue by source - Governmental Activities
7%
21%
29%
24%
6%
13%
Charges for se rvices
Operating grants and contributions
Capital grants and contributions
Property taxes
Sales taxe s
Other taxes and revenues
Financial analysis of the government’s funds
As noted earlier, the City of Twentynine Palms uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

Governmental funds. The focus of the City of Twentynine Palms’ governmental funds is to provide information on near term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City of Twentynine Palms’ financing requirements. Unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year.

As of the end of the current fiscal year, the City of Twentynine Palms governmental funds reported combined ending fund balances of $19,699,804, an increase of $1,636,613 in comparison with the prior year. Approximately 33%, or $6,420,149, of the ending fund balance constitutes unassigned fund balance, which is available for spending at the government’s discretion. The remainder of fund balance is not available for new spending because it has either already been 1) restricted for a variety of purposes by outside sources, $4,160,212; 2) assigned by the government to a specific purpose, $9,025,480 or 3) in a non-spendable form $93,963.

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Major Funds
The General Fund is the chief operating fund of the City of Twentynine Palms. At the end of the current fiscal year, the unassigned fund balance of the General Fund was $6,948,162 while total fund balance was $10,641,969. As a measure of the General Fund’s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 67% of total General Fund expenditures, while total fund balance represents 103% of that same amount. The 67% of unassigned General Fund balance complies with the City’s Fund Balance policy.

The fund balance of the City’s General Fund increased by $601,469 during the current fiscal year, primarily due to increased tax revenue and revenues from building permits.

General Fund revenues for the fiscal year ended June 30, 2022, increased by $645,725, or 5.4%, over the prior year. The overall increase was due to the following factors:
 Tax revenues increased by $1,010,807 from the prior year, largely due to a $553,750 increase in transient occupancy taxes from short-term vacation rentals. Sales and use taxes also increased by $140,604 due to rising inflation. Property assessed values increased by 5.7%, which resulted in an increase of $97,932 in property tax revenue. Property taxes In lieu of Vehicle License Fee (VLF) also increased by $185,349 as a result of the increase in assessed valuations.

General Fund expenditures for the fiscal year ended June 30, 2022, increased by $1,137,798, or 12.3%, over the prior year. The overall increase was due to the following factors:
 Public Safety expenditures, generally the City’s largest cost, increased by $342,825 due to increased contract costs with the County of San Bernardino Sherriff’s Department.  Community Development expenditures increased by $353,091 primarily due to increased contract costs for engineering and building inspections.
 Community services expenditures increased by $334,743 due to the City bringing Community Service personnel back to pre-pandemic levels and resuming recreation activities due to COVID19 mandates being lifted.

The General Fund transferred out $4,268,933 to the Capital Projects Fund to assist in funding several capital projects, including Luckie Park pool upgrade and property acquisitions for the Pioneer Park. The General Fund also transferred out $15,000 to various nonmajor funds, and $428,140 to the Sewer Fund to assist funding the expansion of Project Phoenix Package Treatment Plant. Various nonmajor funds transferred out a total of $20,000 to the General Fund for reimbursement of administrative costs based on approved cost allocations.

The Community Development Block Grant was established to account for the activities of the funding provided by the U.S. Department of Housing and Urban Development under the Community Development Block Grant for projects within the City. Current year revenues totaled $159,440 and current year expenditures totaled $661,165 resulting in a fund deficit of $511,050. This fund deficit is due to timing of grant reimbursements for the Homekey project.

The Project Phoenix Fund is a special revenue fund established to account for the activities of the City’s downtown revitalization project, Project Phoenix, funded through a state grant from the Department of Parks and Recreation. Current year revenues totaled $4,134,592 and current year expenditures totaled $1,940,766, resulting in an increase in fund balance of $2,193,826 for the current year. This fund ended the current fiscal year with a fund balance of $0 as current year revenues offset the prior year’s deficit fund balance.

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The American Rescue Plan Act (ARPA) was established to account for the activities of the funding provided by the U.S. Department of Treasury under Coronavirus State and Local Fiscal Recovery Funds program. Current year revenues totaled $3,118,608, and current year expenditures totaled $2,189. A total of $3,116,419 was transfer to the general fund to replace lost public sector revenue as provided under the U.S. Treasury's Final Rule. This fund ended the current fiscal year with a fund balance of $0 as current year revenues offset current year expenditures and transfers.

The Capital Improvements Fund was established to account for financial resources, other than Community Development Block Grants, used for the planning, construction, repair and rehabilitation of the City’s major capital facilities and infrastructure. Current year revenues and transfers in totaled $2,293,055 and $4,268,933, respectively, and current year expenditures and transfer out totaled $3,830,609 ant $177,925, respectively, resulting in an increase in fund balance of $2,553,434 for the current year. This increase is due to timing of grant reimbursements for various capital projects. At the end of the current fiscal year, the fund balance totaled $4,664,677, which is assigned for specific capital project as approved by Council. Transfers into the fund are appropriated from the unassigned fund balance of the General Fund as directed by Council from prior year excess fund balances.

The City Bond Proceeds Fund was established to account for the 2018 TARB Bond proceeds to be used for the completion of the City’s downtown revitalization project, Project Phoenix. Current year revenues totaled $1,769 and current year expenditures and transfers out totaled $3,658,602 and $17,422, respectively, resulting in a decrease in fund balance of $3,674,255 for the current year. At the end of the current fiscal year, the fund balance totaled $1,236,496, which is restricted for the completion of Project Phoenix.

Business-type Activities. Revenues of the City’s business-type activities were $1,104,142 for the fiscal year ending June 30, 2022. Expenses for the City’s business-type activities were $262,334 for the year, resulting in a net increase in net position of $841,808.

Fiduciary fund. The private-purpose trust fund accounts for the assets and liabilities transferred from the former Redevelopment Agency to the City as Successor Agency. The net deficit held for RDA dissolution is $9,138,641.

General fund budgetary highlights
Revenue was more than budgeted by $1,959,041 as a result of, the City receiving more tax revenues, intergovernmental revenues, and fees from licenses and permits during the year than was projected.

The total expenditures were under budget by 0.3%, or $31,061. The following departments had expenditures over budget: Finance - $32,610; IT department - $12,380; Successor administration - $14,085; and Community development - $333,826.

Capital asset and debt administration
Capital assets
The City’s investment in capital assets for its governmental activities and business-type activities as of June 30, 2022, amounts to $40,113,118 (net of accumulated depreciation). This investment in capital assets includes land, buildings and improvements, machinery and equipment, park facilities, roads, and related facilities. The total increase in the City’s investment in capital assets for the current fiscal year was

17.8%. The increase was primarily due to the increased activity for construction and completion of Project Phoenix.

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2022 2021 2022 2021 2022 2021
Land and improvements 5,575,859 $ 4,594,878 $ - $ - $ 5,575,859 $ 4,594,878 $ Right-of-ways 17,686 17,686 - - 17,686 17,686
Construction in progress 3,289,274 9,541,703 542,982 923,579 3,832,256 10,465,282 Building and improvements 14,978,245 4,481,056 - - 14,978,245 4,481,056 Machinery and equipment 913,199 708,948 - - 913,199 708,948 Office equipment 21,893 20,716 - - 21,893 20,716
Vehicles 67,517 101,220 - - 67,517 101,220
Infrastructure 14,706,463 13,653,306 - - 14,706,463 13,653,306 Total capital assets 39,570,136 $ 33,119,513 $ 542,982 $ 923,579 $ 40,113,118 $ 34,043,092 $ Capital Assets
Total
(Net of depreciation)
Governmental Activities Business-Type Activities
Additional information on the City’s capital assets can be found in Note 6 of this report.

Long-term liabilities
At the end of the current fiscal year, the City had no bonded debt because of the dissolution of the Redevelopment Agency and the transfer of its debt to the Successor Agency. 2022 2021 2022 2021 2022 2021
Net OPEB liability (Asset) 153,371 $ (325,643) $ - $ - $ 153,371 $ (325,643) $ Net pension liability 183,382 793,186 - - 183,382 793,186 Lease liability 9,888 - - - 9,888 -
Facility improvements loan 1,224,900 1,263,036 - - 1,224,900 1,263,036 Compensated absences 285,488 275,098 - - 285,488 275,098 Total long-term liabilities 1,857,029 $ 2,005,677 $ - $ - $ 1,857,029 $ 2,005,677 $ Governmental Activities Business-Type Activities
Non-Current Liabilities
Total
The City’s total long-term liabilities decreased by $148,648, a 7.4% decrease, during the current fiscal year mainly due to changes in the City’s CalPERS net pension liability.

Additional information on the City’s long-term liabilities can be found in Notes 7, 11, and 12 of this report.

Economic factors and next year’s budgets and rates
The unemployment rate for the City of Twentynine Palms on June 30, 2022 was 4.6%. The unemployment rate for San Bernardino County was 4.0% and the unemployment rate for the State of California was 3.7%.

Property tax collections for FY 2022-2023 will rise from the 2021-2022 collections because of the increase in property valuations. Property valuations rose by 5.7% from $967,738,254 in FY 2020- 2021 to $1,023,303,791 in FY 2021-2022.

Housing prices in Twentynine Palms rose. The median home price rose 18.8% from $233,000 in 2021 to $277,000 in 2022.

Construction activity in the community has increased. The City issued 16 single-family building permits during FY 2021-2022, which is eight more compared to prior year. The high point for the City was FY 2005- 2006 when 330 single-family residence permits were issued.

Sales tax collections increased from $1,445,428 in FY 2020-2021 to $1,586,033 in FY 2021- 2022. Taxable sales are expected to increase in the coming fiscal year as the economy is slowly recovering from the COVID-19 pandemic.

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All of these factors were considered in preparing the budget for the 2022-2023 fiscal year.

Requests for information
This financial report is designed to provide a general overview of the City of Twentynine Palms’ finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Office of the Finance Director, 6136 Adobe Road, Twentynine Palms, CA 92277 or phone (760) 367-6799.

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BASIC FINANCIAL STATEMENTS

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City of Twentynine Palms
Statement of Net Position
June 30, 2022
The accompanying notes are an integral part of these financial statements. -13-
Governmental Business-Type
Activities Activities Total
Assets
Cash and investments 17,749,983 $ 85,070 $ 17,835,053 $ Cash and investments with fiscal agent - restricted 1,022,901 - 1,022,901 Receivables:

Intergovernmental 1,343,794 158,828 1,502,622
Taxes 898,154 - 898,154
Interest 23,104 - 23,104
Leases 321,236 - 321,236
Other 107,765 399 108,164
Land held for resale 510,209 - 510,209
Capital assets, not being depreciated 8,882,819 542,982 9,425,801 Capital assets, depreciated, net 30,687,317 935,035 31,622,352 Intangible asset, net 9,857 - 9,857
Total assets 61,557,139 1,722,314 63,279,453
Deferred outflows of resources
Pension related 4,283,653 - 4,283,653
OPEB related 278,688 - 278,688
Total deferred outflows of resources 4,562,341 - 4,562,341 Liabilities
Accounts payable and accrued liabilities 703,847 151,052 854,899 Deposits payable 67,390 - 67,390
Due to developers 554,439 - 554,439
Noncurrent liabilities:

Due within one year
Compensated absences 57,098 - 57,098
Long term liabilities 41,461 - 41,461
Due beyond one year
Compensated absences 228,390 - 228,390
Long term liabilities 1,193,327 - 1,193,327
Net OPEB liability 153,371 - 153,371
Net pension liability 183,382 - 183,382
Total liabilities 3,182,705 151,052 3,333,757
Deferred inflows of resources
Pension related 1,350,650 - 1,350,650
OPEB related 1,422,377 - 1,422,377
Leases 318,868 - 318,868
Total deferred inflows of resources 3,091,895 - 3,091,895 Net position
Net investment in capital assets 38,345,205 1,478,017 39,823,222 Restricted for:

Streets, highways, bikeways, public transit and
other related purposes 2,084,121 - 2,084,121
Community development 1,347,973 - 1,347,973
Economic development 504,591 - 504,591
Health and sanitation 223,527 223,527
Unrestricted 17,339,463 93,245 17,432,708
Total net position 59,844,880 $ 1,571,262 $ 61,416,142 $

City of Twentynine Palms
Statement of Activities
For the year ended June 30, 2022
The accompanying notes are an integral part of these financial statements. -14-
Charges Operating Capital
for grants and grants and
Expenses services contributions contributions
Governmental activities:

General government 1,811,690 $ 170,079 $ 3,014,435 $ - $ Public safety 4,026,069 118,975 241,056 -
Public works 1,231,982 155,458 1,471,770 5,299,593
Community development 4,259,566 883,279 582,095 63,781
Economic development 223,036 - 291 -
Health and sanitation 41,618 7,752 69,597 -
Community services 696,557 329,486 95,659 2,004,506
Interest on long-term debt 40,939 - - -
Total governmental activities 12,331,457 1,665,029 5,474,903 7,367,880 Business-type activities:

Sewer 262,334 5,218 - 475,437
Total business-type activities 262,334 5,218 - 475,437
Total Primary Government 12,593,791 $ 1,670,247 $ 5,474,903 $ 7,843,317 $ General revenues:

Property taxes
Sales and use taxes
Property tax in lieu
Franchise taxes
Transient occupancy taxes
Real property transfer taxes
Motor vehicle in lieu tax
Use of money and property
Other
Transfers in (out)
Total general revenues
Change in net position
Net position, beginning of year, as restated
Net position, end of year
Functions/Programs
Program Revenues

The accompanying notes are an integral part of these financial statements. -15-
Governmental Business-type
Activities Activities Total
$ - 1,372,824 $ 1,372,824 $
- (3,666,038) (3,666,038)
- 5,694,839 5,694,839
- (2,730,411) (2,730,411)
- (222,745) (222,745)
- 35,731 35,731
- 1,733,094 1,733,094
- (40,939) (40,939)
- 2,176,355 2,176,355
218,321 - 218,321
218,321 - 218,321
218,321 2,176,355 2,394,676
2,578,043 - 2,578,043
1,586,033 - 1,586,033
3,413,408 - 3,413,408
- 844,290 844,290
2,481,175 - 2,481,175
126,323 - 126,323
103,369 - 103,369
- (179,141) (179,141)
145,565 - 145,565
623,487 (623,487) -
623,487 10,475,578 11,099,065
841,808 12,651,933 13,493,741
729,454 47,192,947 47,922,401
$ 1,571,262 59,844,880 $ 61,416,142 $

City of Twentynine Palms
Balance Sheet
Governmental Funds
June 30, 2022
The accompanying notes are an integral part of these financial statements. ‐16-
Special Revenue
Community
Development Project Phoenix
General Block Grant State Grant ARPA
Assets
Cash and investments 9,469,353 $ - $ - $ - $
Cash and investments with
fiscal agents - restricted - - - -
Receivables:

Intergovernmental - - - -
Taxes 888,654 - - -
Interest 16,973 - - -
Grants 37,348 568,316 - -
Leases 321,236 - - -
Other - - - -
Land held for resale 93,963 - - -
Due from other funds 666,026 - - -
Total assets 11,493,553 $ 568,316 $ - $ - $
Liabilities, Deferred Inflows of
Resources and Fund Balances
Liabilities:

Accounts payable and accrued liabilities 465,326 $ 1,415 $ - $ - $ Deposits payable 67,390 - - -
Retentions payable - - - -
Due to other funds - 566,825 - -
Total liabilities 532,716 568,240 - -
Deferred Inflows of Resources
Unavailable revenues - 511,126 - -
Leases 318,868 - - -
Total deferred inflows of resources 318,868 511,126 - - Fund balances:

Nonspendable 93,963 - - -
Restricted - - - -
Assigned 3,599,844 - - -
Unassigned 6,948,162 (511,050) - -
Total fund balances (deficit) 10,641,969 (511,050) - -
Total liabilities, deferred inflows of
resources and fund balances 11,493,553 $ 568,316 $ - $ - $

-17-
Total
Nonmajor Total
Capital City Governmental Governmental
Improvements Bond Proceeds Funds Funds
$ - 4,805,530 $ 3,475,100 $ 17,749,983 $
1,022,901 - - 1,022,901
- - 325,343 325,343
9,500 - - 898,154
- - 6,131 23,104
- 275,720 137,067 1,018,451
- - - 321,236
- 12,731 95,034 107,765
416,246 - - 510,209
- - - 666,026
$ 1,448,647 5,093,981 $ 4,038,675 $ 22,643,172 $
$ 16,760 70,231 $ 150,115 $ 703,847 $
- - - 67,390
195,391 285,105 73,943 554,439
- - 99,201 666,026
212,151 355,336 323,259 1,991,702
- 73,968 47,704 632,798
- - - 318,868
- 73,968 47,704 951,666
- - - 93,963
1,236,496 - 2,923,716 4,160,212
- 4,664,677 760,959 9,025,480
- - (16,963) 6,420,149
1,236,496 4,664,677 3,667,712 19,699,804
$ 1,448,647 5,093,981 $ 4,038,675 $ 22,643,172 $
Capital Projects

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City of Twentynine Palms
Reconciliation of the Balance Sheet of
Governmental Funds to the Statement of Net Position
June 30, 2022
The accompanying notes are an integral part of these financial statements. -18-
$ 19,699,804
55,126,146
(15,556,010)
11,291
(1,434)
(183,382)
(153,371)
Long term liabilities (1,234,788)
(285,488)
4,283,653
278,688
(1,350,650)
(1,422,377)
632,798
$ 59,844,880
OPEB related deferred outflows of resources
OPEB related deferred inflows of resources
Amounts reported for governmental activities in the Statement of Net Position are different because:

Fund balances of governmental funds
Accumulated depreciation
Non current liabilities are not due and payable in the current period and, therefore, are not reported in the governmental funds:

Net OPEB liability
Net pension liability
Compensated absences
Intangible asset
Accumulated amortization
Capital assets and right to used asset used in governmental activities are not current financial resources and, therefore, are not reported in the governmental funds:

Deferred outflows and inflows of resources related to pension and OPEB are not reported in the governmental funds:

Net position of governmental activities
Deferred inflows of resources related to revenues are not reported in the Statement of Net Position:

Unavailable revenues
Pension related deferred inflows of resources
Pension related deferred outflows of resources
Capital assets

City of Twentynine Palms
Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds
For the year ended June 30, 2022
The accompanying notes are an integral part of these financial statements. -19-
Special Revenue
Community
Development Project Phoenix
General Block Grant State Grant ARPA
Revenues
Taxes 10,674,796 $ - $ - $ - $
Licenses, permits and fees 992,041 - - -
Intergovernmental 416,440 159,440 4,134,592 3,118,608
Charges for services 473,520 - - -
Fines, forfeitures and penalties 24,879 - - -
Use of money and property (146,016) - - -
Other 90,127 - - -
Total revenues 12,525,787 159,440 4,134,592 3,118,608
Expenditures
Current:

General government 2,366,593 - - 2,189
Public safety 5,342,058 - - -
Public works 610,776 - - -
Community development 1,121,463 - - -
Economic development - - - -
Health and sanitation - - - -
Community services 828,730 95,508 - -
Debt service:

Principal 39,539 - - -
Interest 39,505 - - -
Capital outlay 11,291 565,657 1,940,766 -
Total expenditures 10,359,955 661,165 1,940,766 2,189
Excess/(deficiency)
of revenues under expenditures 2,165,832 (501,725) 2,193,826 3,116,419 Other financing sources (uses)
Lease acquisition 11,291 - - -
Transfers in 3,136,419 - - -
Transfers out (4,712,073) - - (3,116,419)
Total other financing sources (uses) (1,564,363) - - (3,116,419) Net change in fund balances 601,469 (501,725) 2,193,826 - Fund balances (deficit), beginning of year, as restated 10,040,500 (9,325) (2,193,826) - Fund balances (deficit), end of year 10,641,969 $ (511,050) $ - $ - $

-20-
Total
Nonmajor Total
Capital City Governmental Governmental
Improvements Bond Proceeds Funds Funds
$ - - $ 590,628 $ 11,265,424 $
- - 473,550 1,465,591
2,266,605 - 1,648,745 11,744,430
- - 44,136 517,656
- - 3,626 28,505
1,769 - (34,894) (179,141)
26,450 - 29,280 145,857
1,769 2,293,055 2,755,071 24,988,322
9,066 26,024 - 2,403,872
- - - 5,342,058
- - 1,023,900 1,634,676
- - - 1,121,463
- - 223,036 223,036
- - 55,221 55,221
- - - 924,238
- - - 39,539
- - - 39,505
3,830,609 3,649,536 958,046 10,955,905
3,658,602 3,830,609 2,286,227 22,739,513
(3,656,833) (1,537,554) 468,844 2,248,809
- - - 11,291
4,268,933 - 15,000 7,420,352
(17,422) (177,925) (20,000) (8,043,839)
(17,422) 4,091,008 (5,000) (612,196)
(3,674,255) 2,553,454 463,844 1,636,613
4,910,751 2,111,223 3,203,868 18,063,191
$ 1,236,496 4,664,677 $ 3,667,712 $ 19,699,804 $
Capital Projects

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City of Twentynine Palms
Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the year ended June 30, 2022
The accompanying notes are an integral part of these financial statements. ‐21-
Net changes in fund balances - total governmental funds $ 1,636,613 7,530,244
(1,079,621)
Amortization on intangible asset (1,434)
618,555
39,539
(10,390)
3,411,242
507,185
Change in net position of governmental activities $ 12,651,933 Net OPEB liability related net adjustments
Depreciation expense
Cost of assets capitalized, less the net book value of disposals Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds:

Deferred inflows of resources that are not recognized in the Governmental Funds are recognized in the Statement of Activities:

Governmental funds report all contributions for pensions and OPEB as expenditures; however, in the Statement of Activities, pension expense is actuarially determined:

Loan repayments
Change in compensated absences payable
Unavailable revenues
The issuance of long term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes current financial resources.

These amounts are the net effect of the difference in treatment of long -term debt and related items in the statement of activities:

Net Pension liabiltiy related net adjustments
Governmental funds report capital outlays as expenditures. However, in the Statement of Activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense or are allocated to the appropriate functional expense when the cost is below the capitalization threshold. This activity is reconciled as follows:

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

City of Twentynine Palms
Statement of Net Position
Proprietary Funds
June 30, 2022
The accompanying notes are an integral part of these financial statements. ‐22-
Enterprise Fund -
Sewer
Assets
Current assets:

Cash and investments 85,070 $
Grants receivable 158,828
Other receivable 399
Total current assets 244,297
Non-current assets:

Construction in progress 542,982
Infrastructure 935,035
Total non-current assets 1,478,017
Total assets 1,722,314
Liabilities
Current liabilities:

Accounts payable 151,052
Total current liabilities 151,052
Net position
Investment in capital assets 1,478,017
Unrestricted 93,245
Total net position 1,571,262 $

City of Twentynine Palms
Statement of Changes in Net Position
Proprietary Funds
For the year ended June 30, 2022
The accompanying notes are an integral part of these financial statements. ‐23-
Enterprise Fund -
Sewer
Operating revenues
Other $ 5,218
Total operating revenues 5,218
Operating expenses
Other operating expenses 262,334
Total operating expenses 262,334
Operating income (loss) (257,116)
Non-operating revenues (expenses)
Grant revenue 475,437
Transfers in 623,487
Total nonoperating revenues (expenses) 1,098,924
Change in net position 841,808
Net position, beginning of year 729,454
Net position, end of year 1,571,262 $

City of Twentynine Palms
Statement of Cash Flows
Proprietary Funds
For the year ended June 30, 2022
The accompanying notes are an integral part of these financial statements. ‐24-
Enterprise Fund -
Sewer
Cash flows from operating activities
Grants and other revenue (383,274) $
Payments for operating expenses (24,323)
Net cash provided by (used for) operating activities (407,597) Cash flows from noncapital financing activities
Transfers from other funds 623,487
Repayments to other funds (51,819)
Net cash provided by (used for)
noncapital financing activities 571,668
Cash flows from capital financing activities
Cash received from capital grant 475,437
Acquisition of contruction in progress (554,438)
Net cash used for noncapital financing activities (79,001) Net change in cash and cash equivalents 85,070
Cash and cash equivalents, beginning of year -
Cash and cash equivalents, end of year $ 85,070
Reconciliation of operating income (loss) to
net cash provided by operating activities
Operating income (loss) (257,116) $
Adjustments to reconcile operating income to
net cash provided by operating activities:

Non-operating grant revenue
Decrease (Increase) in grants/other receivables (126,158) Increase (Decrease) in accounts payable (24,323)
Net cash provided by (used for) operating activities (407,597) $

City of Twentynine Palms
Statement of Fiduciary Net Position
Fiduciary Fund – Private-Purpose Trust Fund
June 30, 2022
The accompanying notes are an integral part of these financial statements. ‐25-
Successor Agency
to the Twentynine
Palms Redevelopment
Agency
Assets
Current assets:

Cash and investments $ 673,931
Prepaid bond insurance 129,265
Total assets 803,196
Deferred outflows of resources
Deferred loss on refunding 1,710,752
Liabilities
Current liabilities:

Interest payable 158,917
Noncurrent liabilities:

Long-term liabilities, due within one year 387,816
Long-term liabilities, due beyond one year 11,105,856
Total liabilities 11,652,589
Net position
Net position (deficit) (9,138,641)
Total net position (deficit) (9,138,641) $

City of Twentynine Palms
Statement of Changes in Fiduciary Net Position
Fiduciary Fund – Private-Purpose Trust Fund
For the year ended June 30, 2022
The accompanying notes are an integral part of these financial statements. ‐26-
Successor Agency
to the Twentynine
Palms Redevelopment
Agency
Additions
Property taxes $ 982,243
Total additions 982,243
Deductions
Program expenses 81,425
Interest expense 576,901
Total deductions 658,326
Change in net position 323,917
Net position (deficit), beginning of year (9,462,558)
Net position (deficit), end of year (9,138,641) $

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-27-
Note 1: Summary of significant accounting policies
The accounting policies of the City of Twentynine Palms (the City) conform to accounting principles generally accepted in the United States of America as applicable to governments. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for governmental accounting and financial reporting principles. The following is a summary of the significant accounting policies. (a) Reporting entity
The City was incorporated November 23, 1987, under the general laws of the State of California and enjoys all the rights and privileges pertaining to such "General Law" cities. The City is governed by a five member governing council with the mayor appointed by the council.

The Successor Agency of the Twentynine Palms Redevelopment Agency (Successor Agency) is considered a private purpose trust fund; it cannot be considered a component unit of the City. The Successor Agency took over all assets and liabilities of the former redevelopment agency. It is not included in the government-wide financial statements.

Upon dissolution of the former redevelopment agency, the City elected to serve as the successor Housing Agency and chose to retain the housing assets and functions previously performed by the low and moderate income housing fund of the former redevelopment agency. (b) Measurement focus and basis of accounting
Basis of presentation
The basic financial statements of the City have been prepared in conformity with accounting principles generally accepted in the United States of America. GASB is the accepted standard setting body for governmental accounting and financial reporting principles. These statements require that the financial statements described below be presented:

Government-wide financial statements
The government-wide financial statements (i.e., the Statement of Net Position and the Statement of Activities) report information on all of the nonfiduciary activities of the primary government (the City).

For the most part, the effect of inter-fund activity has been removed from these statements.

Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support.

The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the fiduciary fund (the private purpose trust 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 providers have been met.

The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are expenses that are clearly identifiable with a specific program, project, function or segment. Program revenues of the City include: 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment.

Taxes and other items that are properly not included among program revenues are reported instead as general revenues.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-28-
Note 1: Summary of significant accounting policies (continued) (b) Measurement focus and basis of accounting (continued) Amounts paid to acquire capital assets are capitalized as assets in the government-wide financial statements, rather than reported as expenditures. Proceeds of long-term debt are recorded as a liability in the government-wide financial statements, rather than as other financing sources. Amounts paid to reduce long-term indebtedness of the reporting government are reported as a reduction of the related liability, rather than as expenditures.

Fund financial statements
Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary fund, even though the latter is excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. All remaining government funds are aggregated and reported as non-major funds.

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.

Governmental funds
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collected within the current period or soon enough thereafter to pay liabilities of the current period, for this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. However, grant revenues are considered available within 6 months of the end of the current fiscal year. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due.

Property taxes, franchise taxes, intergovernmental revenues, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual, and are therefore recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the City.
(c) Fund classifications
The City reports the following major governmental funds:

General Fund - This fund is the government’s primary operating fund. It accounts for all financial resources of the City, except those required to be accounted for in another fund.

Community Development Block Grant Special Revenue Fund – This fund is used to track the activities of the funding provided by the U.S. Department of Housing and Urban Development under the Community Development Block Grant for projects within the City.

Project Phoenix State Grant Special Revenue Fund - This fund accounts for the activities under the grant from the State of California Department of Parks and Recreation for Project Phoenix.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-29-
Note 1: Summary of significant accounting policies (continued) (c) Fund classifications (continued)
American Rescue Plan Act (ARPA) Special Revenue Fund – this fund is used to track the activities of the funding provided by the U.S. Department of Treasury under Coronavirus State and Local Fiscal Recovery Funds program.

Capital Improvements Capital Projects Fund - This fund accounts for all capital grants for the acquisition or construction of major capital items, other than CDBG monies.

City Bond Proceeds Capital Projects Fund - This fund accounts for the 2018 TARB bond proceeds to be used for certain development projects within the City.

The City’s fund structure also includes the following non-major fund types:

Special Revenue Funds - These funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditure for specific purposes.

Capital Projects Funds - Established to maintain capital projects reserves for the purpose of providing funding for the planning, construction, repair and rehabilitation of the City’s capital assets and to track the progress and expenditures in other capital projects of the City.

The City reports the following proprietary fund:

Sewer Fund - This fund accounts for the operation of the City’s sewer services.

Additionally, the City reports the following fiduciary fund types:

Private-Purpose Trust Fund - This fund accounts for the activities of the Successor Agency to the Twentynine Palms Redevelopment Agency. The fund’s primary purpose is to expedite the dissolution of the former Agency’s net position (except for the low and moderate housing funds net position) in accordance with ABx 1 26 and AB 1454.

As a general rule, the effect of inter-fund activity has been eliminated from the government-wide financial statements. Direct expenses have not been eliminated from the functional categories; indirect expenses and internal payments have been eliminated.

Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. (d) Cash and investments
The City pools cash and investments of all funds, except assets held by fiscal agents. Each fund’s share in this pool is displayed in the accompanying financial statements as cash and investments.

Cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturity of three months or less from the date of acquisition. Investment income earned by the pooled investments is allocated to the various funds on each fund’s average cash and investment balance. Investments are reported in the accompanying financial statements at fair value. Changes in fair value that occur during a fiscal year are recognized as investment earnings reported for that fiscal year. Investment income includes interest earnings, changes in fair value, and any gains or losses realized upon the liquidation, maturity, or sale of an investment.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-30-
Note 1: Summary of significant accounting policies (continued) (e) 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 inter-fund loans) or "advances to/from other funds" (i.e., the noncurrent portion of inter-fund loans). All other outstanding balances between funds are reported as "due to/from other funds." Noncurrent portions of long-term inter-fund loan receivables are reported as advances and such amounts are offset equally by a fund balance classification which indicates that they do not constitute expendable available financial resources and therefore are not available for appropriation.

All trade and tax receivables are shown net of an allowance for uncollectible accounts if applicable, and estimated refunds due.
(f) Property taxes
Under California law, property taxes are assessed and collected by the counties up to one percent of assessed value plus other increases approved by the voters. The property taxes go into a pool, and are then allocated to the cities based on complex formulas. Accordingly, the City accrues only those taxes, which are received from the county within sixty days after year-end.

The following are the important dates relating to the City’s property taxes:

Lien date March 1
Levy date June 30
Due date November 1 and February 1
Collection dates December 10 and April 10
(g) Inventories
Inventories of material and supplies are carried at cost on an average cost basis. The City uses the consumption method of accounting for inventories.
(h) Prepaid items
Payments made to vendors for services that will benefit periods beyond June 30, 2022 are recorded as prepaid items and are offset equally by a fund balance reserve account which indicates that they do not constitute expendable available resources and therefore are not available for appropriation. (i) Capital assets
Capital assets, which include land, machinery and equipment (furniture, vehicles, computers, etc.), buildings and improvements, and infrastructure assets (street systems, storm drains, bridges, etc.), are reported in governmental activities column of the government-wide financial statements. Capital assets are defined by the City as non-infrastructure assets with an initial, individual cost of more than $5,000 and infrastructure assets with a total project cost of more than $50,000 with a useful life of at least three years. Such assets are capitalized at historical cost or estimated historical cost if purchased or constructed. Donated or annexed capital assets are recorded at acquisition value at the date acquired or annexed.

The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets’ lives are not capitalized. Depreciation is recorded in the government-wide financial statements on a straight-line basis over the useful life of the assets as follows:

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-31-
Note 1: Summary of significant accounting policies (continued) (i) Capital assets (continued)
Assets Years
Structures and improvements 40
Public domain infrastructure 50
System infrastructure 30
Vehicles 3 to 15
Other equipment and furnishings 3 to 20
Computer equipment 3 to 10
Periodic restoration and maintenance costs on particular items are charged to expense as incurred. (j) Claims and judgments
The City records a liability for litigation, judgments, and claims when it is probable that an asset has been impaired or a liability has been incurred prior to fiscal year end and the probable amount of loss (net of any insurance coverage) can be reasonably estimated. (k) Unearned revenue
In the government-wide financial statements and the fund financial statements, unearned revenue, represents cash advances by various entities that have not been spent; therefore, no revenue has been recognized.
(l) Net position and fund equity
In the government-wide financial statements and the fiduciary fund financial statements, net position is reported in three categories: net investment in capital assets, restricted net position; and unrestricted. The restricted portion of net position represents net position restricted by parties outside of the City (such as creditors, grantors, contributors, and laws and regulations of other governments) and includes unspent proceeds of bonds issued to acquire or construct capital assets.

The City’s other restricted net position is temporarily restricted (ultimately expendable assets). All other net position is considered unrestricted.
(m) Estimates
The preparation of basic financial statements in conformity with accounting principles generally accepted in the United States of America require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses/expenditures during the reporting period. Actual results could differ from those estimates. (n) Deferred inflows and deferred outflows of resources Deferred outflows of resources represent a consumption of net assets that applies to future periods and are not considered assets as described by the statement. Deferred outflows of resources are required to be presented separately after assets on the statement of net position. Deferred inflows of resources represent an acquisition of net assets that applies to future periods and are not considered to be liabilities as described by the statement. Deferred inflows of resources are required to be presented separately after liabilities on the statement of net position.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-32-
Note 1: Summary of significant accounting policies (continued) (o) Net position flow assumption
Sometimes the City will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted net position and unrestricted net position in the government-wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the government’s policy to consider restricted net position to have been depleted before unrestricted net position is applied. (p) Fund balance
Generally Accepted Accounting Principles (GAAP) require the following classifications of fund balance which describe the relative strength of the spending constraints placed on the purposes for which resources can be used:
 Non-spendable – amounts that are not in a spendable form (such as inventory) or are required to be maintained intact.
 Restricted – amounts constrained to specific purposes by their providers (such as grantors, bondholders and higher levels of government), through constitutional provisions or by enabling legislation.
 Committed – amounts constrained to specific purposes by a government itself, using the highest level of decision-making authority; to be reported as committed, amounts cannot be used for any other purpose unless the government takes the same highest level action to remove or change the constraint.
 Assigned – amounts a government intends to use for a specific purpose; intent can be expressed by the governing body or by an official or body to which the governing body delegates the authority.
 Unassigned – amounts that are for any purpose; positive amounts are reported only in a general fund.

The City Council establishes (and modifies or rescinds) fund balance commitments by passage of a resolution. The City Manager has the authority, granted by the Council, to assign City resources.

When both restricted and unrestricted resources are available for use when expenditure is incurred, it is the City’s policy to use restricted resources first, then unrestricted resources as they are needed. It is also the City’s policy to consider committed amounts as being reduced first, followed by assigned amounts and then unassigned amounts when expenditures are incurred for which amounts in any of those unrestricted fund balance classifications could be used. (q) Fund balance flow assumption
Sometimes the City will fund outlays for a particular purpose from both restricted and unrestricted resources (the total of committed, assigned, and unassigned fund balance). In order to calculate the amounts to report as restricted, committed, assigned, and unassigned fund balance in the governmental fund financial statements a flow assumption must be made about the order in which the resources are considered to be applied. It is the City’s policy to consider restricted fund balance to have been depleted before using any of the components of unrestricted fund balance. Further, when the components of unrestricted fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned fund balance. Unassigned fund balance is applied last.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-33-
Note 1: Summary of significant accounting policies (continued) (r) Pension plan
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 Plan and additions to/deductions from the Plan’s fiduciary net position have been determined on the same basis. For this purpose, benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms.

Investments are reported at fair value.

GASB 68 requires that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following time frames are used.

Valuation date (VD) June 30, 2020
Measurement date (MD) June 30, 2021
Measurement period (MP) July 1, 2020 to June 30, 2021
(s) Other Postemployment Benefits (OPEB)
For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the City’s plan (OPEB Plan) and additions to/deductions from the OPEB Plan’s fiduciary net position have been determined on the same basis. For this purpose, benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value.

GASB 75 requires that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following time frames are used:

Valuation date (VD) June 30, 2021
Measurement date (MD) June 30, 2022
Measurement period (MP) July 1, 2021 to June 30, 2022
(t) Implementation of new pronouncement
GASB has issued Statement No. 87, Leases. The objective of this statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. This Statement increases the usefulness of governments’ financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset.

Under this Statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments’ leasing activities.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-34-
Note 2: Stewardship, compliance and accountability
Appropriations limit
Under Article XIIIB of the California Constitution (the GANN Spending Limitation Initiative), the City is restricted as to the amount of annual appropriations from the proceeds of taxes, and if proceeds of taxes exceed allowed appropriations, the excess must either be refunded to the State Controller or returned to the taxpayers through revised tax rates, revised fee schedules or other refund arrangements. For the fiscal year ended June 30, 2022, proceeds of taxes did not exceed appropriations.

Continuing appropriations
The unexpected and unencumbered appropriations that are available and recommended for continuation are approved by the City Council for carryover to the following fiscal year. These commitments are reported as a reservation of fund balance.

Deficit fund balance
The following funds contained deficit fund balances:

Amount
Major Governmental Fund:

Special Revenue Fund:

Community Development Block Grant (511,050) $
Non Major Funds:

Special Revenue Funds:

Traffic Safety (12,522)
Capital Projects Fund:

Streets (4,441)
Fund
Note 3: Cash and investments
Cash and investments as of June 30, 2022 are classified in the accompanying financial statements as follows:

Statement of Net Position
Cash and investments 17,835,053 $
Cash and investments with fiscal agent - restricted 1,022,901 Statement of Fiduciary Net Position
Cash and investments 673,931
Total cash and investments 19,531,885 $
Cash and investments as of June 30, 2022 consist of the following:

Deposits with financial institutions 3,245,338 $
Petty cash 700
Investments 16,285,847
Total cash and investments 19,531,885 $

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-35-
Note 3: Cash and investments (continued)
Investments authorized by the California Government Code and the City’s investment policy The table below identifies the investment types that are authorized for the City by the City’s investment policy. The table also identifies certain provisions of the California Government Code (or the City’s investment policy, where more restrictive) that address interest rate risk, credit risk, and concentration of credit risk.

Maximum Maximum
Maximum percentage investment
Authorized investments maturity of portfolio in issuer
U.S. Treasury obligations 5 years None None
U.S. Agency obligations 5 years None None
Negotiable certificates of deposit 5 years 30% 250,000 $ Certificates of deposit 5 years None 250,000 $
Checking or passbook savings N/A None None
Local Agency Investment Fund (LAIF) N/A None 75,000,000 $ Investments authorized by debt agreements
Investment of debt proceeds held by bond trustees are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the City’s investment policy. The table below identifies the investment types that are authorized for investments held by the bond trustee.

The table also identifies certain provisions of these debt agreements that address interest rate risk, credit risk, and concentration of credit risk.

Maximum Maximum
Maximum percentage investment
Authorized investments maturity of portfolio in issuer
U.S. Treasury obligations None None None
U.S. Treasury securities None None None
Commercial paper None None None
Bankers' acceptances None None None
Municipal bonds or notes None None None
Investment agreements None None None
Obligations under IRS Section 103(a) None None None
Regulated investment companies None None None
Interest-bearing deposit accounts None None None
Corporate obligations None None None
Money market funds None None None
Local Agency Investment Fund (LAIF) None None 75,000,000 $ Interest rate risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-36-
Note 3: Cash and investments (continued)
Information about the sensitivity of the fair values of the City’s investments (including investments held by bond trustee) to market interest rate fluctuations is provided by the following table that shows the distribution of the City’s investments by maturity:

Amount 12 or less 13 to 24 25 to 60 More than 60
State investment pool 13,095,563 $ 13,095,563 $ - $ - $ - $ Certificates of deposit 2,167,383 253,470 - 1,913,913 - Held by bond trustee:

Federated institutional
tax-free cash trust 1,022,901 1,022,901 - - -
Total investments 16,285,847 $ 14,371,934 $ - $ 1,913,913 $ - $ Investment type
Remaining maturity (in months)
Investments with fair values highly sensitive to interest rate fluctuations The City has no investments (including investments held by bond trustees) that are highly sensitive to interest rate fluctuations (to a greater degree than already indicated in the information provided above).

Concentration of credit risk
The investment policy of the City contains no limitation on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. The City had no investments in any one issuer (other than U.S. Treasury securities, mutual funds, and external investment pools) that represent 5% or more of total City’s investments by reporting unit (primary government, governmental activities, business type activities, fiduciary funds, major funds, non-major funds in the aggregate, etc.).

Fair value measurements
Generally accepted accounting principles (GAAP), provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements).

The three levels of the fair value hierarchy under GAAP are described as follows:

Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the plan has the ability to access.

Level 2 Inputs to the valuation methodology include:
 quoted prices for similar assets or liabilities in active markets;  quoted prices for identical or similar assets or liabilities in inactive markets;
 inputs other than quoted prices that are observable for the asset or liability;
 inputs that are derived principally from or corroborated by observable market data by correlation or other means.
 If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.

Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-37-
Note 3: Cash and investments (continued)
Fair value measurements (continued)
The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The following is a description of the valuation methodologies used for assets measured at fair value.

Certificates of Deposits: These investments have a specified contractual term and value and a significant loss of principal could result if the investments are sold prior to maturity. These investments are priced using a matrix formula. Prices are estimates and the actual value you may obtain for the investments may be different if sold in the secondary market. These investments are classified as Level 2 in the hierarchy.

The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the City believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. There have been no changes in the methodologies used at June 30, 2022.

The City has the following recurring fair value measurements as of June 30, 2022:

Total Level 1 Level 2 Level 3
Investments at fair value:

Certificates of deposit 2,167,383 $ - $ 2,167,383 $ - $ Held by bond trustee:

Federated institutional
tax-free cash trust 1,022,901 1,022,901 - -
Total investments at fair value 1,022,901 $ 2,167,383 $ - $ Investments not subject to the fair value hierarchy:

State investment pool 13,095,563
Total investments 16,285,847 $
Investment type
Credit risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code, the City’s investment policy, or debt agreement, and the actual rating as of the fiscal year end for each investment type.

Minimum
legal
Amount rating AA+ Not rated
State investment pool 13,095,563 $ N/A - $ 13,095,563 $ Certificates of deposit 2,167,383 N/A - 2,167,383
Held by bond trustee:

Federated institutional
tax-free cash trust 1,022,901 Aaa 1,022,901 -
Total investments 16,285,847 $ 1,022,901 $ 15,262,946 $ Investment type
Rating as of year end

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-38-
Note 3: Cash and investments (continued)
Custodial credit risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party.

The California Government Code and the City’s investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The fair value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits.

As of June 30, 2022, none of the City’s deposits with financial institutions in excess of federal depository insurance limits were held in uncollateralized accounts. As of June 30, 2022, City’s investments in the following investment types were held by the same broker-dealer (counterparty) that was used by the City to buy the securities:

Amount
Federated institutional tax-free cash trust 1,022,901 $ Investment type
Investment in State investment pool
The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by the California Government Code under the oversight of the Treasurer of the State of California. The fair value of the City’s investment in this pool is reported in the accompanying financial statements at amounts based upon the City’s pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-39-
Note 4: Inter-fund activity
The following represents the inter-fund activity of the City for the fiscal year ended June 30, 2022:

Transfers
Amount
General Fund ARPA - Major Special Revenue Fund a 3,116,419 $ Nonmajor funds b 20,000
Capital Improvements - Major Capital Projects Fund General Fund c 4,268,933 Nonmajor funds General Fund d 15,000
Sewer Fund General Fund e 428,140
Capital Improvements - Major Capital Projects Fund e 177,925 City Bond Proceeds - Major Capital Projects Fund e 17,422 Total interfund transfers $ 8,043,839
Transfers in Transfers out
Significant transfers included in the accompanying financial statements are described as follows:
a. Transfer from the ARPA Fund to General Fund for government services. b. Transfer to the General Fund is for administrative costs incurred for administering the disbursing funds (e.g., Measure I, and Gas Tax). Disbursing funds receive money which are to be used to fund expenditures in other funds.
c. Transfer from the General Fund to Capital Projects Funds to assist with the funding of several capital projects.
d. Transfer from the General Fund to assist the receiving fund in covering costs incurred in the normal course of business.
e. Transfer to Sewer fund to assist funding for the expansion of Project Phoenix package treatment plant.

Due to/from other funds
Amount
General CDBG 566,825 $
Nonmajor fund:

Traffic Safety 11,537
Streets 87,664
Total interfund borrowing 666,026 $
Receivable fund Payable fund
Amounts due to/from other funds represent short-term borrowings to cover cash deficits on June 30, 2022.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-40-
Note 5: Lease receivable
For the year ended June 30, 2022, the financial statements include the adoption of GASB Statement No. 87, Leases. The primary objective of this statement is to enhance the relevance and consistency of information about governments' leasing activities. This statement establishes a single model for lease accounting based on the principle that leases are financings of the right to use an underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources. For additional information, refer to the disclosures below.

On July 1, 2021, the City entered into a 24 month lease as Lessor for the use of Fire Station - 6560 Adobe Road. An initial lease receivable was recorded in the amount of $67,995. As of June 30, 2022, the value of the lease receivable is $34,425. The lessee is required to make monthly fixed payments of $2,822. The lease has an interest rate of 0.5930%. The building’s estimated useful life was 372 months as of the contract commencement. The value of the deferred inflow of resources as of June 30, 2022 was $33,998, and the City recognized lease revenue of $33,998 during the fiscal year.

On March 11, 2022, the City entered into a 216 month lease as Lessor for the use of ATM Kiosk. An initial lease receivable was recorded in the amount of $222,585. As of June 30, 2022, the value of the lease receivable is $219,882. The lessee is required to make monthly fixed payments of $1,153. The lease has an interest rate of 1.9830%. The land estimated useful life was 0 months as of the contract commencement. The value of the deferred inflow of resources as of June 30, 2022 was $218,818 and the City recognized lease revenue of $3,767 during the fiscal year. The lessee has 5 extension options, each for 36 months.

On July 1, 2021, the City entered into a 371 month lease as Lessor for the use of Lamar Billboard Lease.

An initial lease receivable was recorded in the amount of $54,615. As of June 30, 2022, the value of the lease receivable is $53,718. The lessee is required to make annual fixed payments of $1,800. The lease has an interest rate of 1.8040%. The land estimated useful life was 0 months as of the contract commencement. The value of the deferred inflow of resources as of June 30, 2022 was $52,848, and the City recognized lease revenue of $1,767 during the fiscal year. The lessee has 1 extension options, each for 240 months.

On February 1, 2022, the City entered into a 24 month lease as Lessor for the use of 7125 Mantonya #A Property. An initial lease receivable was recorded in the amount of $16,679. As of June 30, 2022, the value of the lease receivable is $13,211. The lessee is required to make monthly fixed payments of $698.

The lease has an interest rate of 0.3800%. The building’s estimated useful life was 168 months as of the contract commencement. The value of the deferred inflow of resources as of June 30, 2022 was $13,204, and the City recognized lease revenue of $3,475 during the fiscal year.

As of June 30, 2022, the City had total outstanding lease receivables of $321,236 and related deferred inflows of resources of $318,868.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-41-
Note 6: Capital assets
Capital assets for governmental activities for the fiscal year ended June 30, 2022 were as follows:

Beginning Ending
balance Adjustment Additions Deletions balance
Governmental activities:

Capital assets, not being depreciated:

Land and improvements 4,594,878 $ (416,246) $ 1,397,227 $ - $ 5,575,859 $ Right-of-Way 17,686 - - - 17,686
Construction in progress 9,541,703 - 10,655,211 (16,907,640) 3,289,274 Total capital assets, not being
depreciated 14,154,267 (416,246) 12,052,438 (16,907,640) 8,882,819 Capital assets, being depreciated:

Building and improvements 7,460,244 - 10,688,633 - 18,148,877 Machinery and equipment 2,581,021 - 342,778 - 2,923,799 Office equipment 352,259 - 14,507 (135,501) 231,265
Vehicles 1,254,417 - - - 1,254,417
Infrastructure 21,943,605 - 1,781,268 (39,904) 23,684,969 Total capital assets, being
depreciated 33,591,546 - 12,827,186 (175,405) 46,243,327 Less accumulated depreciation for:

Building and improvements (2,979,188) - (191,444) - (3,170,632) Machinery and equipment (1,872,073) - (138,527) - (2,010,600) Office equipment (331,543) - (13,330) 135,501 (209,372) Vehicles (1,153,197) - (33,703) - (1,186,900)
Infrastructure (8,290,299) - (702,617) 14,410 (8,978,506) Total accumulated depreciation (14,626,300) - (1,079,621) 149,911 (15,556,010) Total capital assets being depreciated, net 18,965,246 - 11,747,565 (25,494) 30,687,317 Total capital assets, governmental activities 33,119,513 $ (416,246) $ 23,800,003 $ (16,933,134) $ 39,570,136 $ Current year capital outlay accounts included certain project costs related to repairs, maintenance, and improvements that were not capitalized.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-42-
Note 6: Capital assets (continued)
Capital assets for business-type activities for the fiscal year ended June 30, 2022, were as follows:

Beginning Ending
balance Additions Deletions balance
Business-type activities:

Capital assets, not being depreciated:

Construction in progress 923,579 $ 554,438 $ (935,035) $ 542,982 $ Total capital assets, not being
depreciated 923,579 554,438 (935,035) 542,982
Capital assets, being depreciated:

Infrastructure - 935,035 - 935,035
Total capital assets, being
depreciated - 935,035 * 935,035 -
Total accumulated depreciation - - - -
Total capital assets, business-type activities 923,579 $ 1,489,473 $ (935,035) $ 1,478,017 $ *Asset placed in service June 30, 2022, thus no related depreciation expense for the year.

Certain deletions in the capital assets activity schedule shown above are the result of reclassifications of assets into different classes of assets. If assets that are disposed of are not fully depreciated at the time of the disposal, these deletions in the asset classes may not be accompanied by a like decrease in the accumulated depreciation for the same asset class.

A summary of changes in intangible assets of the City for the year ending June 30, 2022 is as follows:

Beginning Ending
balance Additions Deletions balance
Intangible right to use asset - $ 11,291 $ - $ 11,291 $ Accumulated amortization - (1,434) - (1,434)
Lease asset, net of amortization - $ 9,857 $ - $ 9,857 $ Depreciation expense was charged to functions/programs of the primary government as follows:

Governmental
activities
General government 226,039 $
Public safety 502,320
Public works 153,710
Community development 105,452
Health and sanitation 5,192
Community services 86,907
Total depreciation expense 1,079,621 $

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-43-
Note 7: Long-term liabilities
Long-term liability activity of the City for the fiscal year ended June 30, 2022, was as follows:

Beginning Ending Due within
balance Additions Deletions balance one year
Direct borrowings:

Facility improvements loan $ - 1,263,036 $ (38,136) $ 1,224,900 $ 39,345 $ Lease liability 11,291 - (1,403) 9,888 2,116
Total long-term liabilities 1,263,036 $ 11,291 $ (39,539) $ 1,234,788 $ 41,461 $ Direct Borrowings - Facility improvements loan
On April 1, 2019, the City entered into an agreement to finance certain Energy Efficiency Projects under the Infrastructure State Revolving Fund Program (ISRF Program) in an amount not to exceed $1,300,000.

The proceeds of such obligation will be used to reimburse the City for expenditures incurred or paid prior to incurring the obligation (reimbursement basis). The loan has a term not to exceed 25 years, with an interest rate of 3.17%. The City financed the origination fee of 1.00% or $13,000 upon loan closing, and also a fee of 0.30% is applicable on the outstanding balance. In addition, the loan calls for additional annual payments in an amount equal to 0.3% of the outstanding principal, totaling $54,528 over the life of the loan. The remaining balance of the additional payments is presented in the table below. As of June 30, 2022, the outstanding principal balance of the loan was $1,224,900.

Estimated future debt service requirements are as follows:

Year ending
June 30, Principal
Additional
Payments Interest
2023 39,345 $ 3,675 $ 38,206 $
2024 40,592 3,557 36,939
2025 41,879 3,435 35,632
2026 43,206 3,309 34,283
2027 44,576 3,180 32,892
2028-2032 244,994 13,805 141,994
2033-2037 286,366 9,890 99,966
2038-2042 334,726 5,313 50,840
2043-2044 149,216 675 4,767
Totals $ 46,839 1,224,900 $ 475,517 $
Facility improvements loan

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-44-
Note 7: Long-term liabilities (continued)
Upon default, the Lessor or its assignee, in addition to all other rights and remedies it may have at law or in equity, shall have the option to terminate the Financing Lease on account of default by the City, notwithstanding any retaking of possession or re-letting of the leased asset. In the event of such termination, the City agreed to surrender immediately possession of the leased asset, without let or hindrance, and to pay the Lessor or its assignee all damages recoverable at law that the Lessor or its assignee may incur by reason of default by the City, including, without limitation, any costs, loss or damage whatsoever arising out of, in connection with, or incident to any such retaking possession of the leased asset.

The City Hall was pledged as collateral for this loan.

The Financing Lease and the interest of the City in the leased asset may not be assigned or encumbered by the City except as permitted by Section 2.04 of the Financing Lease. Failure to comply with this provision constitutes an event of default.

Lease Liability
On November 1, 2021, the City entered into a 63 month lease as Lessee for the use of Kyocera TASKAlfa 6053ci Printer/Scanner - P&R. An initial lease liability was recorded in the amount of $11,291.

As of June 30, 2022, the value of the lease liability is $9,888. The City is required to make monthly fixed payments of $199. The lease has an interest rate of 1.0820%. The equipment estimated useful life was 60 months as of the contract commencement. The value of the right to use asset as of June 30, 2022, of $11,291 with accumulated amortization of $1,434 is included with leased assets, detailed in Note 6.

Estimated future debt service requirements are as follows:

Year
ending
June 30, Principal Interest Total
2023 2,116 $ 97 $ 2,213 $
2024 2,139 73 2,212
2025 2,162 50 2,212
2026 2,185 27 2,212
2027 1,286 5 1,291
Totals 9,888 $ 252 $ 10,140 $
Lease liability
Long-term liabilities are generally liquidated by the General Fund.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-45-
Note 8: Compensated absences
For governmental funds, accumulated vacation and sick leave benefits payable in future years when used by the City employees amounted to $285,488 at June 30, 2022. These amounts are payable from future resources and therefore have been recorded in long-term liabilities in the government-wide financial statements. Vacation benefits and sick leave are recorded as expenditures in the related governmental fund financial statements when used. Upon retirement or termination, the expenditures are recorded in the fund which incurred the original obligation. Compensated absences liabilities are generally liquidated by the General Fund. The following is a summary of changes in compensated absences for the year ended June 30, 2022:

Beginning Ending Due within
balance Net Change balance one year
Compensated absences:

Governmental funds 275,098 $ 10,390 $ 285,488 $ 57,098 $ Total compensated absences 275,098 $ 10,390 $ 285,488 $ 57,098 $ Note 9: Property held for resale
The City’s Redevelopment Agency had acquired property from the City as part of its primary purpose to develop unimproved properties. The Redevelopment Agency’s Capital Improvements Fund had carried the land at the lower of cost or estimated net realizable value which was $126,850 at June 30, 2012. As of February 1, 2012, the Agency ceased to exist, and the property was transferred to the Successor Agency. The Successor Agency sold these four properties to the City.

The General Fund purchased the land for $93,963 as a part of the Lear traffic signal installation. The City intends to eventually sell the land.

As part of the City's downtown revitalization project, Project Phoenix, the City acquired 42 parcels from FY 2002 to FY 2022 to enable the redevelopment of Project Phoenix. These parcels are located south of Rt. 62 (Twentynine Palms Highway), west of Cholla Avenue, east of Tamarisk Avenue, and north of Cactus Drive. To facilitate the development of the project, the 42 parcels were combined into 7 parcels, which will consist of a plaza site, a Community and Cultural/Visitor Center site, one housing/hotel site, 3 parcels for public parking lots with the paseo, and a package treatment plant site. On January 25, 2022, the City Council approved the purchase, sale and development agreement with Greens Development Inc. for the sale of a property within the boundaries of Project Phoenix for $416,246 and the subsequent development of a 95-unit hotel. The sale will be concluded during FY 22/23.

The property acquisitions for the hotel site were originally recorded as a capital asset in the governmentwide financial statements. To better reflect the intent of the City with this asset, a prior period adjustment was done to reclassify this asset from capital assets to Land held for resale in the City Bond Proceeds fund.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
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Note 10: Successor Agency long-term debt
The debt of the Successor Agency as of June 30, 2022 is as follows:

Beginning Ending Due within
balance Additions Deletions balance one year
Tax Allocation Bonds:

Direct placements:
2018 Tax Allocation Refunding 12,110,000 $ - $ (360,000) $ 11,750,000 $ 375,000 $ Less deferred amounts:
2018 TARB (269,144) - 12,816 (256,328) 12,816
Total bonds payable $ - 11,840,856 $ (347,184) $ 11,493,672 $ 387,816 $ Description
Future debt service requirements are as follows:

Year ending
June 30, Principal Interest
2023 375,000 $ 470,656 $
2024 390,000 457,981
2025 400,000 444,400
2026 410,000 429,969
2027 435,000 414,653
2028-2032 2,390,000 1,806,502
2033-2037 2,925,000 1,259,694
2048-2042 3,610,000 569,926
2043 815,000 17,318
Totals $ 5,871,099 11,750,000 $
2018 Tax Allocation Refunding Bonds
On April 19, 2011, the Twentynine Palms Redevelopment Agency (the Redevelopment Agency) issued its 2011 Tax Allocation Bonds, Series A and B (the Bonds) in order to fund the Redevelopment Agency’s Project Phoenix. Subsequently, on December 29, 2011, the California Supreme Court upheld Assembly Bill X1 26 that provided for the dissolution of all redevelopment agencies in the State of California as of February 1, 2012. Subsequent to December 29, 2011, the City and the Successor Agency to the Twentynine Palms Redevelopment Agency (the Successor Agency) entered into an agreement in which the City was to take over the responsibilities of overseeing the completion of Project Phoenix. Therefore, on June 29, 2012, the Successor Agency, in accordance with the above-mentioned agreement, transferred to the City the remaining proceeds of the Bonds in the amount of $11,034,138 in order for the City to commence with the project. The outstanding balance of the bonds was transferred to the Successor Agency on February 1, 2012, as part of the former Agency’s dissolution in accordance with AB X1 26 and AB 1484.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-47-
Note 10: Successor Agency long-term debt (continued)
In accordance with the provisions of ABX 1 26 (Bill) and the California Supreme Court’s decision to uphold the Bill, the obligations of the former redevelopment agency became vested with the funds established for the successor agency upon the date of dissolution, February 1, 2012. Former tax increment revenues pledged to fund the debts of the former redevelopment agency will be distributed to the Successor Agency subject to the reapportionment of such revenues as provided by the Bill.

On June 6, 2018, the Successor Agency to the Redevelopment Agency issued its Tax Allocation Refunding Bonds, Series 2018 (Federally Taxable) to fully refund the former Redevelopment Agency’s 2011 Tax Allocation Bonds, Series A & B. The refunding resulted in significant annual savings by lowering the annual debt service payments. The balance of the refunding debt as of June 20, 2022, is $11,750,000.

The payments due under the indenture are secured primarily by a pledge of, security interest in and lien on Tax Revenues (as defined in the Indenture) allocated as described therein and payable on a parity with certain other obligations described in the indenture.

In the event of default, the Trustee may, or if requested in writing by the Owners of the majority in aggregate principal amount of the bonds then outstating, the Trustee shall, by written notice to the Successor Agency, (a) declare the principal of the bonds then outstanding, and the interest accrued thereon, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable, and (b) upon receipt of indemnity to its satisfaction exercise any other remedies available to the Trustee and the Owners in law or at equity.

Under the indenture, the principal due on the bonds is subject to acceleration upon the occurrence of an Event of Default. If an Event of Default occurs under the Indenture, as practical matter, bond owners will be limited to enforcing the obligation of the Successor Agency to repay the bonds on an annual basis to the extent of the Tax Revenues. No real or personal property in the Project Area is pledge to secure the bonds, and it is not anticipated that the Successor Agency will have available moneys sufficient to redeem all of the bonds upon occurrence of an Event of Default.

Note 11: Pension Plan
A. General information about the Pension Plan
Plan description
All qualified permanent and probationary employees are eligible to participate in the Public Agency CostSharing Multiple-Employer Defined Benefit Pension Plan (Plan or PERF C) administered by the California Public Employees’ Retirement System (CalPERS.) The Plan consists of a miscellaneous pool and a safety pool (also referred to as “risk pools”), which are comprised of individual employer miscellaneous and safety rate plans, respectively. Plan assets may be used to pay benefits for any employer rate plan of the safety and miscellaneous pools. Accordingly, rate plans within the safety or miscellaneous pools are not separate plans under generally accepted accounting principles. Individual employers may sponsor more than one rate plan in the miscellaneous or safety risk pools.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-48-
Note 11: Pension Plan (continued)
A. General information about the Pension Plan (continued) Plan description (continued)
The City sponsors four rate plans (two miscellaneous and two safety). In 2016, the City of Twentynine Palms accepted the Twentynine Palms Water District (Water District) PERS Pension Liability within the LAFCO (Local Agency Formation Commission) proceedings that transferred the fire responsibility from the Water District to the County of San Bernardino Fire District. As part of the financial obligation, the Water District not only obligated the Pension Liability but also transferred cash to offset the Liability held in a PARS (Public Agency Retirement System) account. This represents the two safety rates of the plan (PEPRA and Miscellaneous Safety) provided by the City. Benefit provisions under the Plan are established by State statute and City’s 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, at www.calpers.ca.gov.

Benefits provided
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 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 5 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost-of-living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law.

The Plan operates under the provisions of the California Public Employees’ Retirement Law (PERL), the California Public Employees’ Pension Reform Act of 2013 (PEPRA), and the regulations, procedures and policies adopted by the CalPERS Board of Administration. The Plan’s authority to establish and amend the benefit terms are set by the PERL and PEPRA, and may be amended by the California state legislature and in some cases require approval by the CalPERS Board.

The Plan’s provisions and benefits in effect at June 30, 2022, are summarized as follows:

Hire date
Prior to
January 1, 2013
On or after
January 1, 2013
Benefit formula 2.5 % @ 55 2% @ 55
Benefit vesting schedule 5 years service 5 years service Benefit payments monthly for life monthly for life
Retirement age 50 - 67 50- 67
Monthly benefits, as a % of eligible compensation 2.0% to 2.5% 1.0% to 2.5% Required employer contribution rates 12.200% 7.590%
Hire date
Prior to
January 1, 2013
On or after
January 1, 2013
Benefit formula 3% @55 2.5% @57
Benefit vesting schedule 5 years service 5 years service Benefit payments monthly for life monthly for life
Retirement age 50 50-57
Monthly benefits, as a % of eligible compensation 2.4% to 3.0% 2.0% to 2.7% Required employer contribution rates 0.000% N/A
Miscellaneous
Safety

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-49-
Note 11: Pension Plan (continued)
A. General information about the Pension Plan (continued) Contributions
Section 20814(c) of the California Public Employees’ Retirement Law (PERL) requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. The total plan contributions are determined through CalPERS’ annual actuarial valuation process. For public agency cost-sharing plans covered by either the Miscellaneous or Safety risk pools, the Plan’s actuarially determined rate is based on the estimated amount necessary to pay the Plan’s allocated share of the risk pool’s costs of benefits earned by employees during the year, and any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. Employer contribution rates may change if plan contracts are amended. Payments made by the employer to satisfy contribution requirements that are identified by the pension plan terms as plan member contribution requirements are classified as plan member contributions. Employer Contributions to the Plan for the fiscal year ended June 30, 2022, were $311,225. The actual employer payments of $262,161 made to CalPERS by the City during the measurement period ended June 30, 2021, differed from the City’s proportionate share of the employer’s contributions of $1,593,675 by $1,331,514, which is being amortized over the expected average remaining service lifetime in the Public Agency Cost-Sharing Multiple Employer Plan.

B. Net Pension Liability
The City’s net pension liability for the Plan is measured as the total pension liability, less the pension plan’s fiduciary net position. The net pension liability of the Plan is measured as of June 30, 2021, using an annual actuarial valuation as of June 30, 2020 rolled forward to June 30, 2021 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is as follows.

Actuarial Methods and Assumptions Used to Determine Total Pension Liability Valuation Date June 30, 2020
Measurement Date June 30, 2021
Actuarial Cost Method Entry Age Normal in accordance with the requirements of GASB 68 Asset Valuation Method Market Value of Assets
Actuarial Assumptions:

Discount Rate 7.15%
Inflation 2.50%
Salary Increases Varies by Entry Age and Service
Mortality Rate Table (1)
Post Retirement Benefit Increase
Derived using CALPERS' membership data for all funds
The lesser of contract COLA or 2.50% until Purchasing Power Protection Allowance floor on purchasing power applies, 2.50% thereafter.
(1) The mortality table used was developed based on CalPERS’ specific data. The probabilities of mortality are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015. Pre-retirement and Post-retirement mortality rates include 15 years of projected mortality improvement using 90% of Scale MP-2016 published by the Society of Actuaries. For more details on this table, please refer to the CalPERS Experience Study and Review of Actuarial Assumptions report from December 2017 that can be found on the CalPERS website. .

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-50-
Note 11: Pension Plan (continued)
B. Net Pension Liability (continued)
All other actuarial assumptions used in the June 30, 2020, valuation were based on the results of an actuarial experience study for the period from 1997 to 2015, including updates to salary increase, mortality and retirement rates. The Experience Study report can be obtained at CalPERS’ website, at www.calpers.ca.gov.

The General Fund typically has been used in prior years to liquidate net pension liabilities.

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

In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Using historical returns of all of the funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11+ years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the rounded single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equal to the single equivalent rate calculated above and adjusted to account for assumed administrative expenses.

The expected real rates of return by asset class are as follows:

Asset Class1
New
Strategic
Allocation
Real Return
Years 1 - 102
Real Return
Years 11+3
Public equity 50.0% 4.80% 5.98%
Fixed Income 28.0% 1.00% 2.62%
Inflation Assets 0.0% 0.77% 1.81%
Private Equity 8.0% 6.30% 7.23%
Real Assets 13.0% 3.75% 4.93%
Liquidity 1.0% 0.00% (0.92%)
2 An expected inflation of 2.00% used for this period
3 An expected inflation of 2.92% used for this period
1 In the System's ACFR, fixed income is included in Global Debt Securities; Liquidity is included in Short-term Investments; Inflation Assets are included in both Global Equity Securities and Global Debt Securities.

Change of assumptions
There were no change of assumptions for measurement date June 30, 2021.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-51-
Note 11: Pension Plan (continued)
B. Net Pension Liability (continued)
Discount rate
The discount rate used to measure the total pension liability for PERF C was 7.15%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

Subsequent events
On July 12, 2021, CalPERS reported a preliminary 21.3% net return on investments for fiscal year 2020-

21. Based on the thresholds specified in CalPERS Funding Risk Mitigation policy, the excess return of

14.3% prescribes a reduction in investment volatility that corresponds to a reduction in the discount rate used for funding purposes of 0.20%, from 7.00% to 6.80%. Since CalPERS was in the final stages of the four-year Asset Liability Management (ALM) cycle, the board elected to defer any changes to the asset allocation until the ALM process concluded, and the board could make its final decision on the asset allocation in November 2021.

On November 17, 2021, the board adopted a new strategic asset allocation. The new asset allocation along with the new capital market assumptions, economic assumptions and administrative expense assumption support a discount rate of 6.90% (net of investment expense but without a reduction for administrative expense) for financial reporting purposes. This includes a reduction in the price inflation assumption from 2.50% to 2.30% as recommended in the November 2021 CalPERS Experience Study and Review of Actuarial Assumptions. This study also recommended modifications to retirement rates, termination rates, mortality rates and rates of salary increases that were adopted by the board. These new assumptions will be reflected in the GASB 68 accounting valuation reports for the June 30, 2022, measurement date.

Pension plan fiduciary net position
Information about the pension plan’s assets, deferred outflows of resources, liabilities, deferred inflows of resources, and fiduciary net position are presented in CalPERS’ audited financial statements, which are publicly available reports that can be obtained at CalPERS’ website, at www.calpers.ca.gov. The plan’s fiduciary net position and additions to/deductions from the plan’s fiduciary net position have been determined on the same basis used by the pension plan, which is the economic resources measurement focus and the accrual basis of accounting. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan. Investments are reported at fair value.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-52-
Note 11: Pension Plan (continued)
C. Proportionate Share of Net Pension Liability
The following table shows the Plan’s proportionate share of the net pension liability over the measurement period.

Increase (Decrease)
Plan Total Pension
Liability
(a)
Plan Fiduciary Net
Position
(b)
Plan Net Pension
Liability
(c ) = (a) - (b)
Balance at: 6/30/2020 (VD) 21,052,780 $ 20,259,594 $ 793,186 $ Balance at: 6/30/2021 (MD) 35,459,674 35,276,292 183,382 Net changes during 2021-22 14,406,894 15,016,698 (609,804) Valuation Date (VD), Measurement Date (MD).

The City’s proportion of the net pension liability was determined by CalPERS using the output from the Actuarial Valuation System and the fiduciary net position, as provided in the CalPERS Public Agency Cost-Sharing Allocation Methodology Report, which is a publicly available report that can be obtained at CalPERS’ website, at www.calpers.ca.gov. The City’s proportionate share of the net pension liability for the total Plan as of the June 30, 2020 and 2021 measurement dates was as follows:

Proportionate share of NPL - June 30, 2020 0.00729 %
Proportion share of NPL - June 30, 2021 0.00339 %
Change - Increase (Decrease) (0.00390) %
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 of the Plan as of the measurement date, calculated using the discount rate of 7.15 percent, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower (6.15 percent) or 1 percentage-point higher (8.15 percent) than the current rate:

Discount Rate - 1%
(6.15%)
Current Discount
Rate (7.15%)
Discount Rate + 1%
(8.15%)
Plan's Net Pension
Liability/(Asset) $ 183,382 4,909,024 $ (3,711,076) $
Amortization of deferred outflows and deferred inflows of resources Under GASB 68, gains and losses related to changes in total pension liability and fiduciary net position are recognized in pension expense systematically over time.

The first amortized amounts are recognized in pension expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to pensions and are to be recognized in future pension expense.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-53-
Note 11: Pension Plan (continued)
C. Proportionate Share of Net Pension Liability (continued) Amortization of deferred outflows and deferred inflows of resources (continued) The amortization period differs depending on the source of the gain or loss:

Net difference between projected
and actual earnings on pension
plan investments
5 year straight-line amortization
All other amounts Straight-line amortization over the expected average remaining service lives (EARSL) of all members that are provided with benefits (active, inactive and retired) as of the beginning of the measurement period.

The expected average remaining service lifetime (EARSL) is calculated by dividing the total future service years by the total number of plan participants (active, inactive, and retired) in the Public Agency CostSharing Multiple-Employer Plan (PERF C).

The EARSL for PERF C for the measurement period ending June 30, 2021 is 3.7 years, which was obtained by dividing the total service years of 561,622 (the sum of remaining service lifetimes of the active employees) by 150,648 (the total number of participants: active, inactive, and retired) in PERF C.

Inactive employees and retirees have remaining service lifetimes equal to 0. Total future service is based on the members’ probability of decrementing due to an event other than receiving a cash refund.

D. Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions
As of the start of the measurement period (July 1, 2020), the City’s net pension liability was $793,186. For the measurement period ending June 30, 2021 (the measurement date), the City incurred a pension credit of $3,100,018.

As of June 30, 2022, the City has deferred outflows and deferred inflows of resources related to pensions as follows:

Deferred Outflows Deferred Inflows
of Resources of Resources
Differences between expected and actual experience 160,744 $ - $ Differences between projected and actual investment earnings 503,105 - Differences between employer's contributions
and proportionate share of contributions - 1,350,650
Change in employer's proportion 3,308,579 -
Pension contributions made subsequent to measurement date 311,225 - Totals $ 1,350,650 4,283,653 $

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-54-
Note 11: Pension Plan (continued)
D. Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions (continued)
The amounts above are net of outflows and inflows recognized in the 2020-21 measurement period expense. Contributions subsequent to the measurement date of $311,225 reported with deferred outflows of resources will be recognized as a reduction of the net pension liability in the upcoming fiscal year.

Other amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in future pension expense as follows:

Fiscal year ending
June 30: Miscellaneous Safety Total
2023 327,427 $ 557,984 $ 885,411 $
2024 362,809 532,052 894,861
2025 462,015 238,807 700,822
2026 531,758 (391,074) 140,684
2027 - - -
Thereafter - - -
$ 937,769 1,684,009 $ 2,621,778 $
E. Payable to the Pension Plan
At June 30, 2022, the City reported a payable of $-0- for the outstanding amount of contributions to the pension plan required for the year then ended.

The remainder of this page left intentionally blank.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-55-
Note 12: Other post-employment benefits (OPEB)
Plan description
The City has established a Retiree Healthcare Plan (OPEB Plan), and participates in an agent multipleemployer defined benefit retiree healthcare plan. The City pays the first $500 per month for each current employee hired before 9/1/2017; employees hired on or after 9/1/17 receive only the PEMHCA minimum.

Retired employees are eligible for the same plans as active employees, subject to Medicare supplement for those who qualify. The City currently pays 500 per month toward each retiree’s premiums for those hired before 9/1/17. The City does not issue a financial report for the plan. A separate financial report is not prepared for the HC Plan.

Employees covered
As of the June 30, 2021 actuarial valuation, the following current and former employees were covered by the benefit terms under the OPEB Plan:

Active employees 33
Inactive employees or beneficiaries currently receiving benefits 22 Total 55
Contributions
The contribution requirements of plan members and the City are established and may be amended by the City. The City contributes 100% of the retiree and dependent up to the maximum of cost of $500 per month. For the fiscal year ended June 30, 2022, the City’s cash contributions were $181,613 in payments to the trust. In Fiscal Year 2010, the City created a California Employer’s Retiree Benefit Trust (CERBT) with California Public Employees Retirement System (CalPERS) for the purpose of prefunding obligations for past services.

The City terminated the contract with CalPERS in November 2021 and transferred assets to an OPEB trust held with PARS.

Net OPEB Liability
The City’s net OPEB liability was based on an actuarial valuation as of June 30, 2021, and a measurement date of June 30, 2021. The Total OPEB Liability was determined using an actuarial valuation as of June 30, 2022, using the following actuarial assumptions:

Discount Rate 5.75%
Inflation 2.50%
Salary Increases 2.75%
Investment Rate of Return 5.75%
Mortality Rate Pre-retirement mortality rates were based on the 2017 CalPers Retiree Mortality for All Employees table created by CalPERS Healthcare Trend Rate 4.00%
Actuarial Assumptions:

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-56-
Note 12: Other post-employment benefits (OPEB) (continued) Net OPEB Liability (continued)
The long-term expected rate of return (LTROR) on OPEB plan investments was determined by CERBT using a building-block 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 by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The table below provides the long-term expected real rates of return by asset class (based on published capital market assumptions):

Asset Class Target Allocation
Long-term expected
real rate of return
All Domestic Equities 50% 7.25%
All Fixed Income 45% 4.25%
Short-Term Gov't Fixed 5% 3.00%
Total 100%
The General Fund typically has been used in prior years to liquidate net OPEB liabilities.

Discount rate
The discount rate reflects a 5.75% per year net of expenses. This is based on assumed long-term return on employer assets using the “Building Block Method”. The assessment of long-term returns for employer assets is based on long-term historical returns for surplus funds invested pursuant to California Government Code Sections 53601 et seq.

Change of assumptions
A discount rate of 5.75% was used in the current valuation. The discount rate used in the prior valuation was 6.25%.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-57-
Note 12: Other post-employment benefits (OPEB) (continued) Changes in the OPEB Liability
The changes in the net OPEB liability for the OPEB Plan are as follows:

Total OPEB
Liability (a)
Plan Fiduciary
Net Position (B)
Net OPEB
Liability/(Asset)
(c)= (a) - (b)
Balance at June 30, 2021
(Valuation Date June 30, 2021) 2,276,382 $ 2,602,025 $ (325,643) $ Changes recognized for the
measurement period:

Service Cost 47,520 - 47,520
Interest on the total OPEB liability 138,014 (250,791) 388,805 Changes in assumptions 104,420 - 104,420
Plan experience differences (2,215) - (2,215)
Contributions - employer - 67,584 (67,584)
Benefit payments (181,613) (181,613) -
Administrative expenses - (8,068) 8,068
Net Changes (372,888) 106,126 479,014
Balance at June 30, 2022
(Measurement Date June 30, 2022) 2,382,508 $ 2,229,137 $ 153,371 $ Sensitivity of the Net OPEB Liability to changes in the discount rate The following presents the net OPEB liability of the City if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate, for measurement period ended June 30, 2022:

Current
1% Decrease Discount Rate 1% Increase

4.75% 5.75% 6.75%
Net OPEB Liability/(Asset) 372,049 $ 153,371 $ (42,962) $ Sensitivity of the Net OPEB Liability to changes in the health care cost trend rates The following presents the net OPEB liability of the City if it were calculated using health care cost trend rates that are one percentage point lower or one percentage point higher than the current rate, for measurement date ended June 30, 2022:

Current Healthcare Cost
1% Decrease Trend Rates 1% Increase
Net OPEB Liability/(Asset) 74,020 $ 153,371 $ 255,960 $ Gains and losses related to changes in total OPEB liability and fiduciary net position are recognized in OPEB expense systematically over time. Amounts are first recognized in OPEB expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to OPEB and are to be recognized in future OPEB expense. The recognition period differs depending on the source of the gain or loss.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-58-
Note 12: Other post-employment benefits (OPEB) (continued) Recognition of deferred outflows and deferred inflows of resources Net difference between projected and 5 years
actual earnings on OPEB plan
investments
All other amounts Expected average remaining service
lifetime (EARSL) (7.9 Years at June 30, 2021)
OPEB plan fiduciary net position
CalPERS issues a publicly available CERBT financial report that may be obtained from the CalPERS’ website at www.calpers.ca.gov.

OPEB expense related to OPEB
For the fiscal year ended June 30, 2022, the City recognized OPEB credit of $439,601. As of fiscal year, ended June 30, 2022, the City reported deferred outflows of resources related to OPEB from the following sources:

Deferred Deferred
Outflows Inflows
of Resources of Resources
Changes of assumptions 91,202 $ 1,420,443 $
Differences between expected
and actual experience 42,250 1,934
Net difference between projected and actual earnings on OPEB plan investments - 145,236
Total 278,688 $ 1,422,377 $
Other amounts reported as deferred outflows and inflows of resources related to OPEB will be recognized as expense as follows:

Fiscal Year Ended
June 30:

Deferred (Inflows) of
Resources
2023 (466,163) $
2024 (459,305)
2025 (334,496)
2026 82,681
2027 10,870
Thereafter: 22,724
$ (1,143,689)

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-59-
Note 13: Jointly controlled government
On October 16, 1989, the Morongo Basin Transit Authority (the Authority) was created as a joint powers agency by the County of San Bernardino, the City of Twentynine Palms, and the Town of Yucca Valley.

The system will provide transit services in the City and certain surrounding areas of the Morongo Basin as a means of meeting the transit needs of various transit-dependent groups within the area. The system is primarily funded by Article 8 funds. The City has an ongoing responsibility for providing funding on an annual basis for operating costs of the Authority, but the City has no equity interest in, or claim to the assets of, the Authority.

Summarized audited financial information of the Morongo Basin Transit Authority for the year ended June 30, 2021, is as follows:

Current assets $ 6,324,992
Noncurrent assets 5,796,142
Total assets 12,121,134
Deferred outflows of resources 792,030
Total liabilities 5,110,034
Deferred inflows of resources 932,298
Total net position $ 6,870,832
Operating revenue 549,391 $
Operating expenses (5,349,249)
Operating loss (4,799,858)
Non-operating revenue 3,976,022
Net loss before contributed capital (823,836)
Contributed capital 1,038,920
Change in net position $ 215,084
The financial statements can be obtained from the Authority at 62405 Verbena Road, Joshua Tree, CA 92252.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-60-
Note 14: Risk management
The City of Twentynine Palms (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 Member Entity obtains insurance coverage.

The City is a member of the Public Agency Risk Sharing Authority of California-PARSAC (Authority), a joint powers authority, which provides joint protection programs for public entities covering automobile, general liability, errors and omission losses, workers’ compensation, and property claims. Under the program, the City has a $ 10,000 retention limit similar to a deductible with the Authority being responsible for losses above that amount up to $1 million. The Authority has additional coverage of $49 million in excess of its $1 million retention limit through affiliated risk management authorities. The Authority also provides one billion dollars aggregate per occurrence property coverage to its members with such coverage provided by purchased insurance.

Liabilities of the City are reported 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 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 claim’s liability estimate.

The Authority covers workers’ compensation claims up to its self-insurance limit of $500,000. The Local Agency Workers Compensation Excess Pool provides excess coverage to statutory limits. The City pays an annual premium to the Authority and may share in any surplus revenues or may be required to pay additional assessments based upon the Authority’s operating results. Financial statements of the Public Agency Risk Sharing Authority of California (PARSAC) may be obtained from its administrative office located at 2330 E. Bidwell Street, Suite 150, Folsom, California, 95630; www.cira-jpa.org or by calling (916) 927 - 7727.

Liability for uninsured claims
The City estimates its liability for the uninsured portion of claims, including a provision for claims incurred but not reported, based on claims experience. Estimated incurred but not reported claims liabilities in the following table are not material to the City and are therefore not accrued in the financial statements.

Claims activity for the year ended June 30, 2022 and the three previous years was as follows:

Current year
claims and
Fiscal year Beginning changes in Actual claim End of
ended June 30, of year estimates payments year
2019 71,500 $ (21,500) $ - $ 50,000 $
2020 - 50,000 - 50,000
2021 10,500 50,000 (41,721) 18,779
2022 39,774 18,779 27,110 31,443

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-61-
Note 14: Risk management (continued)
At June 30, 2022, total estimated claims payable is held in unassigned fund balances in the General Fund with an amount equal to $31,443. The City retains a risk of loss due to the fact there is a deductible per occurrence and that actual losses may exceed estimated claims or coverage amounts. The City pays an annual premium to the PARSAC and may share in any surplus revenues or may be required to pay additional assessments based upon the PARSAC operating results.

There was no significant reduction in insurance coverage by major categories of risk from the fiscal year ended June 30, 2021 to the fiscal year ended June 30, 2022. Furthermore, there was no settlement which exceeded the insurance coverage for the past three fiscal years.

Note 15: Commitments and contingencies
Litigation
The City is involved as a defendant in various legal proceedings. While it is not feasible to predict or determine the outcome in these cases, it is the opinion of the City that the outcome will have no material adverse effect on the financial position of the City.

Grants
The City has received State and Federal funds for specific purposes that are subject to audit by the grantor agencies. Although such audits could generate expenditure disallowances under the terms of the grants, it is believed that any required reimbursements will not be material.

Note 16: Governmental fund balances
The specific purposes/functions for fund balances classified as non-spendable, restricted, committed, assigned, and unassigned, as of June 30, 2022, are displayed below:

Total
Community Nonmajor Total
Development Project Phoenix Capital City Governmental Governmental General Block Grant State Grant ARPA Improvements Bond Proceeds Funds Funds Nonspendable:

Land held for resale 93,963 $ - $ - $ - $ - $ - $ - $ 93,963 $ Restricted for:

Public works - - - - - - 2,084,121 2,084,121
Health and sanitation - - - - - - 223,527 223,527
Economic development - - - - - - 504,591 504,591
Community development - - - - - 1,236,496 111,477 1,347,973 Assigned:

Fire Safety pension plan 1,300,000 - - - - - - 1,300,000 Luckie Park pool upgrade 1,574,111 - - - - - - 1,574,111 Animal control building upgrades 700,000 - - - - - - 700,000 Channel control trail 25,733 - - - - - - 25,733
Public works - - - - 4,664,677 - 760,959 5,425,636
Unassigned 6,948,162 (511,050) - - - - (16,963) 6,420,149 Total fund balances (deficit) 10,641,969 $ (511,050) $ - $ - $ 4,664,677 $ 1,236,496 $ 3,667,712 $ 19,699,804 $ Special Revenue Capital Projects

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2022
-62-
Note 17: Prior period restatement
The City identified and corrected an accounting error in the prior year for the amounts listed below.

The restatement of $87,473 in the Project Phoenix State Grant fund and Capital Improvements fund was for expenditures recorded in the incorrect fund in the prior year. The $416,246 restatement in the City Bond Proceeds fund is for the cost of property acquisitions that was originally recorded as a capital asset in the government-wide financial statements. To better reflect the intent of the City with this asset, a prior period adjustment was done to reclassify this asset from capital assets to Land held for resale in the City Bond Proceeds fund. See Note 9 for more details.

The beginning fund balance of the following funds have been restated due to the correction.

Governmental Funds
Special Revenue
General*
Project Phoenix
State Grant
Capital
Improvements City Bond Proceeds
Fund balance, beginning of year, as previously reported 9,953,060 $ (2,281,299) $ 2,198,696 $ 4,494,505 $ Prior period restatement 87,440 87,473 (87,473) 416,246 Fund balance, beginning of year, as restated 10,040,500 $ (2,193,826) $ 2,111,223 $ 4,910,751 $ Capital Projects
*City eliminated the previously reported Internal Service Fund and consolidated its activity within the General Fund.

Governmental Activities
Net position, beginning of year, as previously reported 46,776,701 $ Prior period restatement 416,246
Net position, beginning of year, as restated 47,192,947 $

REQUIRED SUPPLEMENTARY INFORMATION

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City of Twentynine Palms
Required Supplementary Information
Budgetary Comparison Schedule
General Fund
For the year ended June 30, 2022
-63-
Actual Variance with
Original Final amounts final budget
Revenues
Taxes 9,263,983 $ 9,263,983 $ 10,674,796 $ 1,410,813 $
Licenses, permits and fees 430,500 430,500 992,041 561,541 Intergovernmental 316,262 316,262 416,440 100,178
Charges for services 436,000 436,000 473,520 37,520
Fines, forfeitures and penalties 5,000 5,000 24,879 19,879 Use of money and property 60,000 60,000 (146,016) (206,016) Other 55,000 55,000 90,127 35,127
Total revenues 10,566,745 10,566,745 12,525,787 1,959,042 Expenditures
Current:

General government
City council 61,207 61,207 53,447 7,760
City administration 537,729 537,729 527,651 10,078
City attorney 110,000 110,000 104,289 5,711
City hall 96,497 96,497 91,371 5,126
Finance 243,447 243,447 276,057 (32,610)
City clerk 213,776 213,776 201,341 12,435
IT department 255,957 255,957 268,337 (12,380)
Nondepartmental 749,685 749,685 692,514 57,171
Successor administration 137,500 137,500 151,585 (14,085) Public safety
Law enforcement 4,772,948 4,772,948 4,738,745 34,203
Code enforcement 648,272 648,272 603,313 44,959
Public works 664,210 664,210 610,923 53,287
Community development 787,637 787,637 1,121,463 (333,826) Community services 1,030,791 1,030,791 828,730 202,061
Debt service
Principal 41,925 41,925 39,539 2,386
Interest 39,434 39,434 39,505 (71)
Capital outlay - - 11,291 (11,291)
Total expenditures 10,391,015 10,391,015 10,360,101 30,914 Excess (deficiency) of revenues
over (under) expenditures 175,730 175,730 2,165,686 1,989,956 Other financing sources (uses)
Lease acquisition - - 11,291 11,291
Transfers in 3,136,419 3,136,419 3,136,419 -
Transfers out (4,733,733) (4,733,733) (4,712,073) 21,660 Total other financing sources (uses) (1,597,314) (1,597,314) (1,564,363) 32,951 Net change in fund balance (1,421,584) $ (1,421,584) $ 601,323 2,022,907 $ Fund balance, beginning of year, 10,040,500
as restated
Fund balance, end of year 10,641,823 $
Budgeted amounts

City of Twentynine Palms
Required Supplementary Information
Budgetary Comparison Schedule
CDBG Special Revenue Fund
For the year ended June 30, 2022
-64-
Actual Variance with
Original Final amounts final budget
Revenues
Intergovernmental 190,054 $ 190,054 $ 159,440 $ (30,614) $ Total revenues 190,054 190,054 159,440 (30,614)
Expenditures
Community services - - 95,508 (95,508)
Capital outlay 190,054 190,054 565,657 (375,603)
Total expenditures 190,054 190,054 661,165 (471,111)
Net change in fund balance - $ - $ (501,725) (501,725) $ Fund balance (deficit), beginning of year (9,325)
Fund balance (deficit), end of year $ (511,050)
Budgeted amounts

City of Twentynine Palms
Required Supplementary Information
Budgetary Comparison Schedule
Project Phoenix Special Revenue Fund
For the year ended June 30, 2022
-65-
Actual Variance with
Original Final amounts final budget
Revenues
Intergovernmental 2,505,245 $ 2,505,245 $ 4,134,592 $ 1,629,347 $ Total revenues 2,505,245 2,505,245 4,134,592 1,629,347
Expenditures
Capital outlay 2,208,155 2,208,155 1,940,766 267,389
Total expenditures 2,208,155 2,208,155 1,940,766 267,389 Net change in fund balance 297,090 $ 297,090 $ 2,193,826 1,896,736 $ Fund balance (deficit), beginning
of year, as restated (2,193,826)
Fund balance, end of year $ -
Budgeted amounts

City of Twentynine Palms
Required Supplementary Information
Budgetary Comparison Schedule
ARPA Special Revenue Fund
For the year ended June 30, 2022
-66-
Actual Variance with
Original Final amounts final budget
Revenues
Intergovernmental 3,118,608 $ 3,118,608 $ 3,118,608 $ - $ Total revenues 3,118,608 3,118,608 3,118,608 -
Expenditures
General government 2,189 2,189 2,189 -
Total expenditures 2,189 2,189 2,189 -
Other financing sources (uses)
Transfers out (3,116,419) (3,116,419) (3,116,419) -
Total other financing sources (uses) (3,116,419) (3,116,419) (3,116,419) - Net change in fund balance - $ - $ - - $
Fund balance (deficit), beginning of year -
Fund balance (deficit), end of year - $
Budgeted amounts

City of Twentynine Palms
Required Supplementary Information Schedule of the City’s Proportionate Share of the Plan’s Net Pension Liability and Related Ratios as of the Measurement Date Last 10 Years * -67-
Measurement Date
Employer's
Proportion of the
Collective Net
Pension Liability1
Employer's
Proportionate
Share of the
Collective Net
Pension Liability Covered Payroll
Employer's
Proportionate
Share of the
Collective Net
Pension Liability
as a percentage of
the Covered
Payroll
Pension Plan's
Fiduciary Net
Position as a
percentage of the
Total Pension
Liability
6/30/2014 0.102% 2,530,753 $ 1,829,632 $ 138.32% 77.53%6/30/2015 0.074% 2,515,772 1,882,894 133.61% 82.58%6/30/2016 0.081% 2,904,210 1,948,280 149.07% 81.00%6/30/2017 0.085% 3,474,126 2,006,275 173.16% 80.10%6/30/2018 0.001% 70,807 2,191,491 3.23% 99.62%6/30/2019 0.005% 506,204 2,310,926 21.90% 97.46%6/30/2020 0.007% 793,186 2,342,734 33.86% 96.23%6/30/2021 0.003% 183,382 2,239,339 8.19% 99.48% * Measurement date 6/30/2014 (fiscal year 2015) was the first year of implementation. Additional years will be presented as information becomes available. 1 Proportion of the net pension liability represents the plan's proportion of PERF C, which includes both the Miscellaneous and Safety Risk Pools excluding the 1959 Survivors Risk Pool.

City of Twentynine Palms
Required Supplementary Information Schedule of Plan Contributions Last 10 Years* -68-
Fiscal Year
Actuarially
Determined
Contribution
Contributions in Relation
to the Actuarially
Determined Contribution
Contribution
Deficiency
(Excess) Covered Payroll
Contributions as a
Percentage of
Covered Payroll
6/30/2015 $ (1,327,005) 327,005 $ (1,000,000) $ 1,882,894 $ 17.37%6/30/2016 (278,084) 278,084 - 1,948,280 14.27%6/30/2017 (302,837) 302,837 - 2,006,275 15.09%6/30/2018 (3,434,678) 331,853 (3,102,825) 2,191,491 15.14%6/30/2019 (388,590) 388,590 - 2,310,926 16.82%6/30/2020 (317,991) 317,991 - 2,342,734 13.57%6/30/2021 (262,161) 262,161 - 2,239,339 11.71%6/30/2022 (311,225) 311,225 - 2,533,623 12.28% * Measurement date 6/30/2014 (fiscal year 2015) was the first year of implementation. Additional years will be presented as information becomes available.

Notes to Schedule:Changes in Benefit Terms: There were no changes to benefit terms that applied to all members of the Public Agency Pool. Additionally, the figuresabove do not include any liability impact that may have resulted from Golden Handshakes that occurred after the June 30, 2020 valuation date, unless the liability impact is deemed to be material to the Public Agency Pool.Changes in Assumptions: There were no assumption changes for 2021. For 2020, the Plan adopted a new amortization policy effective with the 2019actuarial valuation. The new amortization policy shortens the period over which actuarial gains and losses are amortized from 30 years to 20 years withthe payments computed as a level dollar amount. In addition, the new policy does not utilize a five-year ramp-up and ramp-down on UAL basesattributable to assumption changes and non-investment gains/losses. The new policy also does not utilize a five-year ramp-down on investmentgains/losses. These changes apply only to new UAL bases established on or after June 30, 2019. There were no changes in assumptions in 2019. In2018, demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and Review of Actuarial AssumptionsDecember 2017. There were no changes in the discount rate in 2019. In 2017, the accounting discount rate was reduced from 7.65 percent to 7.15percent. In 2016, there were no changes in the discount rate. In 2015, amounts reported reflect an adjustment of the discount rate from 7.5 percent (netof administrative expense) to 7.65 percent (without a reduction for pension plan administrative expense). In 2014, amounts reported were based on th e

7.5 percent discount rate.

City of Twentynine Palms
Required Supplementary Information Schedule of Changes in the Net OPEB Liability and Related Ratios Last Ten Years* -69-
2017 2018 2020 (1) 2021 2022
Total OPEB LiabilityService Cost $ 326,274 313,725 $ 57,138 $ 58,852 $ 47,520 $ Interest on the Total OPEB Liability 178,572 162,816 237,641 132,377 138,014Adjustments - - 190,379 - -Actual and expected experience difference - - 12,104 49,018 (2,215)Changes in assumptions (1,142,700) - (1,879,505) (65,346) 104,420Benefit payments (92,484) (72,988) (145,291) (150,740) (181,613)Net change in Total OPEB Liability (730,338) 403,553 (1,527,534) 24,161 106,126Total OPEB Liability - beginning 4,510,093 4,106,540 3,779,755 2,252,221 2,276,382Total OPEB Liability - ending (a) 3,779,755 4,510,093 2,252,221 2,276,382 2,382,508Plan Fiduciary Net PositionContribution - employer 217,484 197,988 270,291 150,740 67,584Net investment income 96,935 96,920 120,137 297,985 (250,791)Adjustments - - 250,431 - -Differences between projected and actual investments - - (8,018) 130,475 -Benefit payments (92,484) (72,988) (145,291) (150,740) (181,613)Investment expense - - (756) - - Administrative expense (1,406) (1,189) (1,034) (2,040) (8,068)Net change in Plan Fiduciary Net Position 220,529 220,731 485,760 426,420 (372,888)Plan Fiduciary Net Position - beginning 1,469,316 1,248,585 1,689,845 2,175,605 2,602,025Plan Fiduciary Net Position - ending (b) 1,689,845 1,469,316 2,175,605 2,602,025 2,229,137Net OPEB Liability (Asset) - ending (a) - (b) $ 2,089,910 3,040,777 $ 76,616 $ (325,643) $ 153,371 $ Plan fiduciary net position as a percentage of the total OPEB liability 32.58% 44.71% 96.60% 87.49% 93.56%Covered-employee payroll $ 2,191,491 2,006,275 $ 2,342,733 $ 2,239,339 $ 2,533,623 $ Net OPEB liability (asset) as a percentage of covered-employee payroll 151.56% 95.36% 3.27% -14.54% 6.05% Notes to Schedule:Contributions are fixed and not based on a measure of pay, therefore covered-employee payroll is used in the schedule. (1) This reconciliation covers the one-year period from the June 30, 2019 reporting date to the June 30, 2020 reporting date. This was a one-time change concurrent with the change in actuarial firms from one reporting period to the next. As a result of this change, the plan's measurement period will henceforth coincide with its reporting period. * Measurement date 6/30/2017 (fiscal year 2018) was the first year of implementation. Additional years will be presented as information becomes available.

Measurement Date

City of Twentynine Palms
Required Supplementary Information Schedule of OPEB Contributions Last Ten Years* -70-
2017 2018 2019 2020 2021 2022
Statutorily Required Contributions (SRC) 197,988 $ 217,484 $ 217,484 $ 270,291 $ 150,740 $ 67,584 $ Contributions in relation to the SRC (197,988) (217,484) (217,484) (270,291) (150,740) (67,584) Contribution deficiency/(excess) - $ - $ - $ - $ - $ - $ Covered-employee payroll 2,006,275 $ 2,191,491 $ 2,310,926 $ 2,342,733 $ 2,239,339 $ 2,533,623 $ Contribution as a percentage of covered-employee payroll 9.87% 9.92% 9.41% 11.54% 6.73% 2.67%Notes to schedule:Changes in assumptions: NoneMethods and assumptions used to determine contributions:Valuation Date: June 30, 2021Actuarial Cost MethodAsset Valuation Method5 Year Assets SmoothingSalary Increases

2.75%Investment Rate of Return5.75%Retirement Age
The retirement assumptions are based on the 2017 CalPERS 2.0%@62 and 2.5%@55 Rates for Miscellaneous Employees table created by CalPERS.

Mortalit
y
The mortality assumptions are based on the 2017 CalPERS Retiree Mortality for All Employees table created by CalPERS * Measurement date 6/30/2017 (fiscal year 2018) was the first year of implementation. Additional years will be presented as information becomes available.

Entry Age Normal
Fiscal Year

City of Twentynine Palms
Notes to Required Supplementary Information
For the year ended June 30, 2022
-71-
Note 1: Budgetary data
Revenues and expenditures accounted for in the governmental funds are controlled by a formal integrated budgetary accounting system in accordance with various legal requirements which govern the City’s operations.

Each year, the City Council adopts a budget, which provides for the general operations of the City.

Budgets have been adopted on a basis consistent with accounting principles generally accepted in the United States of America (GAAP) for nearly all governmental funds. The City Manager is required to prepare and submit to the City Council the annual budget of the City and administer it after adoption.

The legal level of budgetary control is the department level. Once the budget has been adopted, changes can be made as follows: 1) department heads have the authority to shift expenditures between line items within their departments and 2) the City Manager has the authority to reduce, augment or realign the budget of each fund or to transfer revenues and expenditures for the purpose of maintaining a balanced budget. Budgeted amounts are as originally adopted and as further amended by City Council, on a basis consistent with accounting principles generally accepted in the United States of America (GAAP).

Note 2: Excess of Appropriations
The following funds had total expenditures in excess of total appropriations:

Total Final Budgeted
Expenditures
Total Actual
Expenditures
Excess Of
Expenditures Over
Budgeted Amounts
Major fund:

CDBG 190,054 $ 661,165 $ (471,111) $
City Bond Proceeds 3,518,787 3,658,602 (139,815)
Non-major funds:

Traffic Safety 17,000 17,947 (947)
Article 8 159,955 195,917 (35,962)

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OTHER SUPPLEMENTARY INFORMATION

City of Twentynine Palms
Description of Funds
‐72-
Special revenue funds:

Special revenue funds are used to account for special revenues and the related expenditures, which are legally required to be kept in a separate fund.

Traffic Safety Fund - this fund accounts for the portion of traffic fines allocated to the City. Periodically, transfers are made to the General Fund to be used for safety-related programs.

Gas Tax - this fund accounts for monies received from the state that are earmarked for street repairs.

Fire Facilities Impact Fee Fund - this fund accounts for development fees charged by the City to be used for the construction/expansion of offsite capital improvements to fire facilities. The City did not adopt a budget for this fund in 2022.

Lighting and Landscape A.D. Fund - this fund accounts for funds received for the maintenance of the perimeter landscaping from all houses in a new subdivision.

Public Access Programming Fund - this fund accounts for 1% of the Fee Base per the agreement from Charter Communication to provide public access programming.

Recycling Fund - this fund accounts for funds received for the recycling, waste management, and abatement programs.

Measure I 2011 Fund - this fund was created in fiscal year 2010-2011 to account for the City’s portion of funds designated for various transportation and street repair needs.

Article 8 Fund - this fund accounts for the City’s portion of funds designated for various transportation and street repair needs. Starting in FY 2021-22, the City will no longer receive Article 8 funding.

Traffic Relief Fund - this fund accounts for the City’s portion of funds designated for various transportation and street repair needs. The City did not adopt a budget for this fund in 2022.

Business Tourism Fund - this fund accounts for the City’s portion of funds designated for marketing the City as a tourism destination.

SB1 - Rehab Road Maintenance - this fund accounts for monies received from the state that are earmarked for street repairs.

City of Twentynine Palms
Description of Funds (continued)
‐73-
Capital Project Funds:

Capital project funds are used to account for the improvements undertaken by the City, funded by loans from other funds of the City or bond proceeds.

Curb, Gutter, & Sidewalks Impact Fee Fund – this fund accounts for the collection of impact fees related to the construction of curbs, gutters and sidewalks.

Streets Fund – this fund accounts for streets projects funded by Major Local Highway Funds received from SBCTA, Cal-Trans, or other State Funds.

City of Twentynine Palms
Combining Balance Sheet
Nonmajor Funds
June 30, 2022
‐74-
Traffic Fire Facilities Lighting and
Safety Gas Tax Impact Fee Landscape A.D.

Assets
Cash and investments - $ 318,758 $ 1,924 $ 93,550 $
Receivables:

Intergovernmental 772 51,813 - -
Taxes - - - -
Interest - 560 - 173
Grants - - - -
Other - - - 147
Total assets 772 $ 371,131 $ 1,924 $ 93,870 $
Liabilities and fund balances
Liabilities:
accrued liabilities 1,757 $ 38,347 $ - $ 208 $
- - 1,924 -
Due to other funds 11,537 - - -
Total liabilities 13,294 38,347 1,924 208
Deferred inflows of resources:

Unavailable revenue - - - -
Total deferred inflows of resources - - - -
Fund balances:

Restricted for:

Public works - 332,784 - 93,662
Health and sanitation - - - -
Economic development - - - -
Community development - - - -
Assigned - - - -
Unassigned (12,522) - - -
Total fund balances (deficit) (12,522) 332,784 - 93,662 Total liabilities and fund balances 772 $ 371,131 $ 1,924 $ 93,870 $ Accounts payable and
Special Revenue
Retentions payable

(Continued)
‐75-
Public Access Measure I
Programming Recycling 2011 Article 8
$ 255,425 106,781 $ 1,217,083 $ 198,337 $
56,883 120,223 - -
- - - -
193 367 2,126 381
- - - -
6,003 - - -
$ 312,675 112,977 $ 1,339,432 198,718 $
$ 45,886 1,500 $ - 9,113 $
- - 11,260 -
- - - -
45,886 1,500 11,260 9,113
43,262 - - -
43,262 - - -
- - 1,328,172 189,605
223,527 - - -
- - - -
111,477 - - -
- - - -
- - - -
223,527 111,477 1,328,172 189,605
$ 312,675 112,977 $ 1,339,432 198,718 $
Special Revenue

City of Twentynine Palms
Combining Balance Sheet
Nonmajor Funds
June 30, 2022
‐76-
Business
SB 1 - Road
Maintenance
Traffic Relief Tourism Rehab
Assets
Cash and investments 5,827 $ 418,637 $ 94,605 $
Receivables:

Intergovernmental - - 95,652
Taxes - - -
Interest 11 824 120
Grants - - -
Other - 88,884 -
Total assets 5,838 $ 508,345 $ 190,377 $
Liabilities and fund balances
Liabilities:
accrued liabilities - $ 3,754 $ - $
- - 56,317
Due to other funds - - -
Total liabilities - 3,754 56,317
Deferred inflows of resources:

Unavailable revenue - - -
Total deferred inflows of resources - - -
Fund balances:

Restricted for:

Public works 5,838 - 134,060
Health and sanitation - - -
Economic development - 504,591 -
Community development - -
Assigned - - -
Unassigned - - -
Total fund balances (deficit) 5,838 504,591 134,060
Total liabilities and fund balances 5,838 $ 508,345 $ 190,377 $ Special Revenue
Retentions payable
Accounts payable and

‐77-
Curb, Gutter &
Sidewalks
Impact Fee Streets
$ - 764,173 $ 3,475,100 $
- - 325,343
- - -
1,376 - 6,131
137,067 - 137,067
- - 95,034
$ 137,067 765,549 $ 4,038,675 $
$ 44,960 4,590 $ 150,115 $
4,442 - 73,943
87,664 99,201 -
137,066 4,590 323,259
4,442 - 47,704
4,442 - 47,704
- - 2,084,121
- - 223,527
- - 504,591
- - 111,477
- 760,959 760,959
(4,441) - (16,963)
(4,441) 760,959 3,667,712
$ 137,067 765,549 $ 4,038,675 $
Total Nonmajor
Governmental
Funds
Capital Projects

City of Twentynine Palms
Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Funds
For the year ended June 30, 2022
‐78-
Traffic Fire Facilities Lighting and
Safety Gas Tax Impact Fee Landscape A.D.

Revenues
Taxes - $ - $ - $ - $
Licenses, permits and fees - - - -
Intergovernmental - 712,707 - -
Charges for services - - - 19,823
Fines, forfeitures and penalties 3,626 - - -
Use of money and property - (3,224) - (995)
Other - - - -
Total revenues 3,626 709,483 - 18,828
Expenditures
Current:

General government - - - -
Public works 17,947 599,063 - 26,726
Community development - - - -
Economic development - - - -
Health and sanitation - - - -
Capital outlay - - 21,925 -
Total expenditures 17,947 599,063 21,925 26,726
Excess (deficiency) of revenues
over (under) expenditures (14,321) 110,420 (21,925) (7,898) Other financing sources (uses)
Transfers in 15,000 - - -
Transfers out - (10,000) - -
Total other financing sources (uses) 15,000 (10,000) - - Net change in fund balances 679 100,420 (21,925) (7,898) Fund balances (deficit), beginning of year (13,201) 232,364 21,925 101,560 Fund balances (deficit), end of year (12,522) $ 332,784 $ - $ 93,662 $ Special Revenue

(Continued)
‐79-
Public Access Measure I
Programming Recycling 2011 Article 8
$ - - $ - $ - $
- - - -
69,597 655,067 - -
24,313 - - -
- - - -
(2,137) (1,084) (11,890) (1,935)
26,830 - - -
94,290 23,229 643,177 (1,935)
26,024 - - -
- - 184,247 195,917
- - - -
- - - -
55,221 - - -
- - 225,195 -
55,221 26,024 409,442 195,917
39,069 (2,795) 233,735 (197,852)
- - -
(10,000) - -
- - (10,000) -
39,069 (2,795) 223,735 (197,852)
184,458 114,272 1,104,437 387,457
$ 223,527 111,477 $ 1,328,172 $ 189,605 $
Special Revenue

City of Twentynine Palms
Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Funds
For the year ended June 30, 2022
-80-
Business
SB 1 - Road
Maintenance
Traffic Relief Tourism Rehab
Revenues
Taxes - $ - $ 590,628 $
Licenses, permits and fees - 354,475 -
Intergovernmental - - -
Charges for services - - -
Fines, forfeitures and penalties - - -
Use of money and property (59) (4,887) (785)
Other - 2,450 -
Total revenues (59) 352,038 589,843
Expenditures
Current:

General government - - -
Public works - - -
Community development - - -
Economic development - 223,036 -
Health and sanitation - - -
Capital outlay - - 515,926
Total expenditures - 223,036 515,926
Excess (deficiency) of revenues
over (under) expenditures (59) 129,002 73,917
Other financing sources (uses)
Transfers in - - -
Transfers out - - -
Total other financing sources (uses) - - -
Net change in fund balances (59) 129,002 73,917
Fund balances (deficit), beginning of year 5,897 375,589 60,143 Fund balances (deficit), end of year 5,838 $ 504,591 $ 134,060 $ Special Revenue

-81-
Curb, Gutter &
Sidewalks
Impact Fee Streets
$ - - $ 590,628 $
119,075 - 473,550
211,374 1,648,745 -
- - 44,136
- - 3,626
- (7,898) (34,894)
- - 29,280
211,374 111,177 2,755,071
- - 26,024
- - 1,023,900
- - -
- - 223,036
- - 55,221
170,917 958,046 24,083
170,917 24,083 2,286,227
40,457 87,094 468,844
- - 15,000
- - (20,000)
- - (5,000)
40,457 87,094 463,844
(44,898) 673,865 3,203,868
$ (4,441) 760,959 $ 3,667,712 $
Total Nonmajor
Governmental
Funds
Capital Projects

City of Twentynine Palms
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Traffic Safety Special Revenue Fund
For the year ended June 30, 2022
-82-
Actual Variance with
Original Final amounts final budget
Revenues
Fines, forfeitures and penalties 2,000 $ 2,000 $ 3,626 $ 1,626 $ Total revenues 2,000 2,000 3,626 1,626
Expenditures
Current:

Public works 17,000 17,000 17,947 (947)
Total expenditures 17,000 17,000 17,947 (947)
Excess (deficiency) of revenues
over (under) expenditures (15,000) (15,000) (14,321) 679 Other financing sources
Transfers in 15,000 15,000 15,000 -
Total other financing sources 15,000 15,000 15,000 -
Net change in fund balance - $ - $ 679 679 $
Fund balance, (deficit) beginning of year (13,201)
Fund balance, (deficit) end of year (12,522) $
Budgeted amounts

City of Twentynine Palms
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Gas Tax Special Revenue Fund
For the year ended June 30, 2022
-83-
Actual Variance with
Original Final amounts final budget
Revenues
Intergovernmental 712,317 $ 712,317 $ 712,707 $ 390 $
Use of money and property - - (3,224) (3,224)
Total revenues 712,317 712,317 709,483 (2,834)
Expenditures
Current:

Public works 667,331 667,331 599,063 68,268
Total expenditures 667,331 667,331 599,063 68,268
Excess (deficiency) of revenues
over (under) expenditures 44,986 44,986 110,420 65,434
Other financing sources
Transfers out (10,000) (10,000) (10,000) -
Total other financing sources (10,000) (10,000) (10,000) - Net change in fund balance 34,986 $ 34,986 $ 100,420 65,434 $ Fund balance, beginning of year 232,364
Fund balance, end of year 332,784 $
Budgeted amounts
.

City of Twentynine Palms
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Lighting and Landscape A.D. Special Revenue Fund
For the year ended June 30, 2022
-84-
Actual Variance with
Original Final amounts final budget
Revenues
Charges for services 20,902 $ 20,902 $ 19,823 $ (1,079) $ Use of money and property - - (995) (995)
Total revenues 20,902 20,902 18,828 (2,074)
Expenditures
Current:

Public works 31,470 31,470 26,726 4,744
Total expenditures 31,470 31,470 26,726 4,744
Net change in fund balance (10,568) $ (10,568) $ (7,898) 2,670 $ Fund balance, beginning of year 101,560
Fund balance, end of year 93,662 $
Budgeted amounts
.

City of Twentynine Palms
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Public Access Programming Special Revenue Fund
For the year ended June 30, 2022
-85-
Actual Variance with
Original Final amounts final budget
Revenues
Charges for services 24,000 $ 24,000 $ 24,313 $ 313 $
Use of money and property - - (1,084) (1,084)
Total revenues 24,000 24,000 23,229 (771)
Expenditures
Current:

General government 26,561 26,561 26,024 537
Total expenditures 26,561 26,561 26,024 537
Net change in fund balance (2,561) $ (2,561) $ (2,795) (234) $ Fund balance, beginning of year 114,272
Fund balance, end of year 111,477 $
Budgeted amounts

City of Twentynine Palms
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Recycling Special Revenue Fund
For the year ended June 30, 2022
-86-
Actual Variance with
Original Final amounts final budget
Revenues
Intergovernmental 49,100 $ 49,100 $ 69,597 $ 20,497 $
Use of money and property 700 700 (2,137) (2,837)
Other - - 26,830 26,830
Total revenues 49,800 49,800 94,290 44,490
Expenditures
Current:

Health and sanitation 105,336 105,336 55,221 50,115
Total expenditures 105,336 105,336 55,221 50,115
Net change in fund balance (55,536) $ (55,536) $ 39,069 94,605 $ Fund balance, beginning of year 184,458
Fund balance, end of year 223,527 $
Budgeted amounts

City of Twentynine Palms
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Measure I 2011 Special Revenue Fund
For the year ended June 30, 2022
-87-
Actual Variance with
Original Final amounts final budget
Revenues
Intergovernmental 555,959 $ 555,959 $ 655,067 $ 99,108 $ Use of money and property - - (11,890) (11,890)
Total revenues 555,959 555,959 643,177 87,218
Expenditures
Current
Public works 1,060,969 1,060,969 184,247 876,722
Capital outlay 472,000 472,000 225,195 246,805
Total expenditures 1,532,969 1,532,969 409,442 1,123,527 Excess (deficiency) of revenues
(977,010) (977,010) 233,735 1,210,745
Other financing sources (uses)
Transfers out (10,000) (10,000) (10,000) -
Total other financing sources (uses) (10,000) (10,000) (10,000) - Net change in fund balance (987,010) $ (987,010) $ 223,735 1,210,745 $ Fund balance, beginning of year 1,104,437
Fund balance, end of year 1,328,172 $
over (under) expenditures
Budgeted amounts

City of Twentynine Palms
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Article 8 Special Revenue Fund
For the year ended June 30, 2022
-88-
Actual Variance with
Original Final amounts final budget
Revenues
Use of money and property - $ - $ (1,935) $ (1,935) $
Total revenues - - (1,935) (1,935)
Expenditures
Current:

Public works 159,955 159,955 195,917 (35,962)
Total expenditures 159,955 159,955 195,917 (35,962)
Net change in fund balance (159,955) $ (159,955) $ (197,852) (37,897) $ Fund balance, beginning of year 387,457
Fund balance, end of year 189,605 $
Budgeted amounts

City of Twentynine Palms
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Business Tourism Special Revenue Fund
For the year ended June 30, 2022
-89-
Actual Variance with
Original Final amounts final budget
Revenues
Licenses, permits and fees 268,500 $ 268,500 $ 354,475 $ 85,975 $ Use of money and property 900 900 (4,887) (5,787)
Other 500 500 2,450 1,950
Total revenues 269,900 269,900 352,038 82,138
Expenditures
Current:

Economic development 269,421 269,421 223,036 46,385
Total expenditures 269,421 269,421 223,036 46,385
Net change in fund balance 479 $ 479 $ 129,002 128,523 $ Fund balance, beginning of year 375,589
Fund balance, end of year 504,591 $
Budgeted amounts

City of Twentynine Palms
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual SB 1 - Road Maintenance Rehab Special Revenue Fund
For the year ended June 30, 2022
-90-
Actual Variance with
Original Final amounts final budget
Revenues
Taxes 562,055 $ 562,055 $ 590,628 $ 28,573 $
Use of money and property - - (785) (785)
Total revenues 562,055 562,055 589,843 27,788
Expenditures
Capital outlay 562,055 562,055 515,926 46,129
Total expenditures 562,055 562,055 515,926 46,129
Net change in fund balance - $ - $ 73,917 73,917 $
Fund balance, beginning of year 60,143
Fund balance, end of year 134,060 $
Budgeted amounts

City of Twentynine Palms
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Curb, Gutter, & Sidewalk Impact Fee Capital Projects Fund For the year ended June 30, 2022
-91-
Actual Variance with
Original Final amounts final budget
Revenues
Licenses, permits and fees 90,000 $ 90,000 $ 119,075 $ 29,075 $ Use of money and property - - (7,898) (7,898)
Total revenues 90,000 90,000 111,177 21,177
Expenditures
Capital outlay 259,600 259,600 24,083 235,517
Total expenditures 259,600 259,600 24,083 235,517
Net change in fund balance (169,600) $ (169,600) $ 87,094 256,694 $ Fund balance, beginning of year 673,865
Fund balance, end of year 760,959 $
Budgeted amounts

City of Twentynine Palms
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Streets Capital Projects Fund
For the year ended June 30, 2022
-92-
Actual Variance with
Original Final amounts final budget
Revenues
Intergovernmental 6,164,458 $ 6,164,458 $ 211,374 $ (5,953,084) $ Total revenues 6,164,458 6,164,458 211,374 (5,953,084)
Expenditures
Capital outlay 6,164,458 6,164,458 170,917 5,993,541
Total expenditures 6,164,458 6,164,458 170,917 5,993,541 Net change in fund balance - $ - $ 40,457 40,457 $
Fund balance (deficit), beginning of year (44,898)
Fund balance (deficit), end of year (4,441) $
Budgeted amounts

City of Twentynine Palms
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Capital Improvements Capital Projects Fund – Major Fund For the year ended June 30, 2022
-93-
Actual Variance with
Original Final amounts final budget
Revenues
Intergovernmental 3,567,783 $ 3,567,783 $ 2,266,605 $ (1,301,178) $ Other - - 26,450 26,450
Total revenues 3,567,783 3,567,783 2,293,055 (1,274,728) Expenditures
Capital outlay 10,428,986 10,428,986 3,830,609 6,598,377 Total expenditures 10,428,986 10,428,986 3,830,609 6,598,377 Excess (deficiency) of revenues
(6,861,203) (6,861,203) (1,537,554) 5,323,649
Other financing sources (uses)
Transfer in 4,280,686 4,280,686 4,268,933 (11,753)
Transfer out (177,925) (177,925) (177,925) -
Total other financing sources (uses) 4,102,761 4,102,761 4,091,008 (11,753) Net change in fund balance (2,758,442) $ (2,758,442) $ 2,553,454 5,311,896 $ Fund balance, beginning of year, as restated 2,111,223
Fund balance, end of year 4,664,677 $
over (under) expenditures
Budgeted amounts

City of Twentynine Palms
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual City Bonds Proceeds Capital Projects Fund – Major Fund
For the year ended June 30, 2022
-94-
Actual Variance with
Original Final amounts final budget
Revenues
Use of money and property - $ - $ 1,769 $ 1,769 $
Total revenues - - 1,769 1,769
Expenditures
General government - - 9,066 (9,066)
Capital outlay 3,518,787 3,518,787 3,649,536 (130,749)
Total expenditures 3,518,787 3,518,787 3,658,602 (139,815) Excess (deficiency) of revenues
(3,518,787) (3,518,787) (3,656,833) (138,046)
Other financing sources (uses)
Transfer out (364,100) (364,100) (17,422) (346,678)
Total other financing sources (uses) (364,100) (364,100) (17,422) (346,678) Net change in fund balance (3,882,887) $ (3,882,887) $ (3,674,255) 208,632 $ Fund balance, beginning of year, as restated 4,910,751
Fund balance, end of year 1,236,496 $
over (under) expenditures
Budgeted amounts

STATISTICAL SECTION

This page left blank intentionally.

City of Twentynine Palms

Statistical Section
For the year ended June 30, 2022
This part of the City’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City’s overall financial health.

PAGE
Financial trend information:

Intended to assist users in understanding and assessing how a government’s financial position has changed over time. 95
Revenue capacity information:

Intended to assist users in understanding and assessing the factors affecting a government’s ability to generate its own revenue.

Debt capacity information:

Intended to assist users in understanding and assessing a government’s debt burden and its ability to issue additional debt.

Demographic and economic information:

Intended to assist users in understanding the socioeconomic environment within which a government operates and to provide information that facilitates comparison of financial statement information over time and among governments.

Operating information:

Intended to provide information about a government’s operations and resources in order to assist readers in using financial information to understand and assess a government’s economic condition.

Statistical section memo:

This section includes miscellaneous information regarding the statistical information. 106
111
114
115
119

City of Twentynine Palms
Net Position by Component
Last Ten Fiscal Years
(accrual basis of accounting)
-95-
2013 2014 2015 2016 2017
Governmental activities:

Net investment in
capital assets 23,718,606 $ 25,086,454 $ 24,982,095 $ 25,289,476 $ 25,570,868 $ Restricted for:

Streets, highways, etc. 4,504,002 5,056,505 4,391,078 2,879,535 1,737,290 Community development 11,075,995 10,961,203 10,939,744 10,475,971 9,159,551 Economic development - - - - -
Public safety 369,571 591,580 573,199 111,737 383,926
Health and sanitation - - - - -
Unrestricted 10,511,963 9,511,650 7,419,328 8,451,620 8,984,900 Total governmental activities
net position 50,180,137 $ 51,207,392 $ 48,305,444 $ 47,208,339 $ 45,836,535 $ Business-type activities:

Net investment in
capital assets - $ - $ - $ - $ - $
Unrestricted - - - - -
Total business-type activities:
net position - $ - $ - $ - $ - $
Primary Government:

Net investment in
capital assets 23,718,606 $ 25,086,454 $ 24,982,095 $ 25,289,476 $ 25,570,868 $ Restricted for:

Streets, highways, etc. 4,504,002 5,056,505 4,391,078 2,879,535 1,737,290 Community development 11,075,995 10,961,203 10,939,744 10,475,971 9,159,551 Economic development - - - - -
Public safety 369,571 591,580 573,199 111,737 383,926
Health and sanitation - - - - -
Unrestricted 10,511,963 9,511,650 7,419,328 8,451,620 8,984,900 Total primary government
net position 50,180,137 $ 51,207,392 $ 48,305,444 $ 47,208,339 $ 45,836,535 $ Fiscal Year
Source: City of Twentynine Palms, Finance Department

-96-
2018 2019 2020 2021 2022
Governmental activities:

Net investment in
capital assets 25,182,407 $ 24,577,166 $ 25,593,799 $ 31,856,477 $ 38,345,205 $ Restricted for:

Streets, highways, etc. 1,348,879 3,295,513 4,866,518 4,090,554 2,084,121 Community development 7,796,791 7,355,824 7,240,136 5,168,824 1,347,973 Economic development - - - - 504,591
Public safety 287,250 59,140 59,704 21,925 -
Health and sanitation - - - - 223,527
Unrestricted 8,104,479 7,191,979 5,801,220 5,638,921 17,339,463 Total governmental activities
net position 42,719,806 $ 42,479,622 $ 43,561,377 $ 46,776,701 $ 59,844,880 $ Business-type activities:

Net investment in
capital assets - $ - $ - $ 923,579 $ 1,478,017 $
Unrestricted - - 603,592 (194,125) 93,245
Total business-type activities:
net position - $ - $ 603,592 $ 729,454 $ 1,571,262 $
Primary Government:

Net investment in
capital assets 25,182,407 $ 24,577,166 $ 25,593,799 $ 32,780,056 $ 39,823,222 $ Restricted for:

Streets, highways, etc. 1,348,879 3,295,513 4,866,518 4,090,554 2,084,121 Community development 7,796,791 7,355,824 7,240,136 5,168,824 1,347,973 Economic development - - - - 504,591
Public safety 287,250 59,140 59,704 21,925 -
Health and sanitation - - - - 223,527
Unrestricted 8,104,479 7,191,979 6,404,812 5,444,796 17,432,708 Total primary government
net position 42,719,806 $ 42,479,622 $ 44,164,969 $ 47,506,155 $ 61,416,142 $ Fiscal Year

City of Twentynine Palms
Changes in Net Position
Last Ten Fiscal Years
(accrual basis of accounting)
-97-
2013 2014 2015 2016 2017
Expenses
Governmental activities:

General government 1,872,424 $ 1,765,044 $ 2,708,000 $ 1,609,010 $ 2,162,115 $ Public safety 3,791,617 4,115,618 3,862,568 4,104,813 4,864,815 Public works 2,117,272 1,433,752 2,076,929 2,583,689 3,261,813 Community development 615,268 626,332 370,244 607,888 598,898 Economic development - - - - -
Health and sanitation 123,105 67,126 72,751 48,990 75,989 Community services 1,469,353 1,622,653 1,744,000 1,905,921 2,118,064 Interest on long-term debt 418 76 - - -
Business-type activities:

Sewer - - - - -
Total expenses 9,989,457 9,630,601 10,834,492 10,860,311 13,081,694 Program revenues
Governmental activities:

Charges for services:

General government 64,609 68,120 58,182 75,375 130,574
Public safety 162,511 154,636 143,800 138,401 116,582
Public works 598,042 263,839 71,949 96,296 571,605
Community development 183,140 155,301 144,106 160,860 422,876 Health and sanitation 8,150 6,299 6,596 5,935 6,113
Community services 179,332 205,037 214,706 246,714 279,490 Operating grants and
contributions 1,096,154 1,081,447 943,002 748,743 1,046,376 Capital grants and
contributions 2,062,122 866,466 1,292,770 1,132,585 1,067,289 Total governmental activities program revenues 4,354,060 2,801,145 2,875,111 2,604,909 3,640,905 Business-type activities:

Sewer:

Charges for services - - - - -
Operating grants and
contributions - - - - -
Capital grants and
contributions - - - - -
Total business-type activities program revenues - - - - - Total primary government program revenues 4,354,060 2,801,145 2,875,111 2,604,909 3,640,905 Net revenue (expense):

Governmental activities (5,635,397) (6,829,456) (7,959,381) (8,255,402) (9,440,789) Business-type activities - - - - -
Total primary government net (expense)/revenues (6,829,456) (5,635,397) (7,959,381) (8,255,402) (9,440,789) Fiscal Year
Source: City of Twentynine Palms, Finance Department

(continued)
-98-
2018 2019 2020 2021 2022
Expenses
Governmental activities:

General government 4,930,008 $ 2,915,204 $ 2,602,747 $ 2,815,709 $ 1,811,690 $ Public safety 4,345,660 5,653,861 6,221,681 6,008,474 4,026,069 Public works 2,904,357 2,701,125 2,465,187 1,879,159 1,231,982 Community development 564,289 906,338 1,031,762 1,144,676 4,259,566 Economic development - - - - 223,036
Health and sanitation 52,207 59,863 79,151 124,465 41,618 Community services 1,049,906 1,349,768 1,464,616 593,713 696,557 Interest on long-term debt - - - 40,625 40,939
Business-type activities:

Sewer - - - 83,356 262,334
Total expenses 13,846,427 13,586,159 13,865,144 12,690,177 12,593,791 Program revenues
Governmental activities:

Charges for services:

General government 135,646 322,903 283,628 172,682 170,079 Public safety 123,217 127,397 113,590 90,944 118,975
Public works 59,783 57,609 73,857 169,822 155,458
Community development 180,919 189,569 339,357 598,084 883,279 Health and sanitation 8,093 6,785 5,129 9,595 7,752
Community services 373,805 382,737 286,848 212,906 329,486 Operating grants and
contributions 1,304,672 1,423,950 1,515,075 2,791,174 5,474,903 Capital grants and
contributions 1,947,712 1,192,110 2,658,324 1,644,374 7,367,880 Total governmental activities program revenues 4,133,847 3,703,060 5,275,808 5,689,581 14,507,812 Business-type activities:

Sewer:

Charges for services - - - - 5,218
Operating grants and
contributions - - 603,592 - -
Capital grants and
contributions - - - 209,218 475,437
Total business-type activities program revenues - - 603,592 209,218 480,655 Total primary government program revenues 4,133,847 3,703,060 5,879,400 5,898,799 14,988,467 Net revenue (expense):

Governmental activities (9,712,580) (9,883,099) (8,589,336) (6,917,240) 2,176,355 Business-type activities - - 603,592 125,862 218,321
Total primary government net (expense)/revenues (9,883,099) (9,712,580) (7,985,744) (6,791,378) 2,394,676 Fiscal Year

City of Twentynine Palms
Changes in Net Position
Last Ten Fiscal Years
(accrual basis of accounting)
-99-
2013 2014 2015 2016 2017
General revenues and
other changes in net position
Governmental activities:

Taxes
Property tax, levied for
general purpose 2,409,379 $ 1,977,219 $ 2,046,167 $ 2,057,945 $ 2,085,053 $ Property tax, Redevelopment
Agency increment - - - - -
Sales and use taxes 885,187 834,747 860,948 902,439 1,156,390 Sales tax in lieu 309,217 296,087 264,288 204,050 -
Property tax in lieu 2,739,622 2,688,079 2,747,309 2,807,033 2,831,097 Franchise taxes 638,808 624,084 622,531 615,767 613,152 Transient occupancy tax 892,550 816,017 878,195 943,747 1,110,536 Real property transfer taxes 20,035 22,161 25,404 33,287 30,427 Motor vehicle in lieu tax - - 12,635 10,428 11,711
Total taxes 7,894,798 7,258,394 7,457,477 7,574,696 7,838,366 Investment earnings 21,595 27,938 27,429 29,548 132,600 Other 61,998 83,360 193,340 127,653 98,019
Special item - - - (573,600) -
Extraordinary item - 440,453 - - -
Total governmental activities 7,978,391 7,810,145 7,678,246 7,158,297 8,068,985 Change in net position:

Governmental activities 2,342,994 980,689 (281,135) (1,097,105) (1,371,804) Business-type activities - - - - -
Total primary government 2,342,994 $ 980,689 $ (281,135) $ (1,097,105) $ (1,371,804) $ Fiscal Year
Source: City of Twentynine Palms, Finance Department

-100-
2018 2019 2020 2021 2022
General revenues and
other changes in net position
Governmental activities:

Taxes
Property tax, levied for
general purpose 2,188,281 $ 2,235,565 $ 2,363,787 $ 2,480,111 $ 2,578,043 $ Property tax, Redevelopment
Agency increment - - - - -
Sales and use taxes 1,156,390 1,156,390 1,226,377 1,445,428 1,586,033 Sales tax in lieu 97,927 246,094 - - -
Property tax in lieu 2,869,122 2,975,088 3,095,032 3,228,065 3,413,408 Franchise taxes 704,961 719,642 666,066 766,859 844,290 Transient occupancy tax 1,445,085 1,554,321 1,288,869 1,927,425 2,481,175 Real property transfer taxes 38,728 42,352 47,868 90,417 126,323 Motor vehicle in lieu tax 14,170 12,982 22,919 21,454 103,369 Total taxes 8,514,664 8,942,434 8,710,918 9,959,759 11,132,641 Investment earnings 29,613 223,370 234,897 40,917 (179,141) Other 127,784 477,111 129,549 131,888 145,565
Special item - - - - -
Extraordinary item - - - - -
Total governmental activities 8,672,061 9,642,915 9,075,364 10,132,564 11,099,065 Change in net position:

Governmental activities (1,040,519) (240,184) 486,328 3,215,324 13,275,420 Business-type activities - - 603,592 125,862 218,321
Total primary government (1,040,519) $ (240,184) $ 1,089,920 $ 3,341,186 $ 13,493,741 $ Fiscal Year

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City of Twentynine Palms
Governmental Activities - Tax Revenues by Source
Last Ten Fiscal Years
(accrual basis of accounting)
-101-
Property
Fiscal Transient Sales Sales tax Other
year Property occupancy Franchise and use in lieu in lieu taxes Total 2013 2,409,379 $ 892,550 $ 638,808 $ 885,187 $ 309,217 $ 2,739,622 $ 20,035 $ 7,894,798 $ 2014 1,977,219 816,017 624,084 834,747 296,087 2,688,079 22,161 7,258,394 2015 2,046,167 878,195 622,531 860,948 264,288 2,747,309 38,039 7,457,477 2016 2,057,945 943,747 615,767 902,439 204,050 2,807,033 43,715 7,574,696 2017 2,085,053 1,110,536 613,152 1,156,390 - 2,831,097 42,138 7,838,366 2018 2,188,281 1,445,085 704,961 1,254,317 97,927 2,869,122 52,898 8,612,591 2019 2,235,565 1,554,321 719,642 1,156,390 246,094 2,975,088 55,334 8,942,434 2020 2,363,787 1,288,869 666,066 1,226,377 - 3,095,032 70,787 8,710,918 2021 2,480,111 1,927,425 766,859 1,445,428 - 3,228,065 111,871 9,959,759 2022 2,578,043 2,481,175 844,290 1,586,033 - 3,413,408 229,692 11,132,641 Source: City of Twentynine Palms, Finance Department

City of Twentynine Palms
Fund Balances of Governmental Funds
Last Ten Fiscal Years
(modified accrual basis of accounting)
-102-
2013 2014 2015 2016 2017
General fund
Nonspendable - $ - $ 93,963 $ 93,963 $ 138,142 $
Restricted for:

Public safety 248,158 467,393 467,393 - 323,368
Public works - 1,366,558 1,366,558 - -
Assigned 25,000 50,000 50,000 80,000 -
Unassigned 10,486,525 9,287,164 8,837,625 10,750,067 11,305,480 $ 11,171,115 10,759,683 $ 10,721,576 $ 10,830,067 $ 11,766,990 $ All other governmental funds
Restricted for:

Public safety 121,413 124,187 105,806 111,737 60,558
Public works 4,504,002 3,689,947 3,024,520 2,879,535 1,200,717 Health and sanitation - - - - -
Economic development - - - - -
Community development 11,075,995 10,961,203 10,939,744 10,475,971 9,159,551 Assigned 354,709 376,918 338,899 339,312 1,739,983
Unassigned (115,160) - (84,722) (37,597) (355,494)
Total all other governmental funds 15,940,959 $ 15,152,255 $ 14,324,247 $ 13,768,958 $ 11,805,315 $ Fiscal Year
Source: City of Twentynine Palms, Finance Department

-103-
2018 2019 2020 2021 2022
General fund
Nonspendable 120,329 $ 184,401 $ 1,199,327 $ 1,848,527 $ 93,963 $ Restricted for:

Public safety 231,946 - - - -
Public works - - - - -
Assigned - 1,300,000 1,300,000 1,300,000 3,599,844
Unassigned 9,190,062 6,528,376 5,596,053 6,804,533 6,948,162 $ 8,012,777 9,542,337 $ 8,095,380 $ 9,953,060 $ 10,641,969 $ All other governmental funds
Restricted for:

Public safety 55,304 59,140 59,704 21,925 -
Public works 791,939 841,749 2,110,737 1,891,858 2,084,121 Health and sanitation - - - - 223,527
Economic development - - - - 504,591
Community development 7,796,791 7,355,824 7,240,136 5,168,824 1,347,973 Assigned 1,895,228 4,324,172 3,314,664 2,872,561 5,425,636 Unassigned 61,088 (117,934) (231,808) (2,348,723) (528,013) Total all other governmental funds 10,600,350 $ 12,462,951 $ 12,493,433 $ 7,606,445 $ 9,057,835 $ Fiscal Year

City of Twentynine Palms
Changes in Fund Balances of Governmental Funds
Last Ten Fiscal Years
(modified accrual basis of accounting)
-104-
2013 2014 2015 2016 2017
Revenues
Taxes 8,135,022 $ 7,259,023 $ 7,458,034 $ 7,575,288 $ 7,839,267 $ Licenses, permits and fees 230,192 202,197 188,755 206,678 234,946 Intergovernmental 2,896,353 1,922,219 2,189,528 1,869,087 2,339,955 Charges for services 895,027 578,935 390,507 459,100 1,021,910 Fines, forfeitures, and penalties 57,635 60,985 53,192 49,439 28,302 Use of money and property 48,076 50,880 47,345 43,625 122,221 Other 70,146 67,219 145,351 133,588 116,432
Total revenues 12,332,451 10,141,458 10,472,712 10,336,805 11,703,033 Expenditures
Current:

General government 1,847,552 1,566,836 2,570,015 1,442,203 1,857,763 Public safety 3,776,762 3,712,403 3,854,540 4,038,181 4,247,967 Public works 1,837,618 1,175,174 1,414,470 1,624,365 2,137,014 Community development 615,268 582,704 360,708 370,474 519,306 Economic development - - - - -
Health and sanitation 62,950 60,769 72,751 48,990 66,555 Community services 1,066,961 1,595,465 1,651,970 1,641,196 1,703,505 Debt service:

Principal retirement 14,817 6,247 - - -
Interest and fiscal charges 418 76 - - -
Capital outlay 2,052,039 1,892,966 1,786,427 1,618,194 2,298,463 Total expenditures 11,274,385 10,592,640 11,710,881 10,783,603 12,830,573 Excess of revenues
over (under) expenditures 1,058,066 (451,182) (1,238,169) (446,798) (1,127,540) Other financing sources (uses)
Contributions
from successor agency - 19,544 - - -
Issuance of debt/lease acquisition - - - - -
Transfers in 2,720,140 520,610 64,549 728,669 202,000
Transfers out (2,720,140) (520,610) (64,549) (728,669) (202,000) Proceeds from sale of
capital assets - 7,800 54,585 - 6,857
Total other financing sources (uses) - 27,344 54,585 - 6,857 Net change in fund balances 1,058,066 $ (423,838) $ (1,183,584) $ (446,798) $ (1,120,683) $ Debt service as a percentage of
non-capital expenditures 0.17% 0.07% 0.00% 0.00% 0.00%
Fiscal Year
Source: City of Twentynine Palms, Finance Department

-105-
2018 2019 2020 2021 2022
Revenues
Taxes 8,500,494 $ 9,425,427 $ 9,222,044 $ 10,508,177 $ 11,265,424 $ Licenses, permits and fees 256,673 262,507 430,948 803,988 1,465,591 Intergovernmental 3,129,917 2,198,744 3,761,678 3,863,183 11,744,430 Charges for services 574,146 570,966 420,078 348,021 517,656 Fines, forfeitures, and penalties 22,343 31,023 23,921 13,894 28,505 Use of money and property 141,749 364,827 347,953 48,273 (179,141) Other 180,586 207,865 87,218 186,034 145,857
Total revenues 12,805,908 13,061,359 14,293,840 15,771,570 24,988,322 Expenditures
Current:

General government 5,172,731 2,279,072 1,997,590 2,309,932 2,403,872 Public safety 4,446,864 4,534,322 4,803,036 4,999,233 5,342,058 Public works 2,971,995 2,166,267 1,903,083 1,563,517 1,634,676 Community development 577,433 726,871 796,503 952,405 1,121,463 Economic development - - - - 223,036
Health and sanitation 53,424 48,008 61,104 103,559 55,221 Community services 1,074,549 1,082,497 1,130,660 493,987 924,238 Debt service:

Principal retirement - - - 36,964 39,539
Interest and fiscal charges - - - 40,624 39,505
Capital outlay 1,938,530 2,695,212 4,172,514 8,290,657 10,955,905 Total expenditures 16,235,526 13,532,249 14,864,490 18,790,878 22,739,513 Excess of revenues
over (under) expenditures (3,429,618) (470,890) (570,650) (3,019,308) 2,248,809 Other financing sources (uses)
Contributions
from successor agency - - - - -
Issuance of debt/lease acquisition - 569,315 691,235 - 11,291 Transfers in 255,493 3,039,076 1,543,467 850,225 7,420,352 Transfers out (255,493) (3,089,076) (1,550,967) (860,225) (8,043,839) Proceeds from sale of
capital assets - 284,616 - - -
Total other financing sources (uses) - 803,931 683,735 (10,000) (612,196) Net change in fund balances (3,429,618) $ 333,041 $ 113,085 $ (3,029,308) $ 1,636,613 $ Debt service as a percentage of
non-capital expenditures 0.00% 0.00% 0.00% 0.74% 0.52%
Fiscal Year

City of Twentynine Palms
General Government Revenues by Source
Last Ten Fiscal Years
(modified accrual basis of accounting)
-106-
Fiscal year
ended June 30
Property
taxes
Property tax
in lieu
Sales &
use taxes
Franchise
taxes
Business
Licenses
Room
taxes
2013 2,409,379 $ 2,739,622 $ 1,194,404 $ 638,808 $ 41,632 $ 892,550 $ 2014 1,977,219 2,688,079 1,130,834 624,084 39,587 816,017 2015 2,046,167 2,747,309 1,125,236 622,531 38,328 878,195 2016 2,057,945 2,807,033 1,016,489 615,767 42,560 943,747 2017 2,085,053 2,831,097 1,156,390 613,152 39,954 1,110,536 2018 2,188,281 2,869,122 1,156,390 704,961 24,519 1,445,085 2019 2,235,565 2,975,088 1,402,484 719,642 46,670 1,332,569 2020 2,363,787 3,095,032 1,226,377 666,066 48,029 1,288,869 2021 2,480,111 3,228,065 1,445,428 766,859 60,131 1,927,425 2022 2,578,043 3,413,408 1,586,033 844,290 89,617 2,481,175 Source: City of Twentynine Palms, Finance Department

-107-
Fiscal year
ended June 30
Other
taxes
Permits &
fees
Use of
money and
property
Intergovernmental
revenues &
charges for
services
Other
revenues Total
2013 224,172 $ 142,018 $ 48,076 $ 3,791,380 $ 210,410 $ 12,332,451 $ 2014 114,777 131,606 50,880 2,501,154 67,219 10,141,456 2015 115,377 126,836 47,345 2,580,035 145,351 10,472,710 2016 132,720 125,174 43,625 2,328,187 133,588 10,246,835 2017 123,935 142,388 122,221 3,361,865 116,432 11,703,023 2018 141,954 256,673 141,749 3,696,588 180,586 12,805,908 2019 522,680 262,507 364,827 2,742,814 456,513 13,061,359 2020 581,913 382,919 347,953 4,181,756 111,139 14,293,840 2021 660,294 743,857 48,273 4,211,204 199,923 15,771,570 2022 390,980 1,375,974 (179,141) 12,262,086 145,857 24,988,322

City of Twentynine Palms
Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years
-108-
Total taxable
Fiscal year Secured Unsecured SBE assessed
ended June 30 property property nonunitary value
2013 796,079,890 $ 20,405,004 $ 86,754 816,571,648 $ 0.42557 % 2014 781,792,218 20,057,318 86,754 801,936,290 0.28055 % 2015 802,424,517 20,937,193 252,649 823,614,359 0.28055 % 2016 819,140,029 22,126,150 252,649 841,518,828 0.28055 % 2017 829,433,547 19,046,841 252,649 848,733,037 0.28056 % 2018 841,474,081 18,405,803 252,649 860,132,533 0.28057 % 2019 874,065,397 17,581,904 252,649 891,899,950 0.28057 % 2020 908,885,222 18,715,010 257,656 927,857,888 0.28059 % 2021 949,184,759 18,295,839 257,656 967,738,254 0.28060 % 2022 1,003,153,814 19,892,321 257,656 1,023,303,791 0.28493 % direct tax
rate
Total
$-
$200,000,000
$400,000,000
$600,000,000
$800,000,000
$1,000,000,000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Secured property Unsecured property SBE nonunitary
Source: San Bernardino County Assessor Combined Tax Rolls Note 1:

In 1978, the voters of the State of California passed Proposition 13 which limited property taxes to a total maximum rate of 1% based upon the assessed value of the property being taxed. Each year, the assessed value of property may be increased by an “inflation factor” (limited to a maximum increase of 2%). With few exceptions, property is only re-assessed at the time that it is sold to a new owner. At that point, the new assessed value is reassessed at the purchase price of the property sold. The assessed valuation date shown above represents the only data currently available with respect to the actual market value of taxable property and is subject to the limitations described above.

City of Twentynine Palms
Direct and Overlapping Property Tax Rates
Last Ten Fiscal Years
-109-
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Basic Levy 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 Copper Mountain Community
College Bond 0.02950 0.02660 0.02830 0.02020 0.02600 0.02420 0.02420 0.02430 0.02350 0.02180 Morongo Unified School Bond 0.05810 0.05280 0.05250 0.04660 0.05000 0.04970 0.04970 0.04360 0.04100 0.03910 Total Direct & Overlapping
Tax Rates 1.08760 1.07940 1.08080 1.06680 1.07600 1.07390 1.07390 1.06790 1.06450 1.06090 City's Share of 1% Levy
Per Prop 13 0.28073 0.28073 0.28073 0.28073 0.28073 0.28073 0.28073 0.28073 0.28073 0.28073 Redevelopment Rate* 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 Total Direct Rate 0.42557 0.28055 0.28055 0.28055 0.02056 0.28057 0.28057 0.28059 0.28060 0.28493 Agency Fiscal Year
Source: San Bernardino County Assessor annual tax increment tables. * = The approval of ABX1 26 eliminated redevelopment agencies from the State of California for fiscal year 2012/13 and years thereafter.

City of Twentynine Palms
Property Tax Levies and Collections
Last Ten Fiscal Years
-110-
Total tax Collections in
Fiscal year levy for Percentage subsequent Percentage
ended June 30 fiscal year Amount of levy years Amount of levy 2013 2,409,379 $ 2,409,379 $ 100.00% - 2,409,379 $ 100.00% 2014 1,977,219 1,977,219 100.00% - 1,977,219 100.00%
2015 2,046,167 2,046,167 100.00% - 2,046,167 100.00%
2016 2,057,945 2,057,945 100.00% - 2,057,945 100.00%
2017 2,085,053 2,085,053 100.00% - 2,085,053 100.00%
2018 2,188,281 2,188,281 100.00% - 2,188,281 100.00%
2019 2,235,565 2,235,565 100.00% - 2,235,565 100.00%
2020 2,363,787 2,363,787 100.00% - 2,363,787 100.00%
2021 2,480,111 2,480,111 100.00% - 2,480,111 100.00%
2022 2,578,043 2,578,043 100.00% - 2,578,043 100.00%
Collected within the
fiscal year of the levy Total collections to date
Source: City of Twentynine Palms, Finance Department

City of Twentynine Palms
Ratio of Outstanding Debt by Type
Last Ten Fiscal Years
-111-
Tax Total Percentage
Fiscal year allocation Capital governmental of personal Per ended June 30 bonds leases Loans activities income (1) capita (1) 2013 - $ 6,247 $ - $ 6,247 $ 0.0011% 20.21 $
2014 - - - - 0.0000% -
2015 - - - - 0.0000% -
2016 - - - - 0.0000% -
2017 - - - - 0.0000% -
2018 - - - - 0.0000% -
2019 - - 569,315 569,315 0.1081% 18.19
2020 - - 1,260,550 1,260,550 0.2323% 18.54
2021 - - 1,263,036 1,263,036 0.2279% 18.49
2022 - - 1,224,900 1,224,900 0.2183% 20.26
Source: (1) 2010 and later: US Census Bureau, most recent American Community Survey Note: Details regarding the City’s outstanding debt can be found in the notes to the basic financial statements.

City of Twentynine Palms
Legal Debt Margin Information
Last Ten Fiscal Years
-112-
Fiscal year 2021
Assessed value 1,023,303,791 $
Debt Limit (15% of assessed value) 153,495,569 $
Fiscal year Debt limit (in thousands)
2013 122,486 $
2014 120,290
2015 123,517
2016 126,228
2017 127,310
2018 129,020
2019 133,785
2020 139,179
2021 145,160
2022 153,496
Source: San Bernardino County Auditor/Controller
Note: The City has no applicable outstanding debt.

City of Twentynine Palms
Pledged Revenue Coverage
Last Ten Fiscal Years
-113-
Fiscal year Tax
ended June 30 increment Principal Interest Coverage
2013 * - $ - $ - $ 0%
2014 - - - 0%
2015 - - - 0%
2016 - - - 0%
2017 - - - 0%
2018 - - - 0%
2019 - - - 0%
2020 - - - 0%
2021 - - - 0%
2022 - - - 0%
Tax allocation bonds
Debt service
Source: City of Twentynine Palms, Finance Department
Notes: Details regarding the City’s outstanding debt can be found in the notes to the basic financial statements.
* = The approval of ABX1 26 eliminated redevelopment agencies from the State of California for fiscal year 2012/13 and years thereafter.

City of Twentynine Palms
Demographic and Economic Statistics
Last Ten Calendar Years
-114-
Calendar
year Population
Personal
income
(in thousands
of dollars)
Per capita
personal
income
Unemployment
rate
2012 26,084 555,563 $ 21,299 $ 11.6% (2)
2013 26,576 537,340 20,219 10.1% (2)
2014 26,550 524,894 19,770 10.3% (2)
2015 26,138 529,408 20,089 8.4% (2)
2016 26,919 535,226 19,882 7.4% (2)
2017 27,046 519,560 19,210 8.3% (2)
2018 28,958 526,768 18,190 5.3% (2)
2019 29,258 542,569 18,544 5.0% (2)
2020 29,967 554,193 18,493 9.2% (2)
2021 27,685 561,087 20,266 7.8% (2)

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%
$18,000
$18,500
$19,000
$19,500
$20,000
$20,500
$21,000
$21,500
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Unemployment rate
Per capita personal income
Personal income and unemployment
Sources: (1) Last available US Census Data
(2) California Employment Development Department
(3) US Census Bureau, most recent American Community Survey

City of Twentynine Palms
Full-time Equivalent City Government Employees by Function Last Ten Fiscal Years
-115-
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Function
General government 7 7 7 7 7 7 8 8 8 9
Animal control
Animal control officers 2 2 2 2 2 2 2 2 2 2
Kennel workers 2 2 2 2 2 2 1 1 2 2
Public works
Maintenance 10 10 10 10 11 11 11 11 10 11
Community development 3 3 2 3 3 4 4 4 5 5
Economic development - - - - - 1 1 1 1 1
Community services 7 7 6 6 6 6 6 6 5 7
Total 31 31 29 30 31 32 32 32 32 37
Fiscal Year
Source: City of Twentynine Palms, Finance Department

City of Twentynine Palms
Capital Asset Statistics by Function
Last Ten Fiscal Years
-116-
Function 2013 2014 2015 2016 2017
Pulic works
Streets (miles) 177 177 177 177 177
Streetlights 327 327 327 327 327
Traffic Signals 7 7 7 7 8
Community Services
Parks acreage 80 80 80 80 80
Parks 3 3 3 3 3
Swimming pools 2 2 2 2 2
Community Centers 2 2 2 2 2
Fiscal Year
Source: City of Twentynine Palms, Finance Department

City of Twentynine Palms
Capital Asset Statistics by Function (continued)
Last Ten Fiscal Years
-117-
Function 2018 2019 2020 2021 2022
Pulic works
Streets (miles) 177 177 177 177 178
Streetlights 327 327 327 325 325
Traffic Signals 8 8 9 9 9
Community Services
Parks acreage 80 80 80 80 80
Parks 3 3 3 3 3
Swimming pools 2 2 2 2 2
Community Centers 2 2 2 2 4
Fiscal Year

City of Twentynine Palms
Operating Indicators by Function
Last Ten Fiscal Years
-118-
Function 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Animal Control:

Adopted 650 662 637 549 558 480 678 663 437 482
Animal licenses issued 577 523 539 401 573 423 491 461 433 409 Community Development:

Building permits, including Plan checks
Issued 981 777 703 741 804 697 999 1,193 1,462 1,488
New single family residential 9 8 11 1 9 2 3 3 8 16
New multi family residential - - - - - 8 - 4 2 -
Public Works:

Street resurfacing
In-house (miles) 6 4 6 1 3 2 3 4 1 1
Contract (miles) 2 7 - 3 14 9 2 8 - 1
Berms in-house (miles) - - - 14.8 - - - - - -
Parks and Recreation:

Number of youth sports participants 936 848 944 1,000 1,096 893 917 889 193 709 Recreation classes participants 87 94 156 106 121 181 172 374 301 563 Fiscal Year
Source: City of Twentynine Palms, Finance Department

City of Twentynine Palms
Memo – Statistical Section
-119-
Revenue capacity
Property tax revenues and collections
The City receives property taxes under the “Teeter Plan.” The Teeter Plan allows cities to collect 100 percent of assessed taxes each year in lieu of receiving only those taxes collected by the County currently and receiving penalties and interest when delinquent taxes are collected in future years.

The City has entered such a contract with the County of San Bernardino, which allows the City to have a more reliable and predictable revenue stream. The County benefits by charging interest rates that are substantially higher than market rates when the delinquencies are collected.

Principal property taxpayers
The City does not provide this information due to privacy concerns.

Property tax rates for overlapping governments
California Law provides that general property taxes are assessed at one percent of assessed value.

When the constitutional amendment enacting this provision commonly referred to as Proposition 13 or the “Jarvis Amendment,” went into effect, the taxing agencies within San Bernardino County agreed on a distribution of the one percent among them. The City was not incorporated at that time. Upon incorporation, the City negotiated with the County for a portion of the County allocation. That agreed upon allocation is 26.5 percent of the one percent, or a little more than one quarter of one percent of the assessed valuation. A chart showing the distribution of property taxes is included in the statistical section of this report.

Debt capacity
Direct and overlapping debt
There are no general obligation bonds outstanding by any of the taxing agencies within the City.

Ratio of general bonded debt
The City has no general bonded debt.

Demographic and economic information
Principal Employers
The City does not currently collect this information.

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735 E. Carnegie Dr. Suite I 00
San Bernardino, CA 92408
909 889 087 1 T
909 889 536 1 F
ramscpa. net

PARTNERS
Terry P. Shea. CPA
Scott W. Manno. CPA. CGMA
Leena Shanbhag, CPA. MST. CGMA
Brad ferd A. Weleb1r. CPA. MBA. CGMA
Jenny W. Liu , CPA. MST
Brenda L. Od le. CPA. MST (Panne,· Emeritus)

MANAGERS/ STAFF
Ga,·denya Duran, CPA, CGMA
Brianna Schultz, CPA, CGMA
Seong-Hyea Lee, CPA MBA
Evelyn Mo,·entin-Barcena, CPA
Vernnica Hernandez. CPA
Laura Arvizu, CPA
Xinlu Zoe Zhang, CPA MSA
John Maldonado, CPA, MSA
Thao Le, CPA MBA
Julia Rod ,•iguez Fuentes, CPA MSA
Demi Hite. CPA

MEMBERS
Amer-ican Insti t ute of
Certified Publ ic Accountants
PCPS The A/CPA Affian ce
(or CPA Firms
Gove rn menla f Audit
Quali ty Cente,
Employee Benefit Plan
Audit Quality Center
California Society of
Cer-tified Public Accountants
•
Proud Member of
AlliottGlobalAlliance··

ROGERS, ANDERSON , MALODY & SCOTT, LLP
CE RTIF IED PUBLIC ACCOUNTANTS, SINCE 1948
STABILITY. ACCURACY. TRUST.
-1-

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT

OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH

GOVERNMENT AUDITING STANDARDS
Independent Auditor’s Report
To the Honorable City Council
City of Twentynine Palms, California
We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Twentynine Palms (the City) as of and for the year ended June 30, 2022, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated November 1, 2022.

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

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

Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

-2-
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

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

San Bernardino, California
November 1, 2022

735 E. Carnegie Dr. Suite I 00
San Bernardino, CA 92408
909 889 087 1 T
909 889 536 1 F
ramscpa. net

PARTNERS
Terry P. Shea. CPA
Scott W. Manno. CPA. CGMA
Leena Shanbhag, CPA. MST. CGMA
Brad ferd A. Weleb1r. CPA. MBA. CGMA
Jenny W. Liu , CPA. MST
Brenda L. Od le. CPA. MST (Panne,· Emeritus)

MANAGERS/ STAFF
Ga,·denya Duran, CPA, CGMA
Brianna Schultz, CPA, CGMA
Seong-Hyea Lee, CPA MBA
Evelyn Mo,·entin-Barcena, CPA
Vernnica Hernandez. CPA
Laura Arvizu, CPA
Xinlu Zoe Zhang, CPA MSA
John Maldonado, CPA, MSA
Thao Le, CPA MBA
Julia Rod ,•iguez Fuentes, CPA MSA
Demi Hite. CPA

MEMBERS
Amer-ican Insti t ute of
Certified Publ ic Accountants
PCPS The A/CPA Affian ce
(or CPA Firms
Gove rn menla f Audit
Quali ty Cente,
Employee Benefit Plan
Audit Quality Center
California Society of
Cer-tified Public Accountants
•
Proud Member of
AlliottGlobalAlliance··

ROGERS, ANDERSON , MALODY & SCOTT, LLP
CE RTIF IED PUBLIC ACCOUNTANTS, SINCE 1948
STABILITY. ACCURACY. TRUST.
-1-
November 1, 2022
To the Honorable City Council
City of Twentynine Palms, California
We have audited the financial statements of the City of Twentynine Palms as of and for the year ended June 30, 2022, and have issued our report thereon dated November 1, 2022. Professional standards require that we advise you of the following matters relating to our audit.

Our Responsibility in Relation to the Financial Statement Audit As communicated in our engagement letter dated May 11, 2022, our responsibility, as described by professional standards, is to form and express opinions about whether the financial statements that have been prepared by management with your oversight are presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of your respective responsibilities.

Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting.

Accordingly, as part of our audit, we considered the internal control of the City solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control.

We are also responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process. However, we are not required to design procedures for the purpose of identifying other matters to communicate to you.

Planned Scope and Timing of the Audit
We conducted our audit consistent with the planned scope and timing we previously communicated to you.

Compliance with All Ethics Requirements Regarding Independence The engagement team, others in our firm, as appropriate, our firm, have complied with all relevant ethical requirements regarding independence.

-2-
Significant Risks Identified
We have identified the possibility of the following significant risks:

Management's override of internal controls over financial reporting – Management override of internal controls is the intervention by management in handling financial information and making decisions contrary to internal control policy.

Revenue recognition – Revenue recognition is a generally accepted accounting principle that refers to the conditions under which an entity can recognize a transaction as revenue. Auditing standards indicate that recognizing revenue is a presumed fraud risk and usually classified as a significant risk in most audits.

These significant risks are presumptive in most audits and merit attention by the auditors due to the direct impact over financial reporting and internal control processes. Although identified as significant risks, we noted no matters of management override of controls or deviations from generally accepted accounting principles which caused us to modify our audit procedures or any related matters which are required to be communicated to those charged with governance due to these identified risks.

Qualitative Aspects of the Entity’s Significant Accounting Practices Significant Accounting Policies
Management has the responsibility to select and use appropriate accounting policies. A summary of the significant accounting policies adopted by the City is included in Note 1 to the financial statements. The City adopted GASB Statement No. 87, Leases, during 2022. No matters have come to our attention that would require us, under professional standards, to inform you about (1) the methods used to account for significant unusual transactions and (2) the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus.

Significant Accounting Estimates
Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s current judgments. Those judgments are normally based on knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ markedly from management’s current judgments.

The most sensitive accounting estimates affecting the financial statements are:

Management’s estimate of the fair value of investments is based on information provided by financial institutions. We evaluated the key factors and assumptions used to develop the fair value of investments and determined that it is reasonable in relation to the basic financial statements taken as a whole.

Management’s estimate of depreciation expense is based on the useful lives of acquired assets. We evaluated the key factors and assumptions used to develop depreciation expense in determining that it is reasonable in relation to the financial statements taken as a whole.

Management’s estimate of the net pension liability and related deferred inflows and outflows of resources are based on actuarial reports provided by independent actuaries. We evaluated the key factors and assumptions used to develop the estimate in determining that it is reasonable in relation to the statements taken as a whole.

Management’s estimate of the liability for other post-employment benefits (OPEB) and related deferred inflows and outflows of resources are based on actuarial reports provided by independent actuaries.

-3-
We evaluated the key factors and assumptions used to develop the estimate in determining that it is reasonable in relation to the basic financial statements taken as a whole.

Financial Statement Disclosures
Certain financial statement disclosures involve significant judgment and are particularly sensitive because of their significance to financial statement users. The most sensitive disclosures affecting the City’s financial statements relate to:

The disclosure of fair value of investments in the basic financial statements represents amounts susceptible to market fluctuations.

The disclosure of accumulated depreciation in the basic financial statements is based on estimated useful lives which could differ from actual useful lives of each capitalized item.

The disclosure of net pension liability and related deferred inflows and outflows of resources in the basic financial statements is based on actuarial assumptions. Actual future liabilities may vary from disclosed estimates.

The disclosure of the other post-employment benefits (OPEB) and related deferred inflows and outflows of resources in the basic financial statements identifies the annual OPEB cost and the funded status of the actuarial accrued liability. The information disclosed is based on actuarial assumptions which could differ from actual costs.

The financial statement disclosures are neutral, consistent, and clear.

Significant Difficulties Encountered during the Audit
We encountered no significant difficulties in dealing with management relating to the performance of the audit.

Uncorrected and Corrected Misstatements
For purposes of this communication, professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that we believe are trivial, and communicate them to the appropriate level of management. Further, professional standards require us to also communicate the effect of uncorrected misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the financial statements as a whole and each applicable opinion unit. Management has corrected all such mistatements.

In addition, professional standards require us to communicate to you all material, corrected misstatements that were brought to the attention of management as a result of our audit procedures. The attached schedule summarizes material misstatements that we identified as a result of our audit procedures were brought to the attention of, and corrected by, management.

Disagreements with Management
For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter, which could be significant to the City’s financial statements or the auditor’s report. No such disagreements arose during the course of the audit.

-4-
Representations Requested from Management
We have requested certain written representations from management, which are included in the attached letter dated November 1, 2022.

Management’s Consultations with Other Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting matters. Management informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and accounting matters.

Other Significant Matters, Findings, or Issues
In the normal course of our professional association with the City, we generally discuss a variety of matters, including the application of accounting principles and auditing standards, operating and regulatory conditions affecting the entity, and operational plans and strategies that may affect the risks of material misstatement. None of the matters discussed resulted in a condition to our retention as the City’s auditors.

Other Matters
We applied certain limited procedures to the Management’s Discussion and Analysis, the Budgetary Comparison Schedules, the Schedule of the Plan’s Proportionate Share of the Plan’s Net Pension Liability and Related Ratios, the Schedule of Plan’s Contributions, the Schedule of Changes in the Net OPEB Liability and Related Ratios , and the Schedule of OPEB Plan Contributions which are required supplementary information (RSI) that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI.

We were engaged to report on the combining and individual non-major fund financial statements and the budgetary comparison schedules, which accompany the financial statements but are not RSI. With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves.

We were not engaged to report on introductory and statistical sections, which accompany the financial statements but are not RSI. We did not audit or perform other procedures on this other information and we do not express an opinion or provide any assurance on it.

Restriction on Use
This report is intended solely for the information and use of the Honorable City Council and management of the City and is not intended to be and should not be used by anyone other than these specified parties.

Very truly yours,
San Bernardino, California

STAFF REPORT
TO: City Council
FROM: City Manager
FOR MEETING: Nov 08 2022
SUBJECT: City Wastewater and Sewer Project.

RECOMMENDATION:

Staff is looking for direction and discussion on the following:

1.Location of Treatment Plant;

2. Collection System Initial phasing;

3. State Grant Request.

ORDER OF PROCEDURE:

Request Staff Report (City Manager Presenting)
Council Questions of Staff
Request Public Comment
Council Discussion
Motion/Second
Call the Question
ATTACHMENTS:
• Wastewater Master Plan
(WWMP) and Salt and Nutrient
Management Plan (SNMP)
• Probolsky Research
• Collection System Cost by
Phase
• Exhibit - Proposed location of
plant and collection system
• Exhibit - Former Location of
plant and collection system
• Feasibility Study Report
• Wastewater Powerpoint
BACKGROUND:

Within the adopted Wastewater Master Plan, it states:

Wastewater generated in Twentynine Palms is currently treated in septic tanks or leach fields and discharged in the ground. The exceptions to this are the Mainside area of MCAGCC and some of the new subdivisions and businesses which contain on-site wastewater collection and treatment systems. The City is concentrated around commercial areas which run along State Highway 62, also known as Twentynine Palms Highway, and Adobe Road, which runs north to the Military Base. These areas contain the majority of multifamily and relatively dense single family land uses. Less dense single family and rural living are located in the majority of the remainder of the City. As population growth continues and more lands are urbanized, water usage, and therefore, septic loading within the District service area is anticipated to increase. As per SCAG (Southern California Association of Governments) the City will grow to 35K by 2035, we are currently at 28K.

Given that groundwater is currently the area's only source of water supply, understanding the potential effects of growth on water use and sewer loadings to the groundwater is very important. To this end, the City and the District prepared a Salt and Nutrient Management Plan (SNMP) to assess the long-term potential impacts to groundwater quality from the continued use of septic systems. This WWMP (Waste Water Master Plan) incorporates the findings of the analysis and assess the need for sewers and its implications as a wastewater treatment disposal alternative. Managing housing density can prolong the need for wastewater treatment that would be within regulatory standards. The City currently has 18 approved tract maps that equate to approximately 1,700 dwelling units.

Also for the Salt and Nutrient Management Plan Overview it states:

The guidelines prepared for salt/nutrient management plan was used to develop a comprehensive strategy to monitor and protect the groundwater resources in the area, analyzes nutrient loadings for the various groundwater basins in the area and evaluates loading reductions to balance these basins to avoid potential water quality impacts because of septic systems in the Twentynine Palms area.In addition to the objectives of the SNMP, the premise of developing the WWMP was that if the continued discharges from septic tanks would unreasonably degrade the groundwater quality and result in widespread groundwater pollutions and compliance issues, the need for a community wastewater collection, treatment, and disposal system would be promoted through the WWMP. This will help the District and the City make informed decisions on wastewater management while protecting groundwater resources. Collectively, the SNMP and WWMP serve as two major elements of the overall management plan developed by the City and District for assessing the potential impact on groundwater quality from the existing septic systems and anticipated future development.

Funding Opportunity
• State Funding of $350M for septic to sewer conversions for Disadvantage Communities (DAC) • This funding is a “Race to the Start and a Race to the Finish” • This November/December 2022, State Water will be looking for pre-applications to identify who and how much DACs will be potentially applying
• No later than March 2023, a full application needs to be submitted to State Water to apply for the funds • Shovel Ready is the Key, there are 29 potential projects, including Twentynine Palms, at the State level but, it is unclear who will be ready to apply and complete • Construction needs to start by 2024 and construction needs complete by June 2026 • The program allows the City to apply for 100% of the funds needed, however there is only $350M for the entire state
• The high-level estimate with the low level of design is $126-200M • So, if we can NOT get 100% granted, we need to adjust scope or augment funding • There are three components of the project:
o Building the System (Collection System and Treatment Plant) o Private Property Connections
o Sewer Rates for operations
Staff is looking to affirm the following from Council:

1. Affirm the Commitment to pursue the funding source;

2. Discuss and approve the location of the treatment plant that has changed with further professional investigation and planning;

3. Discuss and approve the collection system phasing, which is a by product of the change of location from above;

4. Discuss the difference between tertiary and advanced treatment of wastewater ENVIRONMENTAL:

The Initial Study (IS) is underway.

ALTERNATIVES:

The City Council could choose not to pursue funding, and/or give other direction.

FISCAL IMPACT:

The Planning and Design are grant funding, however the City does NOT have construction funding.

FINAL REPORT
Twentynine Palms Wastewater Master Plan
August 2014
Prepared for
City of Twentynine Palms and Twentynine Palms Water District 72401 Hatch Road
Twentynine Palms, CA 92277-2935
3210 El Camino Real, Suite 150
Irvine, California 92602-1365
949-261-1577
FAX: 949-261-2134
K/J Project No. 1283001*00

3210 El Camino Real Street, Suite 150
Irvine, California 92602
949-261-1577
949-261-2134 (Fax)
Twentynine Palms
Wastewater Master Plan
29 August 2014
Prepared for
City of Twentynine Palms and
Twentynine Palms Water
District
72401 Hatch Road
Twentynine Palms, CA 92277-2935
K/J Project No. 1283001*00

FINAL Twentynine Palms Wastewater Master Plan i
Table of Contents
List of References ........................................................................................................................ iv List of Tables ................................................................................................................................ iv List of Figures............................................................................................................................... iv List of Appendices ......................................................................................................................... v Executive Summary ....................................................................................................................... I Section 1: Introduction ............................................................................... 1-1

1.1 Background ......................................................................................... 1-1

1.2 Purpose ............................................................................................... 1-1

1.3 Objectives and Scope ......................................................................... 1-2

1.4 Underlying Regulatory Framework ...................................................... 1-3

1.4.1 RWQCB Region 7 Basin Plan .................................................. 1-3

1.4.2 Region 7 Basin Plan Amendment ............................................ 1-4

1.4.3 Statewide Septic Systems Proposed Policy ............................. 1-5

1.4.4 Region 7 Guidelines for Sewage Disposal from Land Developments .......................................................................... 1-6

1.4.5 Anti-Degradation Policy Summary ........................................... 1-6

1.5 District Water Planning and Previous Studies ..................................... 1-6

1.5.1 2010 Urban Water Management Plan (UWMP) ....................... 1-6

1.5.2 1997 Master Plan of Drainage (MPD) ...................................... 1-7

1.5.3 2008 Wastewater Treatment Plant, Joint-Use Study ............... 1-7

1.5.4 2008 Groundwater Management Plan ..................................... 1-7

1.5.5 Other Relevant Data ................................................................ 1-7

1.5.6 Groundwater Study .................................................................. 1-7

1.6 Report Organization ............................................................................ 1-8

1.7 Abbreviations and Acronyms ............................................................... 1-8 Section 2: Background and Study Area ...................................................... 2-1

2.1 Study Area .......................................................................................... 2-1

2.2 Land Use ............................................................................................. 2-1

2.3 Climate and Rainfall ............................................................................ 2-2

2.4 Topography ......................................................................................... 2-3

2.5 Geology ............................................................................................... 2-3

2.6 Water Sources .................................................................................... 2-3

2.6.1 Groundwater ............................................................................ 2-4

2.7 Groundwater Subbasins ...................................................................... 2-4

2.7.1 Indian Cove Subbasin .............................................................. 2-5

2.7.2 Fortynine Palms Subbasin ....................................................... 2-5

2.7.3 Eastern Subbasin ..................................................................... 2-5

2.7.4 Mesquite Lake Subbasin .......................................................... 2-5

Table of Contents (cont'd)
FINAL Twentynine Palms Wastewater Master Plan ii
Section 3: Water Usage .............................................................................. 3-1

3.1 Historic Water Use .............................................................................. 3-1

3.1.1 Water Demand Classification by Customer Type .................... 3-1

3.1.2 Water Demand Classification by Number of Connections ....... 3-2

3.1.3 Historic Water Demand Seasonal Variation ............................. 3-3

3.1.4 Non-Revenue Water ................................................................ 3-3

3.2 Project Planning Scenarios ................................................................. 3-4

3.2.1 Current Scenario: Baseline ...................................................... 3-4

3.2.2 2035 Scenario .......................................................................... 3-4

3.2.3 Build-Out Scenario ................................................................... 3-4

3.3 Population Projections......................................................................... 3-4

3.3.1 Current Population ................................................................... 3-5

3.3.2 2035 Population ....................................................................... 3-5

3.3.3 Build-Out Population ................................................................ 3-5 Section 4: Wastewater Flows ..................................................................... 4-1

4.1 Wastewater Flow Projections Approach .............................................. 4-1

4.1.1 Key Assumptions for Flow Calculations ................................... 4-1

4.1.1.1 Water to Sewer Return Ratios ............................... 4-1

4.1.1.2 Per Capita Water Demand for Current
Scenario ................................................................. 4-2

4.1.1.3 Per Capita Water Demand for Build-out
Scenario ................................................................. 4-2

4.1.2 Residential Loadings ................................................................ 4-3

4.1.3 Non Residential Loadings ........................................................ 4-3

4.2 Wastewater Flows ............................................................................... 4-4

4.3 Data Sources for Wastewater Flow Estimation ................................... 4-5 Section 5: Wastewater Hydraulic Model .................................................... 5-1

5.1 Modeling Software............................................................................... 5-1

5.2 Data Sources ...................................................................................... 5-1

5.3 Model Construction ............................................................................. 5-2

5.3.1 Basic Terminology of Model Data ............................................ 5-2

5.3.1.1 Nodes .................................................................... 5-2

5.3.1.2 Links ...................................................................... 5-2

5.3.1.3 Sub-catchments ..................................................... 5-2

5.3.1.4 Model loads ........................................................... 5-3

5.3.1.5 Models ................................................................... 5-3

5.3.2 Model Building.......................................................................... 5-3

5.3.2.1 Network Trunks ...................................................... 5-3

5.3.2.2 Delineation of Trunk Sheds ................................... 5-3

5.3.2.3 Sub catchment and Watershed Definitions ............ 5-4

5.3.2.4 Manholes ............................................................... 5-4

5.4 Hydraulic Design Criteria and Boundary Conditions ........................... 5-4

5.4.1 Dry Weather Peak Design Flows ............................................. 5-4