Agenda — Twentynine Palms City Council, June 27, 2023 (part 2 of 2)

Public Works
# Description Fee
Highway and Street Permits
Issuance fees
1 Parade $54.79
2 Moving overweight & dimension loads (single trip permit) $25.72 3 Rider to moving permit $31.31
4 Annual or repetitive moving permit $129.71
5 Construction $70.44
6 Road closure processing $102.87
7 Rider to road closure permit $42.49
NOTE: Labor and materials fee. When the City crew accomplishes necessary work over and beyond their normal routine, the actual cost of labor and materials plus 10% will be charged; an additional 50% penalty may be levied by the City, depending on the circumstances.
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Engineering
# Description Fee
Final Tract Map Plan Check:
1 Minimum fee $3,079.45
2 Fee per lot in addition to minimum above $99.52
Minor subdivision ‐ Final Parcel Map Plan Check (four lots or less):
3 Minimum fee $1,568.80
4 Fee per lot in addition to minimum above $60.38
Street Improvement Plan Check
5 Public road improvements (based on the value of the work) 4% of Evaluation
Grading Plan Check and Permit Costs‐ Subdivisions, Commercial Development, Residential Hillside and Over 2500 Cubic Yards
6 Grading (based on the value of the work) 4% of
Evaluation
Miscellaneous
7 Flood hazard report $431.62
8 Technical study / report review (traffic, drainage, hydrology, soils, percolation, etc.) $324.27
9 Subdivision bond extension $648.54
10 Vacation of City streets and/or rights‐of‐ways, alleys, offers of dedication, access rights and public service easements $844.22
11 Offers of dedication $161.02
12 Lot line adjustment (per lot) $523.31
13 Reversion to acreage $1,856.17
14 Certificate of compliance (per lot) $528.90
15 City Engineer (per hour) $213.57
Encroachment Permits
16 Minor ‐ "No Dig" Application (example tree trimming, temporary moving pod, etc.) $57.03
17 Major ‐ Application Fee $136.42
18 Application for work done prior to permit application $357.82 Daily Rental
19 0 to 300 linear feet of trench ( minimum fee) $165.49 20 301 to 500 linear feet of trench $249.35
21 Additional charge for trenches over 500 feet (per 100 linear feet or part thereof) $32.43
22 Miscellaneous encroachments (driveways, etc.) with value under $4,000 $65.97 18

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# Description Fee
Service connections:
23 Each connection under an annual permit $32.43
24 Each connection not under an annual permit $65.97
25 Public road improvements (based on the value of the work) 25% of plan check fee
Bonds and Deposits
26 Tract Map Plan $3,670.97
27 Construction $644.07
Excavation
28 Per linear feet $11.18
29 Minimum $1,319.45
30 Maximum $21,685.87
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Building
# Description Unit Fee
General Fees
1 Issuance Fee* each $73.80
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.
(Plus any surcharges, i.e.; Strong Motion Implementation Program or other fees, i.e.; School Fees, Drainage Fees, Road Fees. Etc.) Additional Inspection and Plan Review Charges:
2 Reinspection Fee each $108.46
3 Duplicate/Replacement Job Card each $51.44
4 Inspections During Off‐Hours (Advance payment) 2 hour Max. $187.85 5 Planning staff review (where applicable) each $57.03
Meetings ‐ Formal and In‐depth
6 Application Meeting $207.98
7 First Hour hourly rate $138.65
8 Each additional hour hourly rate $69.33
Plan Review Fees
9 Plan Review by the Hour (Min. 1/2 Hour) Per 1/2 Hour $59.26 10 Expedited Plan Review

1.5 times the
cost of regular
plan review

REFUNDS
11 Actual Cost Service ‐ Return fee, except for suggested fee $125.24 The Building Official will not refund work that has been initiated for any permit.

The Building Official shall not authorize the refunding of any fee paid after one year in which the fee was paid and work was not commenced. Unused deposit monies of completed Actual Cost Projects will be refunded to the payee when all charges for the project have been recorded.

Appeals
12 Appeal to Building and Safety Board of Appeals per permit $277.31 13 Appeal to Building and Safety Physically Disabled Access Appeals Board per permit $277.31 Chimney
14 Daily Rental each $370.12
15 Chimney Repair each $310.85
16 Close Existing Openings each $158.78
Decks
17 Deck each $282.90
18 Deck (Railing Only) each $146.48
Demolition
19 Demolition (up to 3,000 sf) each $341.04
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# Description Unit Fee
Doors and Windows
20 New door (non structural) each $105.11
21 New door (structural shear wall/masonry) each $239.29 22 New Window (non structural) each $110.70
23 New window (structural shear wall/masonry) each $184.50 24 Bay Window (structural) each $184.50
25 Each additional door or window each 10% of fee
Fences/Walls
26 Non‐masonry, over 6 feet in height up to 100 lf $153.19 27 Non‐masonry, each additional 100 lf each 100 lf $61.50 28 Masonry, over 6 feet in height up to 100 lf $386.89
29 Masonry, each additional 100 lf each 100 lf $84.98
30 Flag pole (over 20 feet in height) each $278.43
31 Foundation Repair each $243.76
Field Investigation and Report
32 Minor Project each $213.57
33 Major Project/Certificate of existing building without permit each $462.92 34 Pre‐Alteration Inspection each $158.78
35 Pre‐Construction Inspection Single Lot each $130.83
36 Each Additional Contiguous Lot (Per Lot) each $50.32 37 Special Inspector Certification each $161.02
38 Materials Testing Lab Certification each $161.02
Garages and other Storage Units / Conventional Wood Frame Including plan check
39 Garage (detached) up to 400 sf sf $420.43
40 Storage shed up to 400 sf sf $239.29
41 Masonry up to 1,000 sf sf $560.21
MISCELLANEOUS:
42 Acoustical Review each $319.80
43 Balcony addition each $265.01
44 Disabled Access Compliance Inspection each $408.13
45 Stairs—First Flight first flight $242.64
46 Each additional flight per flight $95.04
Patio Covers/Awnings/Trellis/Carport /Porch
47 Patio ‐ (Unenclosed) each $213.57
48 Patio ‐ Frame (Enclosed) each $268.36
49 Standard Plan (ICBO or City) Review and Permit each $142.01 50 Arbor/Trellis each $195.68
51 Awning/Canopy (supported by building) each $142.01
52 Carport ‐ (ICBO or wood frame) Review and Permit each $213.57 53 Covered Porch each $213.57
Piles
54 Pile Foundations $410.37
55 Cast in Place Concrete (first 10 piles) up to 10 $822.98 56 Additional Piles (increments of 10) each 10 $286.25
57 Driven (steel, pre‐stressed concrete) up to 10 $822.98 58 Additional Piles (increments of 10) each 10 $286.25
Remodel—Residential
59 Less than 300 sf up to 300 sf $377.94
60 Kitchen up to 300 sf $404.78
61 Bath up to 300 sf $323.15
62 Additional remodel each 300 sf $269.48
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# Description Unit Fee
Roof/Reroof
63 Residential up to 3000 sf $206.86
64 Multi‐Family Dwelling up to 3000 sf $299.67
65 Commercial up to 3000 sf $349.99
66 Commercial Addition each 100 sf $269.48
67 Roof Framing Replacement up to 100 sf $411.49
68 Additional roof structure replacement each 100 sf $196.80 Retaining Walls (concrete or masonry)
69 Standard (up to 50 lf) up to 50 lf $213.57
70 Additional retaining wall each 50 lf $51.44
71 Special Design, 3‐10' high (up to 50 lf) up to 50 lf $296.32 72 Additional retaining wall each 50 lf $106.23
73 Special Design, over 10' high (up to 50 lf) up to 50 lf $535.61 74 Additional retaining wall each 50 lf $124.12
75 Gravity/Crib Wall, 0‐10' high (up to 50 lf) up to 50 lf $493.11 76 Additional Gravity/Crib Wall each 50 lf $106.23
77 Gravity/Crib Wall, over 10' high (up to 50 lf) up to 50 lf $535.61 78 Additional Gravity/Crib Wall each 50 lf $106.23
Sign ‐ Primary (e.g. Billboard)
79 Plan Review each $119.64
80 Permit (includes electrical) each $119.64
Skylight $0.00
81 Less than 10 sf each $158.78
82 Greater than 10 sf or structural each $257.18
Storage Racks
83 0‐8' high (up to 100 lf) first 100 lf $196.80
84 each additional 100 lf each 100 lf $68.21
85 over 8' high (up to 100 lf) first 100 lf $322.03
86 each additional 100 lf each 100 lf $68.21
Swimming Pools
Accessory to Single Family Dwellings
87 With Standard Plan (Plan Review included) each $549.02 All other Swimming Pools
88 Spas, Hot Tubs and Above Ground Pools each $187.85
89 Vinyl‐lined/Fiberglass (up to 800 sf) each $213.57
90 Spa or Hot Tub (Pre‐fabricated) each $168.84
Stock Plans
91 Establish a stock plan‐ plan review fee each $739.11 92 Standard Plan Comparison Review Fee each $161.02
93 Standard Plan Annual Renewal each $193.44
94 All others Per valuation
95 Residential Driveway Approach each $102.87
Temporary Residence or Office (Set Down)
96 Trailer/Motor Home Set Down each $173.32
Temporary Mobile Office Trailer
97 Single Wide (5SU: "Trailer") each $114.05
98 Multiple Section (5SU: "Mobile") each $232.58
Short Term Installation:
99 Temporary Construction Material Processing $159.90
100 Approved Temporary Tents $159.90
101 Large Family Day Care Inspection $324.27
102 Amusement Park Semi‐Annual Inspection Fee $324.27
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# Description Unit Fee
Relocation Inspection and Set Down Fees ‐ Permanent Residential Inspection fee when a building is moved:
103 On the same property each $180.03
104 From one property to another within the City each $301.91 105 From outside the City each $572.51
Set down Permit Fees:
106 Per standard construction fees by occupancy
Walls and Partitions
107 Interior wall ‐ Load Bearing each $186.74
108 Exterior wall ‐ Load bearing each $240.41
109 Partition—Commercial, Interior (up to 30 lf) up to 30 lf $234.82 110 Additional partition each 30 lf $101.75
111 Partition—Residential, Interior (up to 30 lf) up to 30 lf $182.26 112 Additional partition each 30 lf $78.27
Walls ‐ Finishes
113 Siding $91.69
114 Stone and Brick Veneer (interior or exterior) up to 400 sf $91.69 115 Stucco $91.69

ELECTRICAL PERMIT FEES
Panel Upgrade
116 600 volts or less and not over 200 amps each $105.11 117 600 volts or less and 201 to 1 ,000 amps each $213.57 118 Over 600 volts or over 1 ,000 amps each $268.36
Electrical Fee by Area
119
Warehouse, storage garages or aircraft hangers where no repair work is done. sq. ft $241.53 120 All other occupancies not listed in A up to and including 5,000 sq. ft. sq. ft $262.77 121 Over 5,000 sq. ft. (plus cumulative total of $600) sq. ft $370.12 Alternative Schedule
Unit Application
122 3 outlets, 3 lighting fixtures or fraction 1 unit $105.11 123 Every 6 additional units 10% 1 unit 10% addition 6
units
124 Festoon lighting or plug mold, etc. each 20 ft 1 unit $105.11 125
Each additional 29 foot unit 10% Unit 10% additional
10%
Relocation Policy‐‐‐‐ When the structure is located more than fifty (50) miles outside the boundaries of the City of Twentynine Palms, a local agency in that area may be requested to conduct an on‐site may be requested to an on‐site inspection and report its findings to the City. The applicant shall pay conduct an on‐site inspection and report its findings to the City.

The applicant shall pay the local agency directly for the inspection and report preparation. (Form 433A)
The following permit fees are based on the actual area of the occupancies listed, determined from exterior dimensions, and include all lighting fixtures, switch receptacles and the circuit wiring. This method of fee calculation is in addition to the fee for electrical service.

Alternations, additions and new construction where no structural work is being done or where it is impractical to use the square foot schedule, convert to units:
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# Description Unit Fee
Electrical Motors
126 Motor, 1 horsepower or less Each $105.11
127 Motor, More than 1 horsepower Each $105.11
128 Transformer Each $159.90
Temporary Electrical Service Pole
129 Temporary use of construction service, include poles or pedestals each $125.24 130 Additional secondary or supporting‐poles each $35.78 Miscellaneous
131 Area lighting standards $ 11.55 each $105.11
132 (I) Residential swimming pool lights $ 30.45 each $150.95 133 (II) Commercial swimming pool lights $ 58.80 each $249.35 134 Temporary sale stand, including service connections, etc. $ 43.05 each $105.11 135 Inspection for reinstallation of idle meter (removed by utility company) $ 19.95 each $112.94 136 Any electrical work for which a permit is required, but no fee is herein provided each $213.57 137 Lighting pole each $142.01
138 Each add'l pole each $41.37
Overhead Line Construction:
139 Poles and anchors each $105.11
Plan Review Fees:
140 Plan Review Fee
50% of Electrical
Permit Fee
Antenna
141 Antenna‐Monopole each $398.07
142 Cellular/Mobile Phone, free‐standing each $398.07
143 Cellular/Mobile Phone, attached to building each $289.61 144
Each additional antenna installed on a pole 10% each
10% each
additional
antenna
Solar Energy Fees (1):

Solar Plan Review Fees
145 $200.00
146 Commercial roof mount or ground mount  solar not to exceed 50KW. $400.00 147
Commercial roof mount or ground mount  solar exceeding 10KW. Per additional KW or fraction thereof $65.00
Solar Permit Fees
148 $250.00
149
Roof mount or ground mount residential solar (over 15KW). Each additional KW or fraction thereof. $15.00
150 Commercial roof mount or ground mount  solar not to exceed 50KW. $600.00 Roof mount or ground mount , residential small system (all) Roof mount or ground mount , residential small system (under 15KW) Compute fees for motors, transformers and similar appliances for each separate motor, etc. (2) Compute fees for outlets and multi‐outlet assemblies by adding all outlets, switches and lights before determining, the unit application.

When no construction plan review fee is charged and an electrical plan is required to be submitted, a plan review fee shall be paid at the time of submitting plans and specifications for review.
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# Description Unit Fee
151
Commercial roof mount or ground mount solar exceeding 50‐250KW. Per additional KW or fraction thereof $7.00
152
Commercial roof mount or ground mount solar exceeding 250KW. Per additional KW or fraction thereof $5.00
(1) State mandated Fees, no CPI increase was added to these fees.

MECHANICAL PERMIT FEES
153
Installation or relocation of each forced‐air gravity‐type furnace or burner, including ducts and vents, attached to such appliance (TWINPAC includes). each $168.84 154
Installation or relocation of each recessed wall heater, floor furnace, suspended heater, or floor mounted heater including vent.
each $131.94
155 Installation, relocation or replacement of each appliance vent installed and not included in an appliance permit. each $105.11
156
Alteration of or addition to each heating appliance, refrigeration unit, cooling unit, absorption unit, or each heating, cooling, absorption or evaporative cooling system, including controls regulated by the Uniform Mechanical Code. each $131.94
Installation or relocation of each boiler or compressor 157 0 to 15 HP or 0 to 500,000 B.T.U.'s absorption system each $159.90 158 Over 15 HP, or over 500,000 B.T.U's absorption system each $256.06 159 For each air handling unit (HVAC) each $186.74
160
For each evaporative cooler other than portable type i.e.. swamp cooler. 10% of fee for each additional fixture.* each $105.11
161
For each ventilation fan connected to a single duct including mini‐splits. 10% of fee for each additional fixture. each $105.11
162
For each ventilation system which is not a portion of heating or air condition system
each $105.11
163
For the installation of each hood, other than Type 1 grease hood, served by mechanical exhaust, including the ducts from such hood each $186.74 164 Each Type 1 grease hood, including the exhaust system each $228.11 165
For each appliance or piece of equipment regulated by the Mechanical Code, not classed in other appliance categories, or for which no other fee is listed in the section
each $219.16

PLUMBING PERMIT FEES
166 Plumbing fixture or trap (including water, drainage piping and backflow protection) 10% of fee for each additional fixture. each $105.11 167 Private sewer line, each connection each $105.11
168 Private sewage lift station or sump pump each $149.84 169 Building sewer each $125.24
170 Septic tank, cesspool or leach line each $234.82
171 Water heater and/ or vent* each $105.11
172 For each gas piping system, per outlet each $105.11 173 Inspection for installment of idle gas meter (removed by utility company) each $105.11 174
Industrial waste pre‐treatment interceptor, including its trap and vent, excepting kitchen‐type grease interceptors functioning as fixture traps each $153.19
175 Installation, alternation or repair of water piping and/or treating equipment each $105.11 176 For each water distribution system on private property, per connection each $159.90 177 For each gas distribution system on private property, per connection each $159.90 25

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# Description Unit Fee
178 For each public swimming pool, including all necessary piping each $322.03 179 For each private swimming pool, including all necessary piping each $213.57 180 Alternation of drain or vent piping each $86.10
181
For each lawn sprinkler system on any one meter with a backflow protection devices each $86.10
182
Vacuum breakers or backflow protection devices on tanks, vats etc. or for installation on unprotected plumbing fixtures, including necessary water piping each $105.11

ACTIVE WATER SOLAR ENERGY PERMIT FEES
183 For collectors (including related piping and regulating devices) Permit Review system $186.74 184
For Storage Tanks (including related piping and regulating devices) Permit Review system $174.44
185 For Rock Storage Permit Review system $174.44
186
For each appliance or piece of equipment regulated by the Uniform Solar Energy Code for which no fee is listed each $213.57

GRADING FEES
Plan Review Fee:
187 0 ‐ 100 CY $392.48
188 101 ‐ 1000 CY $640.71
189 1001 ‐ 10,000 CY $950.45
Permit Fee:
190 0 ‐ 100 CY $525.54
191 101 ‐ 1000 CY $771.54
192 1001 ‐ 10,000 CY $1,079.04
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Building Permits ‐ Major
CBC Occupancy
Square
Footage Plan Check Permit Total Cost
Commercial 1 $1,555.38 $2,383.95 $3,939.33 $3,939.33 plus 67.66 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1,000 s.f. 1,000 $2,049.62 $3,241.59 5,291.21 5,291.21 plus 49.24 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 5,000 s.f.5,000 $2,631.07 $6,599.46 9,230.53 9,230.53 plus 46.25 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 10,000 s.f. 10,000 $3,535.22 $10,320.75 13,855.97 13,855.97 plus 23.39 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 20,000 s.f.20,000 $4,462.63 $14,071.10 18,533.73 18,533.73 plus 15.17 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 50,000 s.f.50,000 $5,712.75 $21,920.68 27,633.43 27,633.43 plus 12.37 for each additional 100 s.f. or fraction thereof Tenant Improvements 1 $814.03 $1,497.23 $2,311.26 $2,311.26 plus 46.39 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 800 s.f. 800 $1,061.15 $1,991.47 3,052.62 3,052.62 plus 67.84 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1,200 s.f. 1,250 $1,133.83 $2,529.31 3,663.14 3,663.14 plus 27.91 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 2,500 s.f.2,500 $1,322.80 $3,038.08 4,360.88 4,360.88 plus 34.31 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 5,000 s.f.5,000 $1,729.82 $4,346.34 6,076.16 6,076.16 plus 24.32 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 12,500 s.f. 12,500 $2,093.22 $7,631.54 9,724.76 9,724.76 plus 19.88 for each additional 100 s.f. or fraction thereof Residential - New 1 $1,235.58 $1,933.32 $3,168.90 $3,168.90 plus 12.74 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 800 s.f. 800 $1,293.73 $2,078.69 3,372.42 3,372.42 plus 16.08 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1200 s.f. 1,200 $1,424.55 $2,180.44 3,604.99 3,604.99 plus 19.99 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 2,000 s.f.2,000 $1,511.77 $2,413.02 3,924.79 3,924.79 plus 23.26 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 3,000 s.f.3,000 $1,700.74 $2,689.21 4,389.95 4,389.95 plus 21.37 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 4,000 s.f.4,000 $2,093.22 $3,270.66 5,363.88 5,363.88 plus 21.44 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 6,000 s.f.6,000 $2,601.99 $3,619.53 6,221.52 6,221.52 plus 14.35 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 10,000 s.f. 10,000 $3,154.37 $4,215.52 7,369.89 7,369.89 plus 14.34 for each additional 100 s.f. or fraction thereof Residential - Addition 1 $828.57 $1,191.97 $2,020.54 $2,020.54 plus 9.72 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 300 s.f. 300 $857.64 $1,221.05 2,078.69 2,078.69 plus 10.71 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 500 s.f. 500 $930.32 $1,293.73 2,224.05 2,224.05 plus 11.78 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 800 s.f. 800 $1,075.68 $1,468.16 2,543.84 2,543.84 plus 10.38 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1,500 s.f. 1,500 $1,133.83 $1,555.38 2,689.21 2,689.21 plus 12.90 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 2,000 s.f.2,000 $1,322.80 $1,598.99 2,921.79 2,921.79 plus 11.11 for each additional 100 s.f. or fraction thereof Residential - Remodel 1 $537.84 $784.96 $1,322.80 $1,322.80 plus 9.72 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 300 s.f. 300 $552.38 $828.57 1,380.95 1,380.95 plus 10.28 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 500 s.f.500 $697.74 $973.93 1,671.67 1,671.67 plus 19.38 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 800 s.f.800 $741.35 $1,046.61 1,787.96 1,787.96 plus 21.81 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1,500 s.f. 1,500 $872.18 $1,221.05 2,093.23 2,093.23 plus 14.54 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 2,000 s.f.2,000 $930.32 $1,308.26 2,238.58 2,238.58 plus 12.52 for each additional 100 s.f. or fraction thereof 400 $218.04 $348.87 $566.91 $566.91 plus 10.36 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 300 s.f.600 $232.58 $377.94 610.52 610.52 plus 10.90 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 800 s.f. 1,000 $261.65 $436.09 697.74 697.74 plus 5.82 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1,500 s.f. 1,500 $290.73 $465.16 755.89 755.89 plus 4.77 for each additional 100 s.f. or fraction thereof Garage- attached and built at same time as SFD
BUILDING PERMIT FEES - CONSTRUCTION TYPES: II B, III B, IV B, V B Total Cost New Construction Fee Schedule
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$1,555.38 plus 24.74 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1,000 s.f. $2,383.95 plus 42.92 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1,000 s.f. $2,049.62 plus 7.27 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 5,000 s.f. $3,241.59 plus 41.97 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 5,000 s.f.$2,631.07 plus 9.04 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 10,000 s.f. $6,599.46 plus 37.21 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 10,000 s.f.$3,535.22 plus 4.64 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 20,000 s.f. $10,320.75 plus 18.75 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 20,000 s.f.$4,462.63 plus 2.08 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 50,000 s.f. $14,071.10 plus 13.08 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 50,000 s.f.$5,712.75 plus 1.70 for each additional 100 s.f. or fraction thereof $21,920.68 plus 10.67 for each additional 100 s.f. or fraction thereof $814.03 plus 15.46 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 800 s.f. $1,497.23 plus 30.93 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 800 s.f. plus 8.08 1,061.15 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1,200 s.f. 1,991.47 plus 59.76 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1,200 s.f. plus 7.56 1,133.83 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 2,500 s.f. 2,529.31 plus 20.35 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 2,500 s.f. plus 8.14 1,322.80 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 5,000 s.f. 3,038.08 plus 26.17 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 5,000 s.f. plus 2.42 1,729.82 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 12,500 s.f. 4,346.34 plus 21.90 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 12,500 s.f. plus 1.98 2,093.22 for each additional 100 s.f. or fraction thereof 7,631.54 plus 17.90 for each additional 100 s.f. or fraction thereof $1,235.58 plus 3.64 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 800 s.f. $1,933.32 plus 9.10 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 800 s.f. plus 16.35 1,293.73 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1200 s.f. plus 12.72 2,078.69 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1200 s.f. plus 5.45 1,424.55 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 2,000 s.f. 2,180.44 plus 14.54 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 2,000 s.f. plus 9.45 1,511.77 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 3,000 s.f. 2,413.02 plus 13.81 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 3,000 s.f. plus 19.62 1,700.74 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 4,000 s.f. plus 29.07 2,689.21 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 4,000 s.f. plus 12.72 2,093.22 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 6,000 s.f. plus 8.72 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 6,000 s.f. 3,270.66 plus 6.90 2,601.99 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 10,000 s.f. 3,619.53 plus 7.45 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 10,000 s.f. plus 6.90 3,154.37 for each additional 100 s.f. or fraction thereof 4,215.52 plus 7.44 for each additional 100 s.f. or fraction thereof 828.57 plus 4.86 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 300 s.f. 1,191.97 plus 4.86 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 300 s.f.857.64 plus 18.17 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 500 s.f. plus 18.17 1,221.05 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 500 s.f.930.32 plus 24.23 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 800 s.f. plus 29.07 1,293.73 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 800 s.f. plus 4.15 1,075.68 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1,500 s.f. plus 6.23 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1,500 s.f. 1,468.16 plus 18.90 1,133.83 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 2,000 s.f. plus 4.36 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 2,000 s.f. 1,555.38 plus 16.28 1,322.80 for each additional 100 s.f. or fraction thereof plus 3.76 for each additional 100 s.f. or fraction thereof 1,598.99 $537.84 plus 2.43 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 300 s.f. $784.96 plus 7.29 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 300 s.f. 552.38 plus 36.34 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 500 s.f. plus 36.34 828.57 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 500 s.f. 697.74 plus 7.27 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 800 s.f. 973.93 plus 12.11 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 800 s.f. 741.35 plus 9.35 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1,500 s.f. 1,046.61 plus 12.46 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1,500 s.f.872.18 plus 5.81 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 2,000 s.f. 1,221.05 plus 8.72 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 2,000 s.f.930.32 plus 5.01 for each additional 100 s.f. or fraction thereof 1,308.26 plus 7.51 for each additional 100 s.f. or fraction thereof $218.04 plus 3.64 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 300 s.f. $348.87 plus 7.27 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 300 s.f. 232.58 plus 3.63 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 800 s.f. 377.94 plus 7.27 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 800 s.f.261.65 plus 2.91 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1,500 s.f. 436.09 plus 2.91 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1,500 s.f.290.73 plus 2.38 for each additional 100 s.f. or fraction thereof 465.16 plus 2.38 for each additional 100 s.f. or fraction thereof Plan Check Cost New Construction Fee Schedule Building Permit Cost New Construction Fee Schedule 28

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CBC Occupancy
Square
Footage Plan Check Permit Total Cost Total Cost New Construction Fee Schedule Industrial $1,264.65 $2,020.54 $3,285.19 $3,285.19 plus 40.02 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1,000 s.f. 1 1,000 $1,555.38 $2,529.31 4,084.69 4,084.69 plus 41.43 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 5,000 s.f. 5,000 $2,006.00 $5,392.95 7,398.95 7,398.95 plus 31.11 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 10,000 s.f. 10,000 $2,311.27 $8,198.45 10,509.72 10,509.72 plus 18.90 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 20,000 s.f.20,000 $3,197.98 $11,091.17 14,289.15 14,289.15 plus 9.96 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 50,000 s.f.50,000 $3,924.79 $16,338.76 20,263.55 20,263.55 plus 8.13 for each additional 100 s.f. or fraction thereof Shell Building 1 $1,104.76 $1,962.40 $3,067.16 $3,067.16 plus 52.38 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1,000 s.f. 1,000 $1,279.19 $2,834.57 4,113.76 4,113.76 plus 22.35 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 5,000 s.f. 5,000 $1,569.92 $4,331.81 5,901.73 5,901.73 plus 26.31 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 10,000 s.f. 10,000 $1,875.18 $6,657.61 8,532.79 8,532.79 plus 23.33 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 20,000 s.f.20,000 $2,165.90 $11,033.02 13,198.92 13,198.92 plus 11.36 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 50,000 s.f.50,000 $2,369.41 $17,647.02 20,016.43 20,016.43 plus 9.28 for each additional 100 s.f. or fraction thereof Garage, Workshop, Storage 200 $450.62 $1,032.07 $1,482.69 $1,482.69 plus 4.54 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 200 s.f. 1,000 $494.23 $1,061.15 1,555.38 1,555.38 plus 8.72 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1,000 s.f.1,500 $523.31 $1,119.29 1,642.60 1,642.60 plus 7.13 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1,500 s.f. 29

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Plan Check Cost New Construction Fee Schedule Building Permit Cost New Construction Fee Schedule $1,264.65 plus 14.55 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1,000 s.f. $2,020.54 plus 25.46 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1,000 s.f. plus 5.63 1,555.38 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 5,000 s.f. 2,529.31 plus 35.80 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 5,000 s.f. plus 3.05 2,006.00 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 10,000 s.f. 5,392.95 plus 28.06 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 10,000 s.f. plus 4.43 2,311.27 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 20,000 s.f. 8,198.45 plus 14.46 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 20,000 s.f. plus 1.21 3,197.98 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 50,000 s.f. 11,091.17 plus 8.75 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 50,000 s.f. plus 0.99 3,924.79 for each additional 100 s.f. or fraction thereof 16,338.76 plus 7.14 for each additional 100 s.f. or fraction thereof $1,104.76 plus 8.73 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1,000 s.f. $1,962.40 plus 43.65 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1,000 s.f. plus 3.63 1,279.19 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 5,000 s.f. 2,834.57 plus 18.72 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 5,000 s.f. plus 3.05 1,569.92 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 10,000 s.f. 4,331.81 plus 23.26 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 10,000 s.f. plus 1.45 1,875.18 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 20,000 s.f. 6,657.61 plus 21.88 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 20,000 s.f. plus 0.34 2,165.90 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 50,000 s.f. 11,033.02 plus 11.02 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 50,000 s.f. plus 0.28 2,369.41 for each additional 100 s.f. or fraction thereof 17,647.02 plus 9.00 for each additional 100 s.f. or fraction thereof $450.62 plus 2.73 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 200 s.f. $1,032.07 plus 1.82 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 200 s.f. 494.23 plus 2.91 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1,000 s.f. 1,061.15 plus 5.81 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1,000 s.f.523.31 plus 2.38 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1,500 s.f. 1,119.29 plus 4.75 for each additional 100 s.f. or fraction thereof > half of 100 s.f., to and including 1,500 s.f. 30

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Code Enforcement
# Description Fee

CODE COMPLIANCE
1 Re‐inspection fee, if property is not in compliance $139.77 2 Hourly Rate $139.77
3 Seizure warrant process $1,118.17
4 Property noncompliance recording fee (Notice of Pendency) $195.68 5 Administrative charges for towing, storing and impounding vehicles $111.82 6 Withdrawal Notice of Pendency $218.04
31

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Law Enforcement
# Description Fee
1 Parking prohibited $55.91
2 Parking prohibited ‐ School zone $83.86
3 Parking prohibited ‐ Specific places $55.91
4 Parked on median strip $83.86
5 Parked wrong way on one‐way $83.86
6 Parked in excess of 72 hours $83.86
7 Parked in violation of signs or curbs markings $111.82 8 Parked in alley $55.91
9 Vending from vehicle on public right‐of‐way $111.82
10 Repairing vehicle in roadway $167.73
11 Disobeying signs in City parking areas $44.73
12 Commercial truck parked in residential zone $223.63
13 Truck not using designated truck route ‐ First infraction $55.91 14 Truck not using designated truck route ‐ Second infraction $167.73 15 Dismantled vehicle parked on private property over 15 days $111.82 16 Junk, inoperative, unused vehicle parked on public or private property $55.91 17 Motorhome or RV parked on public or private property ‐ being lived in $223.63 18 Clearing more than one acre of land without City permit $1,118.17 19 Failure to obtain City permit or to comply with requirements of permit ‐ First infraction $559.09
20 Failure to obtain City permit or to comply with requirements of permit ‐ Second infraction $1,118.17
21 Failure to obtain City permit or to comply with requirements of permit ‐ Third infraction $2,236.35
22 Parked on bike path $78.27
23 Parked in fire lane $167.73
24 Daily Rental $78.27
25 Parked on wheelchair access $559.09
26 Parked more than 18 inches from curb $27.95
27 Parked on wrong side of street $78.27
28 Parked in handicapped space $559.09
29 Parked in handicapped lines or crosshatch $111.82
30 Parked within 15 feet of hydrant $111.82
31 Parked with person locked inside vehicle $111.82
32 Restricted parking on state highway $55.91
33 Stopped / parked in intersection $111.82
34 Stopped / parked in crosswalk $111.82
35 Stopped within 15 feet of fire station driveway $55.91 36 Stopped in public or private driveway entrance $55.91 37 Stopped on sidewalk $83.86
38 Stopped in bus zone $335.45
39 Blocking traffic at highway obstruction $55.91
40 Blocking access ramp for disabled, if sign or painted curb $447.27 32

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# Description Fee
41 Obstructing handicapped parking $559.09
42 Abandoned vehicle on highway $223.63
43 Abandoned vehicle on private or public property $223.63 44 Fine for violation not listed above $111.82
45 Vehicle Tow Fee $48.00
33

Page 142 of 227 ends

STAFF REPORT
TO: City Council
FROM: City Manager
FOR MEETING: Jun 27 2023
SUBJECT: Reject All Bids for the Project Phoenix – Treatment System Improvements.

RECOMMENDATION:

That the City Council:

1. Reject all bids for the Project Phoenix -– Treatment System Improvements Project.

2. Direct Staff to review the project and revise the scope as needed.

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
BACKGROUND:

On March 8, 2023, staff solicited bids for the Project Phoenix – Treatment System Improvements with an Estimated Contract Value of $1,600,450.00. Bids were received and opened by the Human Resources Manager on April 13, 2023 at 10:00 with the following results:

Company Bid Amount
The Van Dyke Corporation $1,425,415.00
316 Engineering & Construction Co. $1,878,549.00
Tri-Star Contracting $2,302,169.00
Canyon Springs Enterprises $2,834,250.00
The apparent low bid submitted by Van Dyke Corporation proposed a Package Treatment Plant system which differed from the specifications identified in the contract documents. The design engineer, NV5, is not able to make a determination as to whether or not the proposed system meets the requirements.

Staff recommends reviewing and revising the contract documents as necessary and re-advertising the project.

In accordance to the Contract Documents, the City reserves the right to reject any or all bids.

ALTERNATIVES:

Page 143 of 227 ends

The City Council provide alternative direction to Staff.

FISCAL IMPACT:

Funding for the project has been appropriated in the City Council adopted Fiscal Year 2022/2023 budget and includes Federal funds from the United States Department of Commerce, Economic Development Administration. There is no fiscal impact by rejecting all bids. There will be a minor cost to revise the contract documents and re-advertise the project.

Page 144 of 227 ends

STAFF REPORT
TO: City Council
FROM: City Manager
FOR MEETING: Jun 27 2023
SUBJECT: Grant of Option: Affordable Housing IIG Application.

RECOMMENDATION:

The City Council approve the Option to Purchase Real Property with Milestone Housing for furtherance of the Affordable Housing Project behind City Hall; the City will be selling the land AND committing $1M from Housing Funds for the project.

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:
• Option to Purchase -
Milestone Housing Group
• Potential Rents
• Exclusive Negotiating
Agreement
BACKGROUND:

In July of 2020, during the COVID-19 Pandemic, the City interviewed three housing developers for Affordable Housing. With many other projects and the pandemic, the selection of the developer was delayed until 2021. The City ultimately awarded the project to Milestone Housing. The interview team (City Manager, Community Development Director, along with the Town Manager of Yucca Valley) decided that Milestone matches the needs of our community, as a housing developer. During the negotiating process, and the space available in the Project Phoenix area, the team decided that a better and bigger location is behind City Hall, at the corner of Civic Center Drive and Split Rock.

The Project, as conceptually planned, and reviewed by the Planning Commission is as follows:

This project is proposed to build in two phases, 91 affordable, multi-family housing units on a 3.078 acre section of land owned by the City of Twentynine Palms (APN 0618-262-05). The City as landowner has partnered with Milestone Housing Group to construct and operate the project. The first phase is contemplated to include 59 units.

The funding will be committed for two years, or twenty-four months, for the developer to secure funding. The project will cost approximately $21.26M or $354K per unit which will be paid with a combination of SCAG (Southern California Association of Governments), HCD (Housing and Community Development) Funds, Federal Tax Credits from TCAC (Tax Credit Allocation Committee), and developer conventional permanent debt. Page 145 of 227 On September 14, 2021, the City entered into an Exclusive Negotiating Agreement (copy attached)) with Milestone Housing, which enabled Milestone Housing to perform feasibility and due diligence analysis and investigations regarding the site and proposed project. The term of the Exclusive Negotiating Agreement will expire on September 14, 2023. The Option to Purchase Real Property (copy attached) would provide Milestone Housing with the site control necessary to apply for financing commitments, and also includes the proposed salient terms for an affordable housing and property disposition agreement (AHPDA) the City will attempt in good faith to negotiate with Milestone Housing. The site is contemplated to be sold to Milestone Housing, with the purchase price to be paid pursuant to a seller carryback note in favor of the City.

Site Characteristics
The site is located on the northeast corner of Smoketree Avenue and Civic Center Drive and is adjacent to City Hall and Veteran's Memorial Park. The site slopes gently to the south towards Civic Center Drive and the San Bernardino County Flood Control Channel further south. The site is currently vacant containing some scrub vegetation. Evidence of a previous, dirt road (El Paseo Drive) exists on the north side of the site. On the east side some of the blacktop remains where Cholla Avenue existed. Both roads have been abandoned. There is also an area in the southeast part of the site, which was previously excavated and a concrete foundation remains of a previous structure on the north part of the site. The site is under 5 acres and surrounded by development on all four sides and thus is exempt from CEQA per Section 15332, Infill Development Project.

The site was selected for many reasons. It is adjacent to San Bernardino County Social Services which includes the Transitional Assistance Department, San Bernardino County Public Library, and City Hall/Sheriff's Department. Veteran's Memorial Park is also adjacent offering a shaded, green recreational area. All of these area locations are within a short walking distance and do not require crossing a road. Twentynine Palms High School and Oasis Elementary School are located to the west on El Paseo Drive, Morongo Basin Community Health Center to the southwest on Split Rock Avenue, the Channel Trail to the south, and employment opportunities Downtown to the south. A paseo linking El Paseo Drive on the west to Veterans Park on the east is proposed on the north side of the site. A bus stop served by Basin Transit is located adjacent to Veteran's Park on Adobe Road.

Floor Plans and Amenities
The affordable housing project is proposed to consist of 32 units of senior housing and 59 units of family housing.

The senior housing building will be a three-story, elevator building, containing 32 one-bedroom units. The leasing and amenities for the building will be incorporated into the structure. Amenities include a kitchen, restrooms, meeting room, and computer area. An outside patio and BBQ area will be adjacent. The family housing component is contemplated to consist of 59 one, two, and three-bedroom units in three, three-story walkup buildings. Leasing and amenities for the family housing will be located in a separate one-story building. Amenities will include a kitchen, restrooms, meeting room, and computer area. Outdoor amenities for family housing will include a patio, BBQ area, and a tot lot. The total square footage of all structures is proposed to consist of 96,216 sf. All buildings will comply with the California Building Code requirements including Title 24, fire protection, and onsite solar requirements.

ENVIRONMENTAL:

Exempt, infill development.

ALTERNATIVES:

The City Council could choose not to approve the commitment of funds and/or land and provide other recommendations.

FISCAL IMPACT:

The $1M cash loan commitment would come from the Housing funds from Project Phoenix bond proceeds and sale proceeds from the sale of the property for the Home 2 Suites hotel.

Page 146 of 227 ends

882/014122-0044
17761275.4 a06/21/23

OPTION TO PURCHASE REAL PROPERTY
THIS OPTION TO PURCHASE REAL PROPERTY (this “Agreement”) is entered into as of the ___ day of July, 2023 (the “Effective Date”), by and between CITY OF TWENTYNINE PALMS, a California municipal corporation (“City”), and MILESTONE HOUSING GROUP, LLC, a California limited liability company (“MHG”). City and MHG are sometimes referred to collectively herein as the “Parties.”

RECITALS
A. City currently owns fee title to that certain real property located generally at the northwest corner of the intersection of Smoketree Avenue and Civic Center Drive, in the City of Twentynine Palms, County of San Bernardino, State of California (the “City Property”). The City Property comprises approximately four and forty-seven hundredths (4.47) acres, and is commonly identified as APNs: 0618-262-05 and 0618-262-01.

B. MHG desires to develop and operate on a portion of the City Property comprising approximately three and seventy-eight thousandths (3.078) acres (the “Property”) a rental affordable housing development containing approximately ninety-one (91) dwelling units restricted for rental to and occupancy by income-eligible households (the “Affordable Housing Project”).

C. A depiction of the approximate location and configuration of the Property is attached hereto and incorporated herein as Exhibit “A”.. City contemplates processing a lot line adjustment to establish the Property as a separate legal parcel.

D. City and MHG desire to enter into this Agreement to provide for City to grant to MHG and for MHG to obtain from City an option to purchase the Property upon the terms more particularly set forth in this Agreement.

NOW, THEREFORE, IN CONSIDERATION OF THE FOREGOING RECITALS,

WHICH ARE INCORPORATED HEREIN BY THIS REFERENCE, AND THE MUTUAL

PROMISES CONTAINED IN THIS AGREEMENT, THE PARTIES AGREE AS FOLLOWS:

AGREEMENT

1. Grant of Option.
(a) Option. City hereby grants to MHG the option (the “Option”) to purchase the Property on the terms and conditions set forth in this Agreement. (b) AHPDA Form. Prior to the exercise of the Option, City and MHG shall agree on the final form, terms and conditions of the affordable housing and property disposition development agreement for the Property (“AHPDA”), which AHPDA shall incorporate the basic terms set forth on Exhibit “B” attached hereto. Upon the mutual agreement of the final form, terms and conditions of the AHPDA, the Parties shall attach

Page 147 of 227 ends

882/014122-0044
17761275.4 a06/21/23 -2-
the form of the AHPDA, to this Agreement as a substitute Exhibit “B”. If City and MHG do not agree in writing on the form, terms and conditions of the AHPDA prior to the expiration of the Term (as hereinafter defined), this Agreement and the Option shall automatically terminate, without the need of any notice or documentation, and neither Party shall have any further rights or obligations hereunder except for any indemnification obligations hereunder, all of which shall survive the termination hereof.

2. Term of Option.
(a) Term. The term of the Option shall be for a period commencing on the Effective Date and ending 5:00 p.m. (California time) on the two-year anniversary of the Effective Date (the “Term”). Notwithstanding the foregoing, provided MHG is not in default hereunder, the City Manager of City shall have the right, in his or her sole and absolute discretion, to grant an extension to the Term for up to ninety (90) additional days. (b) Exercise of Option. At any time during the Term after the Parties have agreed on the terms and conditions of the AHPDA, and the City Council of the City has considered and approved the AHPDA, MHG may exercise the Option by giving written notice to City of its exercise of the Option (the “Option Notice”). Promptly after the exercise of the Option, MHG and City shall execute and deliver the AHPDA. (c) Expiration. The Option shall expire at 5:00 p.m. (California time) on the last day of the Term.

3. Option Consideration. The Option is granted in consideration of MHG’s payment to City of the sum of Ten Dollars ($10.00). MHG shall pay such amount to City upon the execution of this Agreement.

4. Due Diligence. During the Term, MHG and its employees, contractors, agents, representatives, architects, engineers and consultants (collectively, the “MHG Entities”), at MHG’s sole cost and expense, shall have the right to enter and inspect the Property, make surveys and conduct such soils, engineering, hazardous or toxic material, pollution, seismic or other tests, studies and investigation as MHG may require (collectively, the “Inspections”), pursuant to the terms of this Section 4. (a) MHG shall cause the Inspections to be conducted at times reasonably acceptable to City, upon not less than seventy-two (72) hours’ prior written notice to City in each instance, and in a manner that does not materially adversely affect the Property. City may have a representative present at any Inspections of the Property. (b) In conducting its Inspections at the Property, MHG and the MHG Entities shall: (i) not damage any part of the Property (other than invasive testing conducted in accordance with Sections 4(c) and (d) below) or any personal property located on or adjacent to the Property; (ii) promptly repair any damage to the Property resulting directly or indirectly from the entry by MHG or the MHG Entities or from any such Inspections, unless such damage resulted directly from the discovery of any pre-existing condition at the Property; (iii) not injure or otherwise cause bodily harm to City, or its tenants, agents, guests, invitees, contractors and employees; (iv) comply with all

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applicable laws; and (v) not permit any liens to attach to the Property by reason of the exercise of MHG’s rights hereunder.
(c) Notwithstanding anything to the contrary in this Section 4, MHG shall not undertake any invasive testing, including, without limitation, taking samples of any kind or type from the Property, until such time as MHG has submitted to City and obtained City’s prior written approval of MHG’s proposed work plan, which work plan shall include MHG’s sampling and testing procedures, as well as the specific locations proposed to be accessed. City’s approval pursuant this Section 4 shall not be unreasonably withheld, conditioned, or delayed.
(d) Promptly upon completion of each Inspection, MHG shall cause the portion of the Property subject to such Inspection to be restored to the condition existing immediately prior to such Inspection, provided, however, MHG shall have no obligation to remediate any pre-existing environmental condition discovered by MHG in connection with any Inspection, so long as such Inspection has not exacerbated the pre-existing environmental condition. MHG shall provide City, at no additional charge and without representation or warranty of any kind or liability with respect to the use thereof, with copies of any final reports prepared by third parties for MHG in connection with the Inspections (excluding market studies and architectural renderings, if any) within five (5) business days of MHG’s receipt of the same.
(e) MHG hereby indemnifies, defends, and holds harmless City and City’s officers, officials, members, employees, agents, representatives, contractors, and volunteers (collectively, the “City and City Personnel”), and the Property, free and harmless from and against any and all claims, damages, liabilities, demands, injury, actions, liens, stop notices, losses, costs and expenses (including without limitation reasonable attorneys’ fees and court costs) to the extent arising from or as a result of the conducting of Inspections, except that the City and City Personnel shall not be indemnified to the extent any claim, loss or damage (i) is caused by the City and City Personnel’s gross negligence, recklessness or intentional misconduct (ii) for any matter to the extent arising directly from the discovery of any pre-existing condition at the Property, or (iii) as a result of the City and City Personnel’s intentional material breach of this Agreement.
(f) MHG’s obligations under this Section 4 shall survive the expiration or termination of this Agreement.

5. Insurance. Without limiting MHG’s indemnification obligations under this Agreement, MHG shall procure and maintain, at its sole cost and for the duration of this Agreement, insurance coverage as provided below, against all claims for injuries against persons or damages to property which may arise from or in connection with the performance of the work hereunder by MHG and/or the MHG Entities, including without limitation MHG’s conducting of the Inspections. In the event that MHG subcontracts any portion of the work, the contract between MHG and such subcontractor shall require the subcontractor to maintain the same types (with the same endorsements) and amounts of insurance that MHG is required to maintain pursuant to this Section.

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A. Commercial General Liability Insurance which affords coverage at least as broad as Insurance Services Office “occurrence” form CG 00 01 including completed operations and contractual liability, with limits of liability of not less than One Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) annual aggregate for liability arising out of MHG’s performance of this Agreement, including without limitation MHG’s conducting of the Inspections. Such insurance shall be endorsed to:
(1) Name the City and City Personnel as additional insureds for claims arising out of MHG’s performance of this Agreement, including without limitation MHG’s conducting of the
Inspections.
(2) Provide that the insurance is primary and non-contributing with any other valid and collectible insurance or self-insurance available to City.

B. Automobile Liability Insurance with a limit of liability of not less than One Million Dollars ($1,000,000) each occurrence and One Million Dollars ($1,000,000) annual aggregate. Such insurance shall include coverage for all “owned,” “hired” and “non-owned” vehicles, or coverage for “any auto.” Such insurance shall be endorsed to:
(1) Name the City and City Personnel as additional insureds for claims arising out of MHG’s performance of this Agreement, including without limitation MHG’s conducting of the
Inspections.
(2) Provide that the insurance is primary and non-contributing with any other valid and collectible insurance or self-insurance available to City.

C. Workers’ Compensation Insurance in accordance with the Labor Code of California and covering all employees of MHG providing any service in the performance of this Agreement. Such insurance shall be endorsed to:
(1) Waive the insurer’s right of subrogation against the City and City Personnel.

D. Evidence of Insurance: MHG shall provide to City a Certificate(s) of Insurance evidencing such coverage, together with copies of the required policy endorsements, no later than five (5) business days prior to commencement of any inspections and prior to the expiration of any policy. Statements on an insurance certificate will not be accepted in lieu of the actual endorsements required.

Coverage shall not be suspended, voided, cancelled, reduced in coverage or in limits, non-renewed, or materially changed for any reason, without thirty (30) days prior written notice thereof given by the insurer to City by U.S. mail, or by personal delivery, except for nonpayment of premiums, in which case ten (10) days prior notice shall be provided.

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E. Acceptability of Insurers. Each policy shall be from a company with current A.M. Best’s rating of A- VII or higher and authorized to do business in the State of California, or otherwise allowed to place insurance through surplus lines brokers under applicable provisions of the California Insurance Code or any federal law. Any other rating must be approved in writing by City.

6. City’s Cooperation in Seeking Permits and Approvals. During the Term, MHG may meet with all City, County of San Bernardino, district and other governmental entities to discuss MHG’s proposed development of, and other matters relating to, the development of the Property and may obtain all project approvals that MHG may deem necessary or advisable in connection therewith. Provided City does not incur any liabilities or out-of-pocket costs except those authorized by City and without binding the Property prior to the execution and delivery of the AHPDA in any way, City agrees to cooperate with MHG in any such matters and execute any and all documents or join in any applications that may be required to obtain all such project approvals in connection with the development of the Property. However, the Parties agree that this Agreement shall not be binding on the City Council or the Planning Commission of the City regarding any approvals of the Affordable Housing Project required by such bodies. MHG obtains no right to develop the Affordable Housing Project on the Property or any portion of the Property by virtue of this Agreement.

7. Notices. All notices or other communications made pursuant to this Agreement shall be in writing and shall be served to the Parties at the following addresses (i) mailed by certified mail, postage prepaid, return receipt requested; (ii) sent by express delivery service, charges prepaid with a delivery receipt; or (iii) personally delivered with a delivery receipt:

City: City of Twentynine Palms
6136 Adobe Road
Twentynine Palms, CA 92277
Attn.: City Manager
With a copy to: Rutan & Tucker, LLP
18575 Jamboree Road, 9th Floor
Irvine, CA 92612
` Attn: A. Patrick Muñoz
MHG: Milestone Housing Group, LLC
51 University Avenue, Suite D
Los Gatos, CA 95050
Attn: Manager
With a copy to: Bocarsly Emden Cowan Esmail & Arndt LLP 633 W. Fifth St., 64th Floor
Los Angeles, California 90071
Attn: Kyle Arndt

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All notices shall be deemed received on the date shown on the delivery receipt as the date of delivery, the date delivery was refused, or the date the notice was returned as undeliverable. Either Party may change its address for the purposes of this paragraph by giving prior written notice of the change to the other Party in the manner provided in this Section.

8. Assignment. MHG may assign its rights and obligations under this Agreement to a limited partnership in which MHG or an Affiliate of MHG is the managing general partner (“Partnership”) without consent of City. Except as provided in the preceding sentence, MHG may not assign its rights or obligations under this Agreement without the prior written consent of City. As used in this Agreement, the term “Affiliate” means any person or entity directly or indirectly, through one or more intermediaries, controlling, controlled by or under common control with MHG. The term “control” as used in the immediately preceding sentence, means, with respect to a person or entity that is a corporation, the right to the exercise, directly or indirectly, of more than fifty percent (50%) of the voting rights attributable to the shares of the controlled corporation, and, with respect to a person or entity that is not a corporation, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled person or entity.

9. Binding Effect. This Agreement and its terms and conditions shall be binding upon and inure to the benefit of the Parties to this Agreement and their respective successors and permitted assigns.

10. Time. Time is of the essence of this Agreement.

11. Further Documents. Upon the reasonable request of the other Party, each Party will execute, acknowledge and deliver or cause to be executed, acknowledged and delivered, such further instruments and documents as may be reasonably necessary in order to carry out the intent and purpose of this Agreement, including escrow instructions.

12. Exhibits. All exhibits attached to this Agreement and referred to in this Agreement are incorporated into this Agreement by this reference as though they were fully set forth in this Agreement.

13. Commission. Each Party to this Agreement represents to the other Party that it has not engaged or used the services of any person, firm or corporation that may claim a broker’s commission or finder’s fee upon execution of this Agreement, the exercise of the Option or the execution of the AHPDA, and each Party hereto agrees to hold the other Party harmless from any loss, damage, expense or liability, including attorney’s fees, resulting from any claim by any person, firm or corporation based upon its having acted as broker or finder on behalf of said indemnifying Party.

14. Captions. The captions of the sections/paragraphs of this Agreement are for convenience and reference only, and the words contained in the captions shall in no way be held to explain, modify, amplify or aid in the interpretations, constructions or meaning of the provisions of this Agreement.

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15. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same Agreement.

16. Attorney’s Fees. In any action between MHG and City to enforce or interpret any of the terms of this Agreement, the prevailing Party shall be entitled to recover its costs and expenses, including, without limitation, reasonable attorneys’ fees and expert witness fees.

17. Entire Agreement. This Agreement contains the entire agreement between the Parties respecting the matters set forth herein, and supersedes all prior agreements between the Parties respecting such matters.
[END OF AGREEMENT - SIGNATURES ON FOLLOWING PAGE]

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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.
“City”
CITY OF TWENTYNINE PALMS, a California
municipal corporation
By:

Frank Luckino, City Manager
ATTEST:
____________________________
Cindy Villescas CMC, City Clerk
APPROVED AS TO FORM:

RUTAN & TUCKER, LLP
By: ________________________
A. Patrick Muñoz, City Attorney
“MHG”

MILESTONE HOUSING GROUP, LLC,
a California limited liability company
By: _____________________________
Marcus A. Griffin, Manager

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17761275.4 a06/21/23 EXHIBIT “A”
EXHIBIT “A”

DEPICTION OF THE PROPERTY

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17761275.4 a06/21/23 EXHIBIT “B”
EXHIBIT “B”

TERMS OF AHPDA

1. The purchase price for the Property (“Purchase Price”) shall be One Dollar and Ten Cents ($1.10) per square foot, which Purchase Price is based on an appraisal obtained by the City and represents the fair market value of the Property.

2. The Closing Date shall mean and refer to the date which is the later of the following: (a) five (5) business days following the date MHG has obtained its entitlements for the development of the project, or (b) one hundred eighty (180) days after MHG has received written binding commitments for MHG’s financing; provided, however, that in no event shall be the Closing Date occur following the two-year anniversary of the Effective Date.

3. City shall provide MHG with an CLTA owner’s policy of title insurance with liability in the amount of the Purchase Price showing title to the Property vested in MHG free and clear of exceptions and encumbrances except nondelinquent general and special real property taxes and assessments, easements, encumbrances, covenants, conditions, restrictions, rights of way and other matters of record approved by MHG during the due diligence period and the standard preprinted exceptions of exclusions from coverage set forth in the title policy along with such endorsements as may be reasonably requested by MHG. MHG shall have the right to obtain, at its sole cost and expense, an ALTA extended coverage policy of title insurance.

4. MHG shall have a ninety (90) day due diligence period to approve the condition of the Property and any other matters related to the Property including MHG’s intended use and development thereof, in MHG’s sole and absolute discretion.

5. Title to the Property shall be conveyed by City to MHG pursuant to a grant deed in a form and content to be approved by the Parties and attached to the AHPDA.

6. All items of income and expense related to the Property, including non-delinquent real property taxes and assessments shall be prorated to the Closing Date.

7. City shall pay one-half (1/2) of the escrow fee and all title insurance premiums for that portion of the owner’s title policy which would be incurred for a standard CLTA form of owner’s title insurance policy. MHG shall pay one-half (1/2) of the escrow fee, all documentary transfer taxes, all title insurance premiums associated with any title insurance coverage required by any lender, that portion of the owner’s title policy premium which is attributable to the additional cost of ALTA extended coverage, if applicable, the cost of any survey of the Property

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requested by MHG and the cost of any title endorsements requested by MHG and the cost of recording the Grant Deed.

8. The AHPDA shall contain representations and warranties from City and MHG to be agreed to by the Parties. Otherwise, the Property shall be acquired by MHG in its AS-IS, WHERE-IS and SUBJECT TO ALL FAULTS condition.

9. The AHPDA shall include a commitment by City to provide a loan to MHG sourced from City’s low and moderate income housing asset fund (the “City Loan”) to cover costs incurred by MHG in developing the Affordable Housing Project. A portion of the City Loan, in the amount of the Purchase Price, will be provided in the form of carryback financing to fund MHG’s purchase of the Property; the remaining portion of the City Loan will be provided in the form of a “cash” loan (the “Cash Component of City Loan”). City contemplates that the Cash Component of City Loan will be in amount of One Million Dollars ($1,000,000); the City Loan shall be secured by a deed of trust. Disbursed portions of the City Loan shall accrue simple interest of three percent (3%) per year. The City Loan shall be repaid from a proportionate share of fifty percent (50%) of the cash flow generated by operation of the Affordable Housing Project. The City Loan shall mature 57 years following the closing date under the AHPDA. The City Loan shall be nonrecourse to MHG except with respect to fraud or similar acts of misconduct by MHG. The deed of trust securing the City Loan, but not the City’s regulatory agreement, will be subordinate to the lien of the deed of trust securing a construction and a permanent loan from an institutional lender and each deed of trust securing a greater loan amount, respectively.

10. The AHPDA shall require that MHG develop the Property in a manner which allows the proposed disposition of the Property to qualify as a disposition of exempt surplus land pursuant to the California Surplus Lands Act.

11. The AHPDA shall contain such other terms and conditions as agreed to by the Parties

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RENTAL INFORMATION
21,260,819
Joshua Tree Family Apts

RENTAL INCOME AND EXPENSES

RENTAL INCOME OPERATING EXPENSES
Total Gross Net Total Total Per Unit Annual
Type of No. of Square Square Rent per Utility Rent per Rent per Annual Property Management Fee 727 43,630 Unit: Units Footage Footage Month Allowance Month Month Rent Payroll and Administrative 2,642 158,500 Utility Expenses 907 54,400
1 Bedroom 30% AMI 2 563 1,126 524 35.00 489 978 11,736 Maintenance & Repair Expenses 1,000 60,000 1 Bedroom 40% AMI 3 563 1,689 699 35.00 664 1,992 23,904 Insurance 450 27,000 1 Bedroom 50% AMI 7 563 3,941 874 35.00 839 5,873 70,476 Property Taxes 33 2,000 1 Bedroom 60% AMI 4 563 2,252 1,049 35.00 1,014 4,056 48,672 Other - 0 Unused 0 0 0 0 0.00 0 0 0 Marketing and Leasing 92 5,500 2 Bedroom 30% AMI 3 730 2,190 629 45.00 584 1,752 21,024 Replacement Reserves 250 15,000 2 Bedroom 40% AMI 4 730 2,920 839 45.00 794 3,176 38,112 2 Bedroom 50% AMI 12 730 8,760 1,048 45.00 1,003 12,036 144,432 Total 6,100 366,030 2 Bedroom 60% AMI 4 730 2,920 1,258 45.00 1,213 4,852 58,224 Unused 0 0 0 0 0.00 0 0 0 Per Unit $6,100
3 Bedroom 30% AMI 2 964 1,928 727 55.00 672 1,344 16,128 Per Unit (before Repl Res) $5,850 3 Bedroom 40% AMI 3 964 2,892 969 55.00 914 2,742 32,904 3 Bedroom 50% AMI 10 964 9,640 1,211 55.00 1,156 11,560 138,720 NOI/Cash Flow Calculation 3 Bedroom 60% AMI 5 964 4,820 1,454 55.00 1,399 6,995 83,940 Total Rental Revenue 688,272 Unused 0 0 0 0.00 0 0 0 Commerical Revenue 0
Unused 0 0 0 0 0 0 0 0 Other Income 7,200
Manager 1 964 964 0 0 0 0 0 Effective Gross Income 695,472 Total 60 46,042 57,356 688,272 Less Vacancy/Bad Debt 5% (34,414) 30% 13,813 Net Collected Revenue 661,058
59,855 Less: Operating Expenses (351,030)
Less: Replacement Reserves (15,000)
Net Operating Income 295,029
Debt Service - 1st Mortgage (245,892)
0 Net Cash Flow 49,137
DCR 1.200

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EXCLUSIVE NEGOTIATING AGREEMENT
THIS EXCLUSIVE NEGOTIATING AGREEMENT ( the " Agreement") is entered into as of September 14, 2021 ( the " Effective Date"), by and between the CITY OF TWENTYNINE PALMS, a California municipal corporation (" City"), and MILESTONE HOUSING GROUP, LLC, a California limited liability company (" Developer"). City and Developer may be individually referred to herein as a " Party" and collectively referred to herein as the "Parties".

RECITALS
The following recitals are a substantive part of this Agreement.

A. City is the owner of fee title to that certain real property located generally at the northwest corner of the intersection of Smoke Tree Avenue and Civic Center Drive, in the City of Twentynine Palms, County of San Bernardino, State of California ( the Property"). The Property is depicted on Exhibit "A" hereto, which is incorporated herein by this reference.

B. Developer is an experienced developer of residential housing developments, including affordable rental housing developments.

C. Developer is interested in negotiating with City for purposes of determining the feasibility, and potential terms, for Developer's acquisition of the Property for the potential development thereon of an affordable rental housing development ( an Affordable Housing Project").

D. The purpose of this Agreement is to establish a period during which the Developer may perform studies and investigations and other due diligence activities within the Property to determine the feasibility of Developer' s purchase of the Property for an Affordable Housing Project, and City and Developer shall exclusively negotiate with each other in an attempt to agree on the terms of an affordable housing and property disposition agreement for Developer' s purchase of the Property for development and operation of an Affordable Housing Project (an "AHPDA").

NOW THEREFORE, the Parties mutually agree as follows:

1. Agreement to Negotiate in Good Faith. City and Developer agree that for the term of the "Negotiating Period" ( as defined in Section 2 hereof) each Party shall diligently and in good faith attempt to negotiate the terms of an AHPDA for consideration by the Twentynine Palms City Council ( the " City Council"). During the Negotiating Period, City agrees to negotiate exclusively with Developer, and not to ( 1) negotiate with any other person or entity, with regard to the sale or other disposition of the Property, or ii) approve or conduct a public hearing for any other acquisition, financing and/or development of the Property, or any portion thereof.
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2. Negotiating Period. The negotiating period ( the " Negotiating Period") shall be for a period of six (6) months, commencing on the Effective Date.

The City Manager of City, or his or her designee, shall have the right, in his or her sole discretion, to extend the Negotiating Period for up to an additional three ( 3) months, resulting in a total potential Negotiating Period of up to nine ( 9) months.

Upon the earlier of (a) the expiration of the Negotiating Period, or (b) the Parties' signing an AHPDA for the Property, this Agreement shall automatically terminate, without further written notice or action by either Party. Upon such automatic termination, the Parties acknowledge and agree that neither Party shall have any further rights or remedies as to the other, except as specifically set forth herein.

Notwithstanding the foregoing, however, or anything in this Agreement to the contrary, if, upon Developer' s completion of its due diligence activities and delivery to City of a written acceptance of the physical and environmental condition of the Property, (i) the Parties have not completed negotiations regarding the terms of an AHPDA, and ( ii) there is less than sixty ( 60) days remaining in the Negotiation Period ( as it may have been extended by the City Manager pursuant to the terms of this Section 2), the Negotiation Period shall be automatically extended for an additional sixty ( 60) days to provide the Parties with additional time to attempt to negotiate the terms of an AHPDA.

3. Due Diligence. During the Negotiating Period, Developer and its employees, contractors, agents, representatives, architects, engineers and consultants collectively, the "Developer Entities"), at Developer' s sole cost and expense, shall have the right to enter and inspect the Property, make surveys and conduct such soils, engineering, hazardous or toxic material, pollution, seismic or other tests, studies and investigation as Developer may require ( collectively, the " Inspections"), pursuant to the terms of this Section 3.
a) Developer shall cause the Inspections to be conducted at times reasonably acceptable to City, upon not less than seventy-two ( 72) hours' prior written notice to City in each instance, and in a manner that does not materially adversely affect the Property. City may have a representative present at any Inspections of the Property. b) In conducting its Inspections at the Property, Developer and the Developer Entities shall: ( i) not damage any part of the Property ( other than invasive testing conducted in accordance with Sections 3( c) and ( d) below) or any personal property located on or adjacent to the Property; (ii) promptly repair any damage to the Property resulting directly or indirectly from the entry by Developer or the Developer Entities or from any such Inspections, unless such damage resulted directly from the discovery of any pre-existing condition at the Property; ( iii) not injure or otherwise cause bodily harm to City, or its tenants, agents, guests, invitees, contractors and employees; iv) comply with all applicable laws; and ( v) not permit any liens to attach to the Property by reason of the exercise of Developer's rights hereunder. c) Notwithstanding anything to the contrary in this Section 3, Developer shall not undertake any invasive testing, including, without limitation, taking samples of any kind or type from the Property, until such time as Developer has submitted to City 882/ 014122- 00"
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and obtained City's prior written approval of Developer' s proposed work plan, which work plan shall include Developer' s sampling and testing procedures, as well as the specific locations proposed to be accessed. City' s approval pursuant this Section 3 shall not be unreasonably withheld, conditioned, or delayed.
d) Promptly upon completion of each Inspection, Developer shall cause the portion of the Property subject to such Inspection to be restored to the condition existing immediately prior to such Inspection. Developer shall provide City, at no additional charge and without representation or warranty of any kind or liability with respect to the use thereof, with copies of any final reports prepared by third parties for Developer in connection with the Inspections ( excluding market studies and architectural renderings, if any) within five ( 5) business days of Developer's receipt of the same. e) Developer hereby indemnifies, defends, and holds harmless City and City's officers, officials, members, employees, agents, representatives, contractors, and volunteers ( collectively, the " City and City Personnel"), and the Property, free and harmless from and against any and all claims, damages, liabilities, demands, injury, actions, liens, stop notices, losses, costs and expenses ( including without limitation reasonable attorneys' fees and court costs) to the extent arising from or as a result of the conducting of Inspections, except that the City and City Personnel shall not be indemnified to the extent any claim, loss or damage ( i) is caused by the City and City Personnel' s gross negligence, recklessness or intentional misconduct ( ii) for any matter to the extent arising directly from the discovery of any pre- existing condition at the Property, or (iii) as a result of the City and City Personnel' s intentional material breach of this Agreement.
f) Developer' s obligations under this Section 3 shall survive the expiration or termination of this Agreement.

4. Insurance. Without limiting Developer's indemnification obligations under this Agreement, Developer shall procure and maintain, at its sole cost and for the duration of this Agreement, insurance coverage as provided below, against all claims for injuries against persons or damages to property which may arise from or in connection with the performance of the work hereunder by Developer and/ or the Developer Entities, including without limitation Developer' s conducting of the Inspections. In the event that Developer subcontracts any portion of the work, the contract between Developer and such subcontractor shall require the subcontractor to maintain the same types ( with the same endorsements) and amounts of insurance that Developer is required to maintain pursuant to this Section.

A. Commercial General Liability Insurance which affords coverage at least as broad as Insurance Services Office " occurrence" form CG 00 01 including completed operations and contractual liability, with limits of liability of not less than One Million Dollars ($ 1, 000,000) per occurrence and Two Million Dollars ($2, 000, 000) annual aggregate for liability arising out of Developer's performance of this Agreement, including without limitation Developer's conducting of the Inspections. Such insurance shall be endorsed to:
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1) Name the City and City Personnel as additional insureds for claims arising out of Developer' s performance of this
Agreement, including without limitation Developer's conducting of the Inspections.
2) Provide that the insurance is primary and non-contributing with any other valid and collectible insurance or self-insurance available to City.

B. Automobile Liability Insurance with a limit of liability of not less than One Million Dollars ($ 1, 000, 000) each occurrence and One Million Dollars 1, 000, 000) annual aggregate. Such insurance shall include coverage for all " owned," hired" and " non -owned" vehicles, or coverage for "any auto." Such insurance shall be endorsed to:
1) Name the City and City Personnel as additional insureds for claims arising out of Developer' s performance of this
Agreement, including without limitation Developer' s conducting of the Inspections.
2) Provide that the insurance is primary and non- contributing with any other valid and collectible insurance or self-insurance available to City.

C. Workers' Compensation Insurance in accordance with the Labor Code of California and covering all employees of Developer providing any service in the performance of this Agreement. Such insurance shall be endorsed to:
1) Waive the insurer' s right of subrogation against the City and City Personnel.

D. Evidence of Insurance: Developer shall provide to City a Certificate( s) of Insurance evidencing such coverage, together with copies of the required policy endorsements, no later than five (5) business days prior to commencement of any inspections and prior to the expiration of any policy. Statements on an insurance certificate will not be accepted in lieu of the actual endorsements required.

Coverage shall not be suspended, voided, cancelled, reduced in coverage or in limits, non -renewed, or materially changed for any reason, without thirty (30) days prior written notice thereof given by the insurer to City by U. S. mail, or by personal delivery, except for nonpayment of premiums, in which case ten ( 10) days prior notice shall be provided.

E. Acceptability of Insurers. Each policy shall be from a company with current A.M. Best's rating of A- VII or higher and authorized to do business in the State of California, or otherwise allowed to place insurance through surplus lines brokers under applicable provisions of the California Insurance Code or any federal law. Any other rating must be approved in writing by City.
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5. No Predetermination of City Discretion. The Parties acknowledge and agree that nothing in this Agreement in any respect does or shall be construed to affect or prejudge the exercise of City' s discretion concerning the consideration of an Affordable Housing Project or AHPDA, or any submittal by Developer with respect to either of the foregoing. The Parties do not intend for this Agreement to be an AHPDA, development agreement, or other agreement for the sale or other conveyance, or the development, of the Property. The Parties acknowledge and agree that they have not agreed upon the essential terms of the subject matter of a transaction, and that such essential terms will be the subject matter of further negotiations. The Parties acknowledge and agree that any final agreement, if an agreement is reached, would be in the form of an AHPDA, and any such AHPDA would not be effective until it has been considered and formally approved by the City Council and Developer, and thereafter has been executed by authorized representatives of each of the Parties. Notwithstanding anything in this Agreement to the contrary, City does not intend by this Agreement to commit to a definite course of action with respect to the Property or an Affordable Housing Project, and City retains full discretion with respect to (i) the Property, (ii) any proposed development of the Property, ( iii) an AHPDA, and ( iv) any determination under the California Environmental Quality Act of 1970, Public Resources Code Section 21000, et seq. ("CEQA') with respect to the consideration of an AHPDA and/ or any proposed development of the Property.

6. Costs and Expenses. Each Party shall be responsible for its own costs and expenses in connection with any activities and negotiations undertaken in connection with the performance of its obligations under this Agreement. In addition, Developer hereby acknowledges and agrees that should the Parties negotiate an AHPDA for an Affordable Housing Project, Developer shall be responsible for all of the costs to develop and operate the Affordable Housing Project, without any financial assistance provided by City.

7. Lead Negotiators. The City Manager, or his or her designee, shall be the lead negotiator for the City with respect to the subject matter of this Agreement. The Manager of Developer, or his or her designee, shall be the lead negotiator for Developer with respect to the subject matter of this Agreement.

8. Change in Developer. The qualifications of Developer are of particular interest to City. Consequently, with the exception of an "Affiliate" (as defined below), no person or entity, whether a voluntary or involuntary successor of Developer, shall acquire any rights or powers under this Agreement, nor shall Developer assign all or any part of this Agreement, without the prior written approval of City. Any such approval by City may be granted, withheld or denied at City' s sole and absolute discretion. Any other purported transfer, voluntarily or by operation of law, shall be absolutely null and void and shall confer no rights whatsoever upon any purported assignee or transferee. As used in this Agreement, the term " Affiliate" means any person or entity directly or indirectly, through one or more intermediaries, controlling, controlled by or under common control with Developer. The term " control" as used in the immediately preceding sentence, means, with respect to a person or entity that is a corporation, the right to the exercise, directly or indirectly, of more than fifty percent ( 50%) of the voting rights attributable to the shares of the controlled corporation, and, with respect to a person or entity that is not a corporation, 882/014122-0044
16697234. 3 a09/ 15/ 21 5

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the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled person or entity.

9. Property Documents; City Cooperation. Within fifteen ( 15) days after the Effective Date, City shall provide or cause to be provided to Developer all documents relating to the physical or environmental condition of the Property ( including, but not limited to, environmental, property physical condition, geological studies, engineering and structural analyses, and geotechnical reports and soil tests and analyses) to the extent reasonably known to be in City' s possession or control.

10. Address for Notices. Any notices pursuant to this Agreement shall be in writing and sent ( i) by Federal Express ( or other established and reputable express delivery service which maintains delivery records and provides a receipt with the time and date of delivery), ( ii) by hand delivery, or ( iii) by certified or registered mail, postage prepaid, return receipt requested, to the following addresses:

To City: City of Twentynine Palms
6136 Adobe Road
Twentynine Palms, CA 92277
Attn.: City Manager
With a copy to: Rutan & Tucker, LLP
18575 Jamboree Road, 9th Floor
Irvine, CA 92612
Attn: A. Patrick Munoz
To Developer: Milestone Housing Group
51 University Avenue, Suite D
Los Gatos, CA 95050
Attn: Manager
With a copy to: Bocarsly Emden Cowan Esmail & Arndt LLP 633 W. Fifth St., 64th Floor
Los Angeles, California 90071
Attention: Kyle Arndt
Any Party may designate a different address for itself by notice similarly given.

Any notice, demand or document so given, delivered or made by United States mail, shall be deemed to have been given seventy-two (72) hours after the same is deposited in the United States mail as registered or certified mail, addressed as above provided, with postage thereon fully prepaid. Any notice, demand or document delivered by overnight delivery service shall be deemed complete upon actual delivery or attempted delivery, provided such attempted delivery is made on a business day. Any such notice, demand or document not given by registered or certified mail or by overnight delivery service as aforesaid shall be deemed to be given, delivered or made upon receipt of the same by the Party to whom the same is to be given or delivered. 182/ 014122- 0044
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11. Default. Failure by either Party to negotiate in good faith or to perform any other of its obligations as provided in this Agreement shall constitute an event of default under this Agreement. The non -defaulting Party shall give written notice of a default to the defaulting Party, specifying the nature of the default and the action required to cure the default. If the default remains uncured fifteen ( 15) days after the date of such notice, the non -defaulting Party may exercise the remedies set forth in Section 12 of this Agreement.

12. Remedies for Breach of Agreement. In the event of an uncured default under this Agreement, the sole remedies of the non -defaulting Party shall be to ( a) terminate this Agreement, or ( b) institute an action for specific performance of this Agreement. Following the termination of this Agreement, neither Party shall have any further rights, remedies or obligations under this Agreement, except as specifically set forth herein. Neither Party shall have any liability to the other for monetary damages for the breach of this Agreement, or failure to reach agreement on an AHPDA, and each Party hereby waives and releases any such rights or claims it may otherwise have at law or at equity. Furthermore, Developer knowingly agrees that it shall have no right to specific performance for conveyance of any right, title or interest in the Property or any portion thereof, and shall not file a lis pendens with respect to the Property or any portion thereof. The Parties' rights and obligations under this Section 12 shall survive the expiration or termination of this Agreement.

13. Entire Agreement. This Agreement constitutes the entire understanding and agreement of the Parties, integrates all of the terms and conditions mentioned herein or incidental hereto, and supersedes all negotiations or previous agreements between the Parties or their predecessors in interest with respect to all or any part of the subject matter hereof.

14. Time of Essence. Time i
Agreement in which time is a material part.

Developer trigger any obligation of City to
however that City shall notify Developer
reasonably practicable.
of the essence of every portion of this
In no event shall an incomplete submittal by
review and/ or perform hereunder; provided,
of an incomplete submittal as soon as is

15. Agreement Does Not Constitute Development Approval. City reserves final discretion and approval as to any proposed development of the Property and any AHPDA and all proceedings and decisions in connection therewith. This Agreement shall not be construed as a grant of development rights or land use entitlements to construct an Affordable Housing Project or any other project on the Property. All design, architectural, and building plans for any proposed development shall be subject to the review and approval of City and any other Federal, State or local entity with jurisdiction over the Property and/or proposed development. By its execution of this Agreement, City is not committing itself to or agreeing to undertake the disposition of the Property to Developer, or any other acts or activities requiring the subsequent independent exercise of discretion by City or any agency or department thereof. 882/ 014122- 0044
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16. Governing Law. This Agreement shall be construed in accordance with the internal laws of the State of California, without regard to conflict of law principles.

17. Amendments. This Agreement may not be altered, amended, changed, waived, terminated, or modified in any respect or particular unless the same shall be in writing and signed by the Parties.

18. Implementation of Agreement. City shall maintain authority to implement this Agreement through the City Manager (or his or her designee). The City Manager shall have the authority to make approvals, waive provisions and/or enter into certain amendments of or implementing agreements for this Agreement on behalf of City so long as such actions do not materially or substantially change the substantive business terms of this Agreement, or add to the costs incurred or to be incurred by City as specified herein. All other material and/or substantive approvals, waivers, or amendments shall require the consideration, action and written consent of the City Council.

21. Real Estate Commissions. Each of the Parties represents and warrants to the other Party that no real estate commission, broker's fees, or finder's fees which may accrue by means of the acquisition of the Property is due to any person, firm or entity City shall indemnify, protect, defend and hold harmless Developer from any loss, liability, damage, cost, claim or expense ( including reasonable attorneys' fees) incurred by reason of any broker fee, commission or finder' s fee that is payable or alleged to be payable to any broker or finder which results from any act or agreement of City ( including without limitation any commission payable to Broker. Developer shall indemnify, protect, defend and hold harmless City from any loss, liability, damage, cost, claim or expense ( including reasonable attorneys' fees) incurred by reason of any broker fee, commission or finder' s fee that is payable or alleged to be payable to any broker or finder which results from any act or agreement of Developer.

22. Conflict of Interest. No member, official or employee of City having any conflict of interest, direct or indirect, related to this Agreement shall participate in any decision relating to this Agreement. The Parties represent and warrant that they do not have knowledge of any such conflict of interest.

23. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but which when taken together shall constitute one and the same instrument.

24. Confidentiality.
a) Proprietary Documents. The Parties anticipate that during the Term each shall from time to time disclose and provide to the other certain proprietary reports, correspondence and other information related to the Affordable Housing Project. Unless otherwise required by law, as determined by City staff and/or City' s City Attorney in their discretion, no Party shall disclose ( except to its own and to the other Party' s employees, officers, directors, agents, advisors, existing and prospective lenders, investors, counsel and consultants) information 182/ 014122- 0044
16697234. 3 a09/ 15/ 21 g

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regarding or related to the Project which is not already public, and which has been delivered to such Party pursuant to the terms hereof. b) Public Disclosure. Notwithstanding the foregoing Section 24( b), Developer acknowledges and agrees that City, as a government agency, ( a) is subject to broad disclosure obligations under applicable law, including the California Public Records Act (Gov. Code Sections 6250 et seq.) (" PRA"), and ( b) holds Planning Commission and City Council meetings which are open to the public and at which information concerning the Affordable Housing Project may be disclosed, including reports to the City Council of the City describing the Project, and including any documents to be approved by the City Council of the City. Nothing in this ENA shall prohibit any disclosure required by law.

25. Force Majeure. In addition to specific provisions of this Agreement, performance by either Party hereunder shall not be deemed to be in default where delays or defaults are due to war; insurrection; strikes; lockouts; riots; floods; earthquakes; fires; casualties; acts of God or other deities; acts of the public enemy; epidemics; quarantine restrictions; freight embargoes; litigation beyond the reasonable control of a Party; unusually severe weather; inability, despite commercially reasonable efforts, to secure necessary labor, materials or tools; delays of any contractor, subcontractor or supplier beyond the reasonable control of a Party; acts of the other Party; acts or the failure to act of any public or governmental entity ( except that acts or the failure to act of City shall not excuse performance by City); or any other acts or causes beyond the reasonable control of the Party claiming an extension of time to perform. An extension of time for any such cause shall be for the period of the enforced delay and shall commence to run from the time of the commencement of the cause, if notice by the Party claiming such extension is sent to the other Party within thirty ( 30) days of the commencement of the cause.

Notwithstanding any provision of this Agreement to the contrary, in no event shall adverse market conditions, interest rates, the lack of funding or difficulty obtaining the financing necessary to complete the Inspections and other due diligence investigations to be completed hereunder constitute grounds of enforced delay pursuant to this Section.

End of Agreement- Signature page follows]
882/ 014122- 0044
16697234. 3 a09/ 15/ 21

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NOW THEREFORE, City and Developer have executed this Exclusive Negotiating Agreement as of the date first set forth above.

Cindy Alescas CMC, City Clerk
APPROVED AS TO FORM:

RUTAN & T , KER, LLP
A. Patrick Mun Cit rney
CITY:

CITY OF TWENTYNINE PALMS, a California
municipal cor ere4ie
By:

Frank Luckino
DEVELOPER:

MILESTONE HOUSING GROUP, LLC., a
California limited liability c mpany
ByIq
Marcus A. driftin, Wanager
2/ 014122-0044
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EXHIBIT " A"

DEPICTION OF PROPERTY
882/ 014122- 00"
16697234.3 a09/ 15/ 21

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STAFF REPORT
TO: City Council
FROM: Finance Director
FOR MEETING: Jun 27 2023
SUBJECT: Reserve Policy.

RECOMMENDATION:

The City Council approve Resolution No. 23-__, establishing a 50-55% target amount for unrestricted/undesignated reserves and authorize the use of reserves in the amount of $473,853 to pay off a portion of the inactive Fire Safety Plan in FY 2023-24.

ORDER OF PROCEDURE:

Request Staff Report (Finance Director Presenting)
Council Questions of Staff
Request Public Comment
Council Discussion
Motion/Second
Discussion of Motion
Call the Question
ATTACHMENTS:
• Exhibit A - City of Twentynine
Palms General Fund Reserve
Policy Report
• Resolution No. 23 - Reserve
Policy
• General Fund Reserves
Survey
• Reserve Policy PowerPoint
Presentation
BACKGROUND:

In the strategic planning guidance document in 2017, the City Council requested that Staff review/create the City's General Fund reserve policy. In May 2018, Staff presented to City Council the attached reserve policy prepared by William C. Statler, City consultant. At the 2018 meeting, City Council approved a reserve policy of 60-65%.

Throughout the years, the City has maintained a very strong financial position, and has complied with the reserves target. For instance, the unassigned fund balance in FY 2020-21 was 69% of total General Funds expenditures, and 63% in FY 2021-22. Although the City's unassigned reserves are expected to remain untouched in FY 2022-23, the denominator, which is total General Fund operating expenditures, is expected to increase significantly due to rising inflation and addition of a Sherriff's Detective, which will reduce the City's reserves to 55%. Page 171 of 227 The attached General Fund reserve policy covers six key areas:
 Sets the minimum General Fund reserve target using the structured approach developed by the Government Finance Officers Association of the United States and Canada (GFOA) in assessing risk factors (www.gfoa.org/financialpolicies). Based on this assessment, the recommended target minimum is 55% of operating expenditures.
 Identifies when it is appropriate to use reserves below the target amount.  Provides a strategy for restoring the reserve if it falls below the target minimum.  Presents guidelines for accounting and financial reporting of the reserve.  Discusses other areas where the Council may decide to set reserve amounts.  Compares actual versus target.

In addressing circumstances where the reserve may be less than the target amount, the proposed policy recommends that the City strive to restore reserves to the policy minimum within five years. As revenues versus expenditures improve, the policy recommends that the City allocate at least half to reserve restoration, with the balance available to fund asset replacements, unfunded liabilities, capital improvement projects, service level restorations or new operating programs.

The policy also addresses circumstances where taking reserves below policy levels would be appropriate in responding to the risks that reserves are intended to mitigate, such as:
 Meeting cash flow needs during the fiscal year.
 Closing a projected short-term revenue-expenditure gap.  Responding to unexpected expenditure requirements or revenue shortfalls.  Making investments in unfunded liability reductions, economic development and revenue base improvements, productivity improvements and other strategic opportunities that will strengthen City revenues, reduce future costs or achieve high-priority City goals.

In Fiscal Year 2023-24, City expects to use about $474K from the reserves to pay off the Twentynine Palms Water District's fire safety pension plan (the Plan) which was assumed by the City back in 2016.

City Staff had been waiting for the U.S. Treasury 20-year bond rates to get higher than 3.5% to terminate the Plan and to reduce the City's liability. With the current U.S. Treasury Bond rate at record highs, approximately 4.02% as of June 6, 2023, City Staff saw this as a strategic opportunity to reduce future costs. The City is currently at the final stage of the termination process and is waiting for the final valuation from CalPERS. Based on the last valuation prepared by CalPERS on December 9, 2022, the final payoff amount, based on a 3.75% discount rate, will be approximately $3.5M. The City has assigned $1.3M of its General Fund reserves to terminate the Safety Plan. In addition to this, there is a total of $1.6M in the Water District PARS Post-Employment Benefits Trust, which equates to almost $3M in total available funding to terminate the Plan. As mentioned above, the City will have to use approximately $474K of its reserves to fund the remaining balance. City Staff proposes to replenish the fund balance with an internal loan from the City's fire station annual lease payment received from San Bernardino County. With the annual lease being $35K per year, it will take approximately 14 years to replenish the City's reserves.

In order to meet current operating costs, Staff is recommending a 50-55% target amount for unrestricted/undesignated reserves and authorize the use of reserves in the amount of $474K to pay off a portion of the inactive Fire Safety Termination Plan in FY 2023-24.

ENVIRONMENTAL:

N/A
ALTERNATIVES:

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The City Council could choose to set reserves at levels that are lower or higher than the recommended target.

FISCAL IMPACT:

The fiscal impact is reducing reserves from 60-65% to 50-55% of operating expenditures.

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GENERAL FUND RESERVE POLICY
April 2018

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General Fund Reserve Policy

TABLE OF CONTENTS
Report Purpose 1
Proposed Policy Overview 1
Minimum Target Reserve 1
Uses and Restoration of the Reserve 2
Accounting for the Reserve 3
Status Summary: Actual Versus Target 3
Include the Reserve Policy in the Budget Document 4
Discussion 4
The Power of Fiscal Policies 4
Prudent Reserves Reflect Ability to Manage Risk, Not Fiscal Strength Per Se 5 What’s the Right Amount? GFOA Structured Assessment Methodology 5 Alternatives 7
Setting the Minimum Target Reserve at Lower or Higher Amounts than 55% 7 Using a Different Basis for Determining the Reserve 8
Showing the Reserve as “Assigned” in Financial Statements 9 Defining Reserves as the Unrestricted Fund Balance 9
Segregating the Reserve into Separate Components 10
Conclusion 10

APPENDIX
A. Proposed General Fund Reserve Policy A-1
B. General Fund Reserve Risk Factors: GFOA Structured Assessment Methodology B-1 C. Cash Flow Analysis C-1
D. Consultant Background D-1

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- 1 -
April 2018
City of Twentynine Palms

GENERAL FUND RESERVE POLICY
The purpose of this report is to assist the City in developing a General Fund reserve policy for fiscal stability, cash flow and contingencies that will provide a solid foundation for financial decision-making. Provided in Appendix A is the recommended General Fund reserve policy, which covers six key areas:
• Sets the minimum General Fund reserve target using the structured approach developed by the Government Finance Officers Association of the United States and Canada (GFOA) in assessing risk factors (www.gfoa.org/financialpolicies).

Based on this assessment, the recommended target minimum is 55% of operating and debt service expenditures. (As discussed below, while the City does not currently have any General Fund debt service costs, this could change in the future and thus the policy addresses this possibility.)
• Identifies when it is appropriate to use reserves below the target amount. • Provides a strategy for restoring the reserve if it falls below the target minimum. • Presents guidelines for accounting and financial reporting of the reserve. • Discusses other areas where the Council may decide to set reserve amounts. • Compares actual versus target.

PROPOSED POLICY OVERVIEW
Minimum Reserve Target
The recommended policy sets the target minimum unassigned General Fund balance at 55% of operating and debt service expenditures. This is largely based on the structured assessment methodology for setting reserve levels developed by the GFOA in considering a 124 Cerro Romauldo Avenue
San Luis Obispo, CA 93405
805.544.5838  Cell: 805.459.6326
[email protected]
www.bstatler.com
William C. Statler
Fiscal Policy  Financial Planning  Analysis  Training  Organizational Review .
.
.
.
.
.
.
.
.

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General Fund Reserve Policy
- 2 -
city’s exposure to the following eight fiscal risk factors, which are discussed in greater detail later in this report:
• Vulnerability to extreme events and public safety concerns • Revenue source stability
• Expenditure volatility
• Leverage, such as unfunded pensions and asset maintenance • Liquidity (cash flow)
• Dependence of other funds on the General Fund
• Growth: revenue and expenditure imbalance
• Unfunded high priority capital projects
Depending on the results of this assessment, the GFOA methodology provides recommended targets ranging from a minimum of 16.6% of expenditures (60 days cash flow) to circumstances where more than 35% might be warranted. Based on the City’s circumstances, the GFOA’s structured methodology recommends a target higher than 35%.

Based on the City’s need to maintain reserves at 25% just to meet cash flow needs during the year, the recommended policy is 55% to provide appropriate flexibility in addressing economic uncertainties, such as downturns in the economy and external revenue hits (like State takeaways); responding to local disasters; contingencies for unforeseen operating or capital needs; and strategic opportunities.

This compares with the City’s most recent audit results for the fiscal year ended June 30, 2017, where the City had an unassigned General Fund balance of $11.3 million (135.8% of actual expenditures); and the 2017-18 Budget, which projects that the ending unassigned General Fund balance will be $11.5 million (130.1% of expenditures).

Uses and Restoration of the Reserve
In addressing future circumstances where the reserve may be less than the target amount, the proposed policy recommends that the City strive to restore reserves to the policy minimum within five years. As revenues versus expenditures improve, the policy recommends that the City allocate at least half to reserve restoration, with the balance available to fund asset replacements, unfunded liabilities, capital improvement projects, service level restorations or new operating programs.

The policy also addresses circumstances where taking reserves below policy levels would be appropriate in responding to the risks that reserves are intended to mitigate, such as:
• Meeting cash flow needs during the fiscal year.
• Closing a projected short-term revenue-expenditure gap. • Responding to unexpected expenditure requirements or revenue shortfalls. • Making investments in unfunded liability reductions, economic development and revenue base improvements, productivity improvements and other strategic opportunities that will strengthen City revenues, reduce future costs or achieve high-priority City goals.

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General Fund Reserve Policy
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• Where a fiscal forecast shows an ongoing structural gap: providing a strategic bridge to the future.

On the other hand, the policy notes that the City should avoid using reserves to fund ongoing costs or projected systemic “gaps.” Stated simply, reserves can only be used once, so their use should be restricted to one-time (or short-term) uses.

Accounting for the Reserve
The policy sets the reserve target based on the unassigned General Fund balance: net of nonspendable, restricted, committed or assigned balances. This intuitively makes sense: nonspendable and externally restricted funds are not readily available to
meet the risks that the reserve is
intended to mitigate. (This is also
the recommended approach by the
GFOA in its publication Financial
Policies).

It should also be net of other
commitments or assignments, so it is
available to meet its intended
purposes.

Based on the unassigned fund
balance, two things can be readily
determined from the audited
financial statements after calculating
the policy target based on actual
operating expenditures:
• Whether the City has achieved
its policy goal.
• And the amount (if any) that
reserves (unassigned fund
balance) exceed or are less than
the policy goal.

Status Summary: Actual Versus Target
Lastly, the policy provides a status summary of the policy target with the actual reserve amount. If the projected reserve is less than the target minimum, the strategy for achieving policy restoration should discussed. This comparison should be updated at least annually and included with the policy.

General Fund Balance Classifications
Under generally accepted accounting principles set
by the Government Accounting Standards Board
(GASB) in Statement No. 54, General Fund balance
is classified into five components:
• Non-Spendable. Amounts that are not in
spendable form, such prepaid items or
inventories.
• Restricted. Amounts subject to externally
enforceable restrictions imposed by outside third
parties.
• Committed. Amounts whose use is constrained
internally by the agency itself for specific
purposes set by the governing body.
• Assigned. Amounts intended for specific
purposes as determined by the governing body
or others it has formally designated.
• Unassigned. Residual classification of
spendable amounts available for other
purposes.

As discussed below, the City’s target reserve should
be reported as part of the “unassigned” fund
balance.

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It should be noted that comparing policy with actual is a useful approach for all fiscal policies in demonstrating effective steward of City assets. It keeps fiscal policies – and compliance with them – on the City’s financial management radar on an ongoing basis.

Include the Reserve Policy in the Budget Document
Key City policies are addressed in the Budget Message. Since having a clearly stated reserve policy has its greatest value during the budget preparation, review and adoption process, this report recommends including the reserve policy in the budget document itself (along with other significant budget and fiscal policies).

DISCUSSION
The Power of Fiscal Policies
As we know from experience over the past 25 years – with the recession and recoveries of 1992-94, 2003-05 and the Great Recession beginning in 2008 – good times come and go.

But an organization’s values shouldn’t. And that’s what fiscal policies are all about:
articulating the agency’s financial management values before they are place under stress.

Stated simply, clearly articulated policies – and being guided by them – are the best way of ensuring long-term fiscal health. While the strength of the local economy and related General Fund revenues are important, no city is immune from economic downturns. In navigating tough fiscal times, effective financial management is the most critical factor for long-term fiscal success; and clearly articulated policies provide an essential framework and foundation for effective decision-making.

Fiscal policies are important in both good times and bad. The roots of fiscal adversity for most governments take hold in the good times, by making commitments that are not sustainable. They rarely surface in the “bad” times, when most agencies act on the “First Rule of Holes” (when you find yourself in one, stop digging).

They are both preventative and curative:
• Clearly articulated policies – and following them – help prevent problems from arising in the good times.
• And provide more effective responses when the inevitable bad times occur.

They are most powerful when it put in place before the need for them arrives, recognizing that not all financial decision-making situations can be reasonably anticipated.

Policies should be set based on the agency wants to be, which may not be where it is today.

However, setting the course for where it wants to be significantly enhances its ability to get there. Accordingly, each policy should include a brief “compliance status.” And if it is not there yet, the policy should provide the agency’s plan for getting there. (As discussed above, the proposed reserve policy includes this component.)

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General Fund Reserve Policy
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Policies Versus Plans. Planning is essential for success. However, plans change over time as actual results replace assumptions. But fiscal policies are the “north star” guiding the preparation of plans. They help making tough decisions easier by articulating values before they are put placed under stress by adverse circumstances. An organization can reasonably do something else, but policies are a powerful starting point for asking: but for “this” unexpected circumstance, what would we have otherwise done? Lastly, of all the fiscal policies that cities should set, minimum reserve targets are among the most important.

Prudent Reserves Reflect Ability to Manage Risk, Not Fiscal Strength Per Se Reserves – whether large or small – do not per se reflect on a city’s financial capacity or underlying fiscal strength. There are much better indicators than reserves for this, most notably the ability over time for ongoing revenues to adequately meet day-to-day service needs, capital improvement goals and debt service requirements.

Stated simply, reserves are a risk management tool: how much can things go differently than the organization otherwise thought they would before it must take corrective action? Reserves can also serve as a bridge to the future, providing time to develop and implement thoughtful long-term solutions.

Typical risks that reserves help mitigate include economic uncertainties, such as downturns in the economy and external revenue hits (like State takeaways); responding to local disasters; contingencies for unforeseen operating or capital needs; strategic opportunities; and cash flow.

What’s the Right Amount? It depends on each agency’s unique fiscal circumstances and its capacity for risk. In answering this question, the GFOA has developed a structured assessment methodology for setting reserve levels in considering an agency’s exposure to the following eight fiscal risk factors:

1. Vulnerability to extreme events and public safety concerns. Major extreme events the community could reasonably be subject to and the likelihood and potential magnitude of loss for each event.

2. Revenue source stability. Volatility of each major revenue source based on factors such as past experience and trends with that revenue, characteristics of the tax or rate payers, state or federal revenue takeaways and economic factors.

3. Expenditure volatility. Spikes in expenditures, usually arising from special, nonrecurring circumstances such as lawsuits; critical special projects without a funding source; or new state or federal spending requirements and unfunded mandates.

4. Leverage. Common examples include unfunded pensions and unfunded asset, as well as outstanding bonded indebtedness and compensated absences. Is the source of leverage very large? Does it have an off-setting funding source or asset?

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General Fund Reserve Policy
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5. Liquidity (cash flow). Intra-period cash imbalances, such as property taxes that are only received at two major points during the year (December and June).

6. Dependence of other funds. Are there other funds that have a significant dependence on the General Fund?

7. Growth. Is significant growth a realistic possibility in the next three to five years? This includes assessing likely potential marginal costs associated with serving new growth compared with marginal revenues and resulting gaps.

8. Capital projects. Are there high priority projects without a funding source, where reserves may be looked to as a funding source?
As discussed in greater detail in Appendix B, the methodology uses a scale of 5 to 1 in assessing how important reserves are in mitigating each risk:
5: Very important
4: Important
3: Neutral
2: Unimportant
1: Very unimportant
Since there are eight mitigation factors, total scores will range from 8 (the least risk) to 40 points (greatest risk). Along with these eight risk factors, the methodology also considers:
• City size (assumes larger cities have more mitigation strategies than smaller ones) • Other reserve/contingency funds
• Borrowing capacity
Depending on the results of this assessment, the GFOA methodology provides recommended targets ranging from a minimum of 16.6% of expenditures (60 days cash flow) to circumstances where more than 35% might be warranted.

The following summarizes the GFOA’s rating scale.

GFOA Reserve Rating Scale
Rating Target Minimum General Fund Reserve
8 -16 Minimal risk to retain through reserves. Consider target equal to the GFOA minimum recommended reserve of 16.6% (two months cash flow) of revenues/expenditures.
17-24 Low to moderate level of risk to retain through reserves. Consider reserve target of 17% to 25%.
25-31 Moderate to high level of risk to retain through reserves. Consider reserve target of 26% to 35%.

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Rating Target Minimum General Fund Reserve
32-40 High level of risk to retain through reserves. Consider reserve target greater than 35%.

As detailed in Appendix B, the City’s rating under this methodology is 32, which indicates that the target minimum should be higher than 35%.

Five of the assessment factors were largely responsible for this rating:
• Revenue stability
• Expenditure volatility
• Cash flow (see sidebar and
Appendix C)
• Unfunded liabilities
• Unfunded capital projects
The other three factors (vulnerability
to extreme events and public safety
concerns; dependence of other funds
on the General Fund; and growth)
were not significant in this rating.

ALTERNATIVES
Setting the Minimum Target
Reserve at Lower or Higher
Amounts than 55%
Based the GFOA structured
assessment methodology, this report
recommends a minimum target
General Fund balance of 55% of
operating and debt service costs.

However, the Council is the ultimate
“decider” in balancing risks and reserves. Stated simply, the City’s fiscal resources do not exist to amass large fund balances but rather, to deliver important services that help make Twentynine Palms a good place to live, work and play. On the other hand, prudent reserves are essential in helping assure stability in the delivery of services.

Accordingly, the Council could reasonably set reserves at levels that are lower or higher than the recommended target.

Lower Target than 55%. The GFOA assessment methodology recommends a target higher than 35% but does not provide further guidance. A lower target of 40% to 50% would still be Mitigating Cash Flow with TRANS
Along with reserves, cash flow needs can be
addressed by issuing Tax and Revenue
Anticipation Notes (TRANS).

TRANS are short-term borrowings by local
government agencies who are not able to meet
their cash flow needs during the year. They are
typically issued early in the fiscal year and repaid
before year-end.

At one time, many TRANS were issued as an
investment strategy, since the proceeds could be
invested at higher yields than their tax-exempt
interest rate. However, this favorable variance
between interest costs and yields has not been the
case since the Great Recession.

Stated simply, while incurring debt to meet cash
flow needs is an option, it is preferable to avoid it if possible. Moreover, TRANS are not free: there are
financing and interest costs in issuing them.

Appendix C provides a cash flow analysis for the
General Fund, which shows the need for 25% to
cover several low points in the fiscal year, most
notably in November and May prior to the receipt of
property tax revenues (the City’s most important
General Fund revenue source).

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General Fund Reserve Policy
- 8 -
with the GFOA recommended range. However, given that 25% is needed for cash flow purposes alone, reserves lower than 55% would provide limited flexibility for fiscal stability and contingencies.

Higher Target than 55%. Based on surveys provided on the California Society of Municipal Finance Officers’ web site as well as other studies, there are many cities in California that have minimum target reserve policies of 50% or higher, including:
• La Canada Flintridge: 125%
• Stanton: 75%
• La Palma: 60%
• Carpinteria: 55%
• Brisbane, Camarillo, Laguna Nigel, Lomita, Malibu, Mission Viejo, Moraga, Rancho Palos Verdes and San Ramon: 50%
Given the many uncertainties ahead, a target higher than 55% would also be reasonable.

Using a Different Basis for Determining the Reserve
The proposed policy bases the 55% target on annual operating and debt service costs.

However, other options used by California cities include:
• Total expenditures and uses (operating, debt service and capital expenditures, and transfers out)
• Operating expenditures only
• “Normal” annual expenditures (thus including operating costs, less one-time costs such as special studies and plans; debt service; some “normal” capital costs; and transfers out, less any one-time purposes)
• Other combinations of expenditures and uses
• Revenues rather than expenditures
Where the base is narrower (such as just operating expenditures), the same target percentage will result in a smaller reserve; conversely, where the base is broader (including capital, debt service and/or transfers), the same target percentage will result in a larger reserve.

In the case of the City, it makes sense to include both operating and debt service costs in the base:
• Operating costs are included in the base in virtually all cases, which makes sense: this is the “core” cost base of city services that is most at risk; and while sensitive to economic changes and community needs (up or down), it is relatively stable from year to year.

While it is possible that there may be significant one-time costs included in the operating budget, adjusting for this is not recommended: the difference is likely to be immaterial and, more importantly, transparency in calculating the reserve target will be enhanced by “keeping it simple.”

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General Fund Reserve Policy
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• Debt service costs are also ongoing contractual obligations (until the principal balance is paid-off); accordingly, it makes sense to include this in the target base as well. As noted above, while the City does not currently have any General Fund debt service costs, this could change in the future. Accordingly, to be proactive in accounting for this possibility, it makes sense to include this as part of the base.

On the other hand, capital projects can vary from year-to-year, and the reserve should be relatively stable. And interfund transfers are internally determined by the City: overall City resources are unaffected by them. (And as a practical matter, the City’s use of transfers out is minimal. For example, they were $192,000 in 2016-17, just 2% of total expenditures and uses.) Accordingly, the recommended policy excludes capital project costs and transfers out, and includes operating and debt service costs, as the basis for determining reserve levels.

Showing the Reserve as “Assigned” in Financial Statements On one hand, it makes intuitive sense to consider the recommended reserve as “assigned” for fiscal stability, cash flow and contingencies. However, these purposes fall into a category that GASB calls “revenue stabilization, working capital needs, contingencies or emergencies;” and unless they are specifically classified as restricted or committed (which would not be appropriate in this case), GASB 54 states that they “… should be reported as unassigned in the general fund.”
Defining Reserves as the Unrestricted Fund Balance
As discussed above, GASB defines organizes the unrestricted General Fund balance (net of non-spendable and restricted amounts) into three categories:
• Committed
• Assigned
• Unassigned
As noted above, GASB 54 indicates that “operating reserves” like these should be classified as “unassigned.” Also, unless the City formally commits or assigns balances for specific purposes, all of the fund balance will be shown as “unassigned” anyway. Moreover, in its structured assessment methodology, the GFOA recommends that the minimum fund balance target be exclusive of other commitments or assignments.

That said, while this report recommends using the unassigned balance, it is not unusual for cities to define reserves for policy purposes as the potentially larger (depending on the size of the amounts classified as committed or assigned) unrestricted balance.

In the City’s case, through June 30, 2017, there is no difference between the unrestricted and unassigned balance: of the $11.3 million in the unrestricted General Fund balance, all of the balance was classified as “unassigned.” Accordingly, the distinction will only be important in the future if the City expands its use of fund balance assignments and commitments. (The proposed policy provides for this.)

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General Fund Reserve Policy
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Segregating the Reserve into Separate Components
The proposed policy sets a unified reserve target of 55% to meet the aggregate of the risks it is intended to meet. Since not all factors are likely to come into play at the same time, this approach makes sense: “pooling” purposes serves to lower the overall reserve amount that might otherwise be needed to meet each of the risk factors individually. Moreover, budgeting and accounting for the reserve is simpler and more straightforward, as is communicating its purpose to the community and organization.

That said, there may be some interest in separating the need for the reserve into specific categories. In that case, the following are recommended:
• Cash Flow: 25%
• Fiscal Stability: 15%
• Contingencies/Strategic Opportunities: 15%

CONCLUSION
Establishing a reserve policy – and being guided by it – is one the City’s most important fiscal policies by mitigating financial risks. Based on the results of the GFOA structured assessment methodology, this report recommends that the minimum reserve target be set at 55% of operating and debt service expenditures.

Along with the recommended target, it sets guidelines for when it is appropriate to use reserves below the target amount; restoring the reserve if it falls below the target minimum; accounting and financial reporting of the reserve; and for at least annually comparing actual results versus the target. It also discusses alternatives for the City’s consideration for each of the key recommendations.

William C. Statler
Fiscal Policy  Financial Planning  Analysis  Training  Organizational Review

APPENDIX
A. Proposed General Fund Reserve Policy
B. General Fund Reserve Risk Factors: GFOA Structured Assessment Methodology C. Cash Flow Analysis
D. Consultant Background
. . . . . . . . . . . . . . . . . . . . .

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Appendix A: Proposed General Fund Reserve Policy
A-1
Reserves for Fiscal Stability, Cash Flow and Contingencies The City will strive to maintain a minimum unassigned fund balance of at least 55% of operating and debt service expenditures in the General Fund for fiscal stability, cash flow and contingencies/strategic opportunities. This is based on the risk assessment methodology for setting reserve levels developed by the Government Finance Officers Association of the United States and Canada (GFOA) in adequately addressing:
• Revenue source stability, local disasters and other financial hardships or downturns in the local or national economy.
• Contingencies for unseen operating or capital needs, including strategic investment opportunities.
• Unfunded liabilities such as pensions and retiree health obligations. • Dependency of other funds on the General Fund.
• Institutional changes, such as State budget takeaways and unfunded mandates. • Cash flow requirements.

Whenever the City’s General Fund unassigned fund balance falls below this target, the City will strive to restore reserves to this level within five years. As revenues versus expenditures improve, the City will allocate at least half to reserve restoration, with the balance available to fund asset replacements, unfunded liabilities, capital improvement projects, service level restorations or new operating programs.

Circumstances where taking reserves below policy levels would be appropriate include responding to the risks that reserves are intended to mitigate, such as:
• Meeting cash flow needs during the fiscal year.
• Closing a projected short-term revenue-expenditure gap. • Responding to unexpected expenditure requirements or revenue shortfalls. • Making investments in unfunded liability reductions, economic development and revenue base improvements, productivity improvements and other strategic opportunities that will strengthen City revenues, reduce future costs or achieve high-priority City goals. • Where a forecast shows an ongoing structural gap: providing a strategic bridge to the future.

On the other hand, the City should avoid using reserves to fund ongoing costs or projected systemic “gaps.” Stated simply, reserves can only be used once, so their use should be restricted to one-time (or short-term) uses.

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Appendix A: Proposed General Fund Reserve Policy
A-2
Future Capital Project or Other Long-Term Goal Assignments or Commitments The Council may also commit or assign specific General Fund balance levels above the reserve target for fleet, facility, technology and equipment replacements; future development of capital projects, unfunded liabilities and similar policy commitments and assignments for future purposes and long-term goals that it determines to be in the best interests of the City.

Other Commitments and Assignments
In addition to the 55% target noted above, unrestricted fund balance levels will be sufficient to meet funding requirements for programs or projects approved in prior years which are carried forward into the new year; debt service reserve requirements; commitments for encumbrances; and other restrictions, commitments or assignments required by contractual obligations, state law or generally accepted accounting principles.

Status: In Compliance. For the last audited financial statements for the fiscal year ended June 30, 2017, the City had an unassigned General Fund balance of $11.3 million (135.8% of actual operating service expenditures); and the 2017-18 Budget projects that the ending unassigned General Fund balance will be $11.5 million (130.1% of operating and debt service expenditures).

Note: The City does not currently have any General Fund debt service costs. However, this could change in the future and thus the policy addresses this possibility and setting the basis for the target minimum as operating and debt service costs.

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Appendix B: GFOA Structured Assessment Methodology
B-1
Analyzing the General Fund Reserve Risk Factors
The sections below provide guidance on analyzing the risk factors described in Chapter 4 on general fund reserves. Each heading corresponds to a worksheet in the Excel workbook that is available at www.gfoa.org/financialpolicies. The blue cells in the sheet are entry cells. There should be no need to type in other cells. Complete the sheets starting with the left-most and continue all the way to the final sheet at the right.

The first eight sheets ask you to analyze each risk factor in the book. First, you identify your basic sources of risk. Then you assess the level of risk you face. Next, you identify other available risk mitigation approaches. The sections below provide more specific guidance on how to accomplish this for each risk factor. Finally, you decide how important it is for your government to retain risk through general fund reserves. The level of importance is indicated by assigning a 1 through 5 score, where 5 indicates the greatest need to retain risk. Each sheet contains guidelines to help you decide the most appropriate score for each risk factor.

The ninth and final sheet helps you to zero in on a final reserve target by summarizing the results of the prior eight sheets and bringing in other drivers of reserve size. Note that this sheet does not provide you with a precise suggested target. Rather it suggests a broad range and strategies for arriving at a final target.

Below is more specific guidance for analyzing the risk factors in the first eight sheets.

Vulnerability to Extreme Events and Public Safety Concerns Identify Risks. List out the major extreme events to which the community could reasonably be subjected. This could include both natural and man-made events. Public safety professionals may have a community disaster preparedness plan that could help identify these risks; linking the reserve analysis to such a plan would increase the credibility of the resulting policy.

Assess Risks. Consider the potential magnitude of loss for each event. The magnitude of loss should be based on past experiences with similar extreme events or reasonable estimates based on the disaster preparedness plan (note that the estimate is not necessarily a worst-case scenario).

Identify Other Risk Mitigation Approaches. If extreme events are a serious risk for the community, also consider risk transfer options. Might more comprehensive insurance coverage be a better option than very high levels of fund balance? If the source of risk is man-made, such as the potential for an accident at a hazardous chemical plant, might the chemical company be able to take greater responsibility for the risk they pose to the community? Also consider how quickly federal assistance can be accessed and the speed with which funds spent responding to a disaster might be reimbursed.

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Appendix B: GFOA Structured Assessment Methodology
B-2
Assess Necessity of Risk Retention. Assign a score for the importance of risk retention through the use of reserves, when it comes to extreme events.

Revenue Source Stability
Identify Risks. Start by listing out major revenue sources.

Assess Risks. Consider the volatility of each source, based on factors such as past experience and trends with that revenue, characteristics of the tax or rate payers, and economic factors.

Identify Other Risk Mitigation Approaches. Think about other approaches that the government has to deal with declining revenues. This might include means to easily reduce variable costs or the ability to access other sources of funding.

Assess Necessity of Risk Retention. Assign a score for the importance of risk retention through the use of reserves, when it comes to revenue stability.

Expenditure Volatility
Identify Risks. Start by listing sources of potential spikes in expenditure (usually arising from special, non-recurring circumstances) that could be expected to occur within the next three to five years. Examples might include lawsuits against the government or critical special projects without a funding source. Typically, recurring sources of expenditure volatility, such as health care benefit costs, would not be included because they should be dealt with in the context of an annual budget process. An exception to this might be highly variable and difficult-to-predict costs, such as energy or fuel (in the case of a fleet).

Assess Risks. Enumerate a reasonable estimate of the potential cost of each source (i.e., the magnitude of the risk), taking into account the probability of it occurring (i.e., an unlikely event is less of a risk than a more likely event of similar potential loss).

Identify Other Risk Mitigation Approaches. Think about other approaches to dealing with these expenditure spikes. For example, the finance officer may find that some events (like an essential special project) have a very high chance of occurring, but will not occur for a number of years into the future. In this case, the finance officer could suggest a “sinking fund” where the project would be gradually funded over time. This could be made a commitment or assignment within the fund balance to help differentiate it from funds used to manage more uncertain risks. A similar approach could be used for known lawsuits.

Assess Necessity of Risk Retention. Assign a score for the importance of risk retention through the use of reserves, when it comes to expenditure spikes.

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Appendix B: GFOA Structured Assessment Methodology
B-3
Leverage
Identify Risks. Start by listing major sources of leverage. Common examples include pensions, unfunded asset maintenance, and debt.

Assess Risks. Then assess each source’s implications for the organization’s future financial flexibility by consider the size of the obligation. Is the source of leverage very large? Does it have an off-setting funding source or asset? Identify Other Risk Mitigation Approaches. It is often better to use other approaches to risk management on these sources of leverage, rather than retaining the risk through reserves. For example, if unfunded asset maintenance is a problem, then the finance officer might use an asset maintenance plan (or other suitable estimate) to demonstrate the magnitude of the risk and encourage the governing board create a special set-aside to begin funding this liability – and avoid managing this risk with general fund reserves. In another example, if unfunded pension liabilities are an issue, the organization should develop a strategy to pay down those liabilities. In this situation, the finance officer could point out how pension liability constrains the financial flexibility of the organization, thereby decreasing the reserve’s ability to manage other types of risk.

Assess Necessity of Risk Retention. Assign a score for the importance of risk retention through the use of reserves, when it comes to leverage.

Liquidity
Identify Risks. List major sources of intra-period cash imbalances. A good example is property taxes that are only received at one or two points during the year.

Assess Risks. Describe the size of the problem created by these sources of imbalance.

Does it have the potential to significantly interfere with operations? Identify Other Risk Mitigation Approaches. To what extent can tools like internal borrowing or tax anticipation notes provide a cost-effective alternative to keeping a reserve?
Assess Necessity of Risk Retention. Assign a score for the importance of risk retention through the use of reserves, when it comes to liquidity.

Other Funds’ Dependency
Identify Risks. Start by listing other funds that have significant dependence on the general fund. Dependence will usually be indicated by regular operating transfers that are an unusually high percentage of the receiving fund’s expenditure budget.

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Appendix B: GFOA Structured Assessment Methodology
B-4
Assess Risks. Assess the level of reserves in these other funds. Are reserves low? If so, is this fund subject to potential risks that could require a substantial draw on reserves? If so, is the general fund expected to backstop this fund?
Identify Other Risk Mitigation Approaches. A major point for the finance officer to explore is whether the general fund should be “back stopping” these other funds in the first place. For example, an under-performing enterprise fund may be receiving operating transfers not because it is good public policy, but because the political will has not been mobilized to make the enterprise self-sufficient or to divest of it.

Assess Necessity of Risk Retention. Assign a score for the importance of risk retention through the use of reserves, when it comes to other funds.

Growth
Identify Risks. This factor is only relevant if significant growth is a realistic possibility in the next three to five years. Start by identifying major potential sources of growth.

Assess Risks. Estimate the potential marginal costs associated with serving new growth and compare it to marginal revenues (this information should be available from long-term financial plans and forecasts). If there is a gap due to significant timing differences between when revenue is received from growth and when expenditures are made on services for that growth, then reserve targets could be adjusted to account for that gap.

Identify Other Risk Mitigation Approaches. Special growth or impact fees could be assessed at the time of construction to avoid this risk. For example, if a new development is expected to generate $10M annually in new taxes starting three years in the future (but nothing before then), but costs $7M to service starting in two years, then a reserve (or impact fees) may be needed. If the gap between revenue growth and service expenditures is due to a structural mismatch between costs and revenues (i.e., the growth does not pay for itself), then the government should re-examine its tax-fee structures, service provision methods, and/or land use plans to correct this imbalance.

Assess Necessity of Risk Retention. Assign a score for the importance of risk retention through the use of reserves, when it comes to growth.

Capital Projects
Identify Risks. Use a capital improvement plan to determine if there are high priority projects without a funding source.

Assess Risks. Assess whether decision-makers might consider pay-as-you-go financing, using general fund reserves as at least part of the source.

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Appendix B: GFOA Structured Assessment Methodology
B-5
Identify Other Risk Mitigation Approaches. If pay-as-you-go financing is something decision-makers might consider, then the finance officer may wish to broach the possibility of a commitment or assignment for the project so that pay-as-you-go financing does not detract from the general reserve’s ability to manage other risks.

Assess Necessity of Risk Retention. Assign a score for the importance of risk retention through the use of reserves, when it comes to capital projects.

Your Target
Step 1. Determine Your Total Score from the Risk Factors Step 1 on this sheet totals your scores from the foregoing sheets.

Step 2. Preliminary Analysis
In Step 2, find your score in the ranges presented and consult the analytical guidance.

This is preliminary, as the analytical guidance will be refined in the next steps.

Step 3. Consider the Impact of Government Size, Budget Practices, and Borrowing Capacity
In Step 3, you consider additional drivers of fund balance: government size, budget practices, and borrowing capacity. In each blue box, enter the indicated number of positive or negative points for each driver (totaling them for each driver, as might be needed).
• Size of Government. GFOA’s analysis of the thousands of governments that participate in GFOA’s comprehensive annual financial report presentation award program shows a very weak direct relationship between population size and size of fund balance. In fact, a statistical analysis of the data shows that although there is an inverse relationship between population size and size of fund balance, only about between 10% and 20% of the variation in fund balance size between governments can be explained by population.
i Hence, the sheet only provides points for the very largest and smallest governments.
• Budget Practices. The presence of formal or informal contingencies already built into the budget may relieve the need to carry some additional reserves. The finance officer can search directly for the presence of informal contingencies by searching prior years’ budget-versus-actual reports for areas with consistent positive variances – this may indicate areas that are consistently over-budgeted. The finance officer can also look indirectly for contingencies by examining the budgeting system for practices that unintentionally encourage informal contingencies. For example, systems that provide little flexibility for managers to transfer budgets between different accounts will encourage managers to build additional slack into their budget since they do not have the ability to move surpluses in one account to counteract a deficit in another.

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Appendix B: GFOA Structured Assessment Methodology
B-6
• Borrowing Capacity. You can evaluate your borrowing capacity by comparing your current level of debt against your financial policy for debt. If no policy standards are in place, consider the rating agency guidelines below.

Standard and Poor’s Debt Ratios and Ranges
ii
Overall Net Debt
per Capita
Overall Net Debt as a %
of Market Value
Debt Service as a %
of Expenditures
Low Below $1,000 Below 3% Below 8%
Moderate $1,000 - $3,000 3% - 6% 8% - 15%
Moderately
High
$3,000 - $5,000 6% - 10% 15% - 20%
High Above $5,000 Above 10% Above 25%
The finance officer should also consider internal borrowing capacity. Inventory reserves in other funds and assess the extent to which these reserves are necessary to deal with the risks with which these funds are faced. If other funds have sizable reserves compared to the risks they are retaining, they could serve as an alternative to larger general fund reserve targets. However, internal borrowing should not be considered an alternative without a strong internal borrowing policy in place.

Step 4. Consider the Impact of Commitments/Assignments, Outsider Perceptions, and Political Support
In Step 4, you consider the drivers of Commitments/Assignments, Outsider Perceptions, and Political Support. Put an “X” in the blue cell next to all the statements that apply to you.
• Commitments or Assignments. Think about all assignments and commitments that impact fund balance. Then assess how constraining those assignment and commitments are and how available that portion of the fund balance might be to retain risk. For instance, a board might “commit” a certain amount to a “rainy day” reserve.

This sort of commitment would be very consistent with the purpose of retaining the types of risk defined in this analysis, and so could be considered part of the total amount of general fund balances available for a reserve. Conversely, an assignment or commitment for asset maintenance or a special project is intended to be spent on a particular use, and therefore is not really available for risk retention. These sorts of uses should be subtracted from the definition of fund balance available for a reserve. • Outsider Perceptions. Take stock of relevant outsider perceptions. What have rating agencies said in the past about your level of reserves? Could failure to carry a certain level of reserves contribute to a ratings downgrade? Also consider citizen perspectives – could having too high of a reserve provoke a backlash? Take these perceptions into account when settling on a final reserve target. • Political Support. A reserve target must be formally adopted by the board in order to do much good. Therefore, consider what might lead to a politically acceptable target level. For instance, governing boards often place great weight on benchmarking studies with similar organizations – a proposed target might garner more support if it is seen as consistent with the practices of comparable governments.

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Appendix B: GFOA Structured Assessment Methodology
B-7
Step 5: Putting It All Together
The green cell contains a revised risk score, which takes account of your point totals from Step 3. Using this revised score, revisit the ranges and analytical guidance in Step 2.

Also, consider the boxes you checked in Step 4. Add the advice from these statements to your final analytical guidance from Step 2. Using this advice, you can finalize a reserve target and present it to the board.
i The range comes from using different permutations of the data set, such as removing or including certain outliers.
ii The ratios are taken from David G Hitchcock, Karl Jacob, and James Wiemken, “Key General Obligation Ratio Credit Ranges – Analysis vs. Reality,” Standard & Poor’s: 2008. However, the ranges have been modified slightly by the authors to provide a more streamlined presentation. Specifically, in the original document, the overall net debt per capita “low” range is $1,000 to $2,000 and the “moderate” range is $2,000 to $5,000.

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Vulnerability to Extreme Events

1. Identify Risks
What extreme events are you at risk for?
A Fire
B Flood
C Drought
D Earthquake

2. Assess Risks
What is your vulnerability to each extreme event, given past experience? A Low
B Moderate
C High (but City not responsible for water service)
D Low probability; depending on epicenter, losses could be significant

3. Identify other risk mitigation approaches
What options do you have to avoid, reduce, or transfer the risk (i.e., manage it without reserves) A FEMA reimbursement
B FEMA reimbursement
C State drought relief, possible FEMA reimbursement
D FEMA reimbursement
Note: While significant reimbursements from FEMA are likely, it is also likely that there will be significant lags between when recovery costs are incurred and when payments will be received. Lastly, based on experiences in other cities, even under the best of circumstances, it is unlikely that the City will be reimbursed for all recovery costs. And even where costs are largely recovered, there is no reimbursement for lost revenues - like sales tax and TOT - during the disaster and recovery period.

4. Considering the above, how important for you is it to retain the risks of extreme events through reserves ? 3 < Enter your score here
5 Very important. We are subject to extreme events of severe potential magnitude which would require a quick and decisive response from our government. There are few alternative risk management approaches. 4 Important. We are subject to extreme events of severe potential magnitude, but our government does not have an important disaster response role and/or we have other risk management alternatives. 3 Neutral. We do not face an unusually high or low level of risk from extreme events. 2 Unimportant. We are subject to one or two types of significant extreme events and we have other risk management options.
1 Very unimportant. We are subject to very few, if any, potential extreme events of significant potential damage B-8
Appendix B: GFOA Structured Assessment Methodology

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Revenue Source Stability

1. Identify Risks
What are your major revenue sources?
A Property Tax (55%)
B Sales Tax (13%)
C TOT (11%)
E Franchise Fees (6%)
F State Takeaways (Always a Threat)
Note: Top 5 revenues account for about 85% of total revenues

2. Assess Risks
How stable are your revenue sources?
A Historically stable but downturn in "Great Recession;" decreased by 8% from FYE 2008 to 2011 B Subject to significant swings with economy; decreased by 16% from FYE 2008 to 2012 C Subject to significant swings with economy; decreased by 9% from FYE 2013 to 2014 D Stable
F Historically significant

3. Identify other risk mitigation approaches
What options do you have to avoid, reduce, or transfer the risk (i.e., manage it without reserves) Limited in all cases

4. Considering the above, how important for you is it to retain the risks of revenue instability through reserves ? 4 < Enter your score here
5 Very important. We rely on just one or two sources of revenue, and they are unstable 4 Important. We rely on unstable sources for a significant portion of our revenue and/or have particular unstable payers as part of our tax base (e.g., sales tax from an industry with volatile sales) 3 Neutral. We do not face an unusually high or low level of risk from revenue instability 2 Unimportant. While some portion of our revenue base has instability, the majority of revenues are pretty stable. 1 Very unimportant. Our revenues are very stable and diverse.

B-9
Appendix B: GFOA Structured Assessment Methodology

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Expenditure Volatility

1. Identify Risks
What are sources of potential expenditure spikes?
A Increased pension costs
B Health Insurance Costs
C Unexpected infrastructure repairs
D State/federal mandates

2. Assess Risks
What is the potential cost of these spikes?
A Based on CalPERS investment losses and approved funding methodology changes, very high B Significant
C Unknown
D Moderate

3. Identify other risk mitigation approaches
What options do you have to avoid, reduce, or transfer the risk of these potential spikes? (i.e., manage it without reserves)
A Need to address on ongoing basis
B Need to address on ongoing basis
C Unknown
D Limited (legislative advocacy)

4. Considering the above, how important for you is it to retain the risks of expenditure spikes through reserves ? 5 < Enter your score here
5 Very important. There are expenditure spikes with very high potential to open a significant hole in our budget. 4 Important. We are subject to important potential expenditure spikes, such that we need reserves but we also have other risk mitigation approaches available.
3 Neutral. We do not face an unusually high or low level of risk from expenditure spikes 2 Unimportant. There are one or a few potential spikes but the risk of them occurring is low, the impact not great and/or we have other risk management options.
1 Very unimportant. We have no important risk from expenditure spikes.

B-10
Appendix B: GFOA Structured Assessment Methodology

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Leverage

1. Identify Risks
What are major sources of leverage you are subject to?
A Pension liabilities
B OPEB liabilities
C
D

2. Assess Risks
What are the implications of leverage for the organization's financial flexibility? A Higher future costs
B
C
D

3. Identify other risk mitigation approaches
What options do you have to avoid, reduce, or transfer the risk of leverage? (i.e., manage it without reserves) A Need to address these higher cost on an ongoing basis: reserves not an appropriate source of funding B
C
D

4. Considering the above, how important for you is it to retain the risks of leverage through reserves ? 5 < Enter your score here
5 Very important. We are subject to significant leverage and have no other risk management approach 4 Important. We are subject to significant leverage and do not have equally significant offsetting risk management approaches.
3 Neutral. We do not face an unusually high or low level of risk from leverage 2 Unimportant. We have one or two sources of leverage, but these are largely addressed with other risk management strategies.
1 Very unimportant. We have no important sources of leverage that aren't already managed with out reserves.

B-11
Appendix B: GFOA Structured Assessment Methodology

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Liquidity

1. Identify Risks
What are your major sources of potential intra-period cash imbalances? A Property tax collections in Nov/Dec/Jan and May (55% of revenues): see cash flow worksheet B Gas and electric franchise payments in April
D Liability insurance and OPEB payments in July
Note: Per cash flow worksheet, 25% cash flow deficit in November

2. Assess Risks
How likely are these risks to occur and what is their potential magnitude? A Ongoing
B Ongoing
C Ongoing

3. Identify other risk mitigation approaches
What options do you have to avoid, reduce, or transfer the risk of liquidity? (i.e., manage it without reserves) A Tax/revenue anticipation notes - but results in added interest costs B Borrow from other funds - but adds "leverage" to them C

4. Considering the above, how important for you is it to retain the risks of liquidity spikes through reserves ? 5 < Enter your score here
5 Very important. We have very important potential intra-period imbalances with few risk management alternatives. 4 Important. We have important potential intra-period imbalances, but do have some off-setting risk management alternatives.
3 Neutral. We do not face an unusually high or low level of risk from intra-period cash imbalances. 2 Unimportant. We have some minor potential intra-period cash imbalances. 1 Very unimportant. Our cash flows are very stable.

B-12
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Other Funds Dependency

1. Identify Risks
What other funds rely on the general fund for an important part of their funding? A Very limited
B
C

2. Assess Risks
How likely is it that these funds will need the general fund to "backstop" them in an emergency? A
B
C

3. Identify other risk mitigation approaches
What options do you have to avoid, reduce, or transfer the risk of other funds' dependency? (i.e., manage it without reserves)
A
B
C

4. Considering the above, how important for you is it to retain the risks of other fund dependency through reserves ?
3 < Enter your score here
5 Very important. A number of funds rely on the general fund for backstopping, with few, if any, risk management alternatives.
4 Important. We have at least some funds that rely on the general fund and this includes reliance for backstopping. 3 Neutral. We do not face an unusually high or low level of risk from other fund dependency. 2 Unimportant. There are a small number of funds that rely on the general fund, and the potential for the general fund to need to backstop them is small.
1 Very unimportant. No other funds rely on the general fund for backstopping.

B-13
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Growth

1. Identify Risks
What are potential major sources of growth in the next three to five years? A Very limited new development opportunities

2. Assess Risks
What is the potential for these sources of growth to cause imbalances in the revenue received from the growth and the expenditures needed to serve it?
A Limited

3. Identify other risk mitigation approaches
What options do you have to avoid, reduce, or transfer the risk of growth? (i.e., manage it without reserves) A Limited, if significant growth does occur

4. Considering the above, how important for you is it to retain the risks of growth through reserves ? 2 < Enter your score here
5 Very important. We expect significant growth with imbalances in the timing of revenues and expenditures 4 Important. We have some growth that will cause imbalances in the timing of revenues and expenditures. 3 Neutral. We do not face an unusually high or low level of risk from growth 2 Unimportant. We have a small potential for future growth and/or only minor potential imbalances in the timing between revenues and expenditures.
1 Very unimportant. We expect no growth or growth will fully pay for itself as expenditures are incurred.

Population as of January 1: Last Ten Years
2017 26,919
2016 26,055
2015 26,141
2014 26,828
2013 26,267
2012 25,817
2011 25,287
2010 25,053
2009 25,745
2008 25,996
2007 25,582
Source: State of California, Department of Finance, Demographic Research Unit http://www.dof.ca.gov/Forecasting/Demographics/Estimates/ B-14
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Capital Projects

1. Identify Risks
What high priority capital projects don't have a funding source? A The City has a significantly underfunded CIP
B
C

2. Assess Risks
What is the likelihood that reserves will be looked to as a funding source for the project? A Likely
B
C

3. Identify other risk mitigation approaches
What options do you have to avoid, reduce, or transfer the risk of capital projects using reserves as a funding source? (i.e., manage it without reserves)
A Not applicable
B
C

4. Considering the above, how important for you is it to retain the risks of unfunded capital projects through reserves ?
5 < Enter your score here
5 Very important. There are very high profile projects with out a funding source and reserves are likely to be considered as a funding source.
4 Important. There are at least some high profile projects where reserves may be called upon to provide at least some of the funding.
3 Neutral. We do not face an unusually high or low level of risk from unfunded high-priority projects 2 Unimportant. High priority capital projects will probably have funding sources, if they don't already. 1 Very unimportant. All high priority capital projects have funding sources.

B-15
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Guiding Your Selection of a Fund Balance Target
Step 1. Determine your total score from the risk factors 32 Your total score from the risk factors (calculated if you entered a score in other sheets) Step 2. Preliminary Analysis
Compare your score from Step 1 to the guidelines below.

Your Score Analytical Guidance
8 - 16
You face minimal risk to retain through reserves. Consider a target equal to the GFOA minimum recommended reserve of 16.6% of revenues/expenditures.
17-24
You face a low to moderate level of risk to retain through reserves. Consider adopting a reserve target somewhat higher than the GFOA minimum (e.g. 17-25% of revenues/expenditures). Since risk is low, do not invest excessive analytical effort in determining an exact target amount. Consider a short, informal benchmarking study with peer agencies to provide guidance. 25-31
You face a moderate to high level of risk to retain through reserves. Consider adopting a target amount of reserves significantly higher than the GFOA recommended minimum (e.g., 26 - 35%). Consider a short, informal benchmarking survey as a starting point, but then analyze your most significant risk factors to make sure they are adequately covered by what the survey suggests is reasonable. 32 - 40 You face a high level of risk to retain through reserves. Consider adopting a much higher target than the GFOA minimum (e.g., greater than 35%). Consider performing a more in-depth analysis of the risks you face to arrive at target level of reserved that provides sufficient coverage.

Step 3. Consider Impact of Government Size, Budget Practices, & Borrowing Capacity For each driver pick which description best fits you and enter the appropriate number of points. 2 Government Size
+2 We are under 50,000 in population
0 We are between 50,000 and 300,000 in population
-4 We are over 300,000 in population
0 Budget Practices
-3 The budget has a formal contingency beyond what is being considered for this reserve. -2 The budget has informal contingencies beyond what is being considered for the reserve. 0 The budget is lean and has no contingencies in it.

B-16
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-2 Borrowing Capacity
-3
We have excellent external and internal borrowing capacity, including a good rating, little existing debt, and political will to use it.
-2
We have some external and/or internal borrowing capacity and political will could be mobilized to use it.
0 We have little or no borrowing capacity.

Step 4. Consider Impact of Commitments/Assignments, Outsider Perceptions & Political Support Place an "X" next to each statement that applies to you.

Commitments and Assignments
We have commitments or assignments that designate fund balance for uses other than retaining the types of risk described in this analysis. If so, these commitments/assignments should not be included in the total reserve used to reach your target.

Outsider Perceptions
Rating agencies have given us a target level of reserve for getting a good rating. If so, use that target in place of or in addition to a benchmarking survey to provide guidance on starting point for your target.

The public is likely to question reserve levels as too high. If so, be sure to document your analysis findings in the other sheets.

Political Support
The governing board places great weight on the policies of comparable jurisdictions. If so, conduct a benchmarking survey that includes governments the board perceives as relevant.

The board places great weight on rating agency recommendations. If so, tie the reserve target recommendation to rating agency recommendations or standards.

The board places great weight on GFOA recommendations. If so, use this analysis and GFOA's Best Practices to support your recommendation.

Step 5. Putting it All Together
A. Consider your adjusted risk score and re-consult the analytical guidance. 32 < Your adjusted risk score (risk score modified with results from Step 3) B. Review results of Step 4.

Review each item you checked from Step 4 and add the advice to your analytical guidance.

C. Proceed with finalizing target
Proceed with setting a final reserve target based on analytical guidance.

B-17
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Appendix C: City of Twentynine Palms Cash Flow, 2017-18 Budget Total % Total July Aug Sept Oct Nov Dec Jan Feb Mar Apr May June

REVENUES
Taxes
Property Tax 2,147,100 24% - - - - 214,700 751,500 214,700 107,400 - 751,500 107,300 - Property Tax - VLF 2,853,700 31% - - - - - - 1,426,800 - - - 1,426,900 - Sales Tax 1,195,000 13% 95,600 95,600 119,500 95,600 95,600 119,500 95,600 95,600 95,600 95,600 95,600 95,600 TOT 1,017,000 11% 50,900 50,900 76,300 76,300 50,900 50,900 152,400 50,900 50,900 101,700 152,400 152,500 Franchise Fees 575,000 6% 14,400 14,400 28,800 43,100 28,800 57,500 28,800 14,400 57,500 229,800 14,400 43,100 Other Taxes 26,700 0% 2,200 2,300 2,300 2,300 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 Total Taxes 7,814,500 86% 163,100 163,200 226,900 217,300 392,200 981,600 1,920,500 270,500 206,200 1,180,800 1,798,800 293,400 Intergovernmental 127,000 1% 10,500 10,500 10,600 10,600 10,600 10,600 10,600 10,600 10,600 10,600 10,600 10,600 Licenses & Permits 160,000 2% 13,400 13,400 13,400 13,400 13,300 13,300 13,300 13,300 13,300 13,300 13,300 13,300 Burrtec/Street Sweeper 120,000 1% 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 Service Charges 295,000 3% 24,500 24,500 24,600 24,600 24,600 24,600 24,600 24,600 24,600 24,600 24,600 24,600 Other Revenues 327,000 4% 27,200 27,200 27,200 27,200 27,200 27,200 27,300 27,300 27,300 27,300 27,300 27,300 Transfers In 232,500 3% 19,300 19,300 19,300 19,400 19,400 19,400 19,400 19,400 19,400 19,400 19,400 19,400 Total Revenues 9,076,000 100% 268,000 268,100 332,000 322,500 497,300 1,086,700 2,025,700 375,700 311,400 1,286,000 1,904,000 398,600

ANNUALCOSTS
General Liability 130,500 130,500
OPEB 126,500 126,500
Non-Profit Org Contrib 47,500 47,500
Cal-ID 30,500 30,500
Other Costs 8,499,400 708,200 708,200 708,300 708,300 708,300 708,300 708,300 708,300 708,300 708,300 708,300 708,300 Total Costs 8,834,400 - 1,043,200 708,200 708,300 708,300 708,300 708,300 708,300 708,300 708,300 708,300 708,300 708,300 NET REVENUES 241,600 (775,200) (440,100) (376,300) (385,800) (211,000) 378,400 1,317,400 (332,600) (396,900) 577,700 1,195,700 (309,700) Cummulative Net 241,600 (775,200) (1,215,300) (1,591,600) (1,977,400) (2,188,400) (1,810,000) (492,600) (825,200) (1,222,100) (644,400) 551,300 241,600 % OF ANNUAL COSTS -9% -14% -18% -22% -25% -20% -6% -9% -14% -7% 6% 3% C-1

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Appendix D: Consultant Background
D-1
Bill Statler has extensive experience in organizational review, strategic planning and policy analysis, as well as in a broad range of financial management practices that have received state and national recognition for excellence in financial planning and reporting.

His work ranges from San Luis Obispo (the city that Oprah Winfrey calls the “Happiest City in America”) to volunteer service helping the troubled City of Bell reform their government.

SENIOR FINANCIAL MANAGEMENT EXPERIENCE
Bill Statler has over 30 years of years of senior financial management experience, which included serving as the Director of Finance & Information Technology/City Treasurer for the City of San Luis Obispo for 22 years and as the Finance Officer for the City of Simi Valley for 10 years before that.

Under his leadership, the City of San Luis Obispo received national recognition for its financial planning and reporting systems, including:
• Award for Distinguished Budget Presentation from the Government Finance Officers Association of the United States and Canada (GFOA), with special recognition as an outstanding policy document, financial plan and communications device. San Luis Obispo is one of only a handful of cities in the nation to receive this special recognition.
• Awards for excellence in budgeting from the California Society of Municipal Finance Officers (CSMFO) in all four of its award budget categories: innovation, public communications, operating budgeting and capital budgeting. Again, San Luis Obispo is among a handful of cities in the State to earn recognition in all four of these categories.
• Awards for excellence in financial reporting from both the GFOA and CSMFO for the City’s comprehensive annual financial reports.
• Recognition of the City’s financial management policies as “best practices” by the National Advisory Council on State and Local Budgeting.

The financial strategies, policies and programs he developed and implemented resulted in strengthened community services and an aggressive program of infrastructure and facility improvements, while at the same time preserving the City’s long-term fiscal health.

CONSULTING AND INTERIM ASSIGNMENTS
Long-Term Financial Plans
 City of Salinas
 City of Camarillo
 City of Carpinteria
 City of Pismo Beach
 City of Grover Beach

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Appendix D: Consultant Background
D-2
 City of Twentynine Palms
 City of Bell
 Bear Valley Community Services District
Strategic Planning and Council Goal-Setting
In collaboration with the HSM Team
 City of Monrovia
 City of Sanger
 City of Pismo Beach
 City of Bell (Pro Bono)
 City of Willits
Organizational Analysis and Policy Advice
 Organizational Review (Plans/Public Works and Community Services): City of Monterey  Finance Organizational Review: Ventura Regional Sanitation District  Benchmark Analysis: City of Capitola
 Financial Management Improvements: City of Capitola
 Organizational Review: City of Willits (in collaboration with the HSM Team)  Finance Division Organizational Review: Sacramento Metropolitan Fire District  Finance Department Organizational Review: City of Ceres (in collaboration with national consulting firm)
 Financial Management Transition Team and Policy Advice: City of Bell (Pro Bono)  Preparation for Possible Revenue Ballot Measure: City of Monterey  Fund Accounting Review: State Bar of California
 Construction Project Contracting Review: Central Contra Costa Sanitary District  Focused Financial Review: City of Watsonville
 Financial Assessment: City of Guadalupe
 Financial Condition Assessment: City of Grover Beach
 General Fund Reserve Policy: City of Pacific Grove
 General Fund Reserve Policy: City of Lompoc
 General Fund Reserve Policy: City of Willits
 Reserve Policy: State Bar of California
 Budget and Fiscal Policies: City of Santa Fe Springs
Interim Finance Director
 City of Monterey
 San Diego County Water Authority
 City of Capitola
Other Financial Management Services
 Revenue Options Study: Santa Clara Valley Water District  Revenue Options Study: City of Greenfield

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Appendix D: Consultant Background
D-3
 Revenue Options Study: City of Pismo Beach
 Cost Allocation Plan: City of Greenfield
 Cost Allocation Plan: City of Guadalupe
 Cost Allocation Plan: City of Port Hueneme
 Cost Allocation Plan: City of Grover Beach
 Cost Allocation Plan Review: State Bar of California
 Cost Allocation Plan Review: City of Ukiah
 Disciplinary Proceedings Cost Recovery Review: State Bar of California  Water and Sewer Rate Reviews: Avila Beach Community Services District  Water and Sewer Rate Reviews: City of Grover Beach
 Solid Waste Rate Review: County of San Luis Obispo, Los Osos and North County Areas  Joint Solid Waste Rate Review: Cities of Arroyo Grande, Grover Beach, Pismo Beach and Oceano Community Services District

PROFESSIONAL LEADERSHIP
• Member, Board of Directors, League of California Cities (League): 2008 to 2010 • Member, California Committee on Municipal Accounting: 2007 to 2010 • Member, GFOA Budget and Fiscal Policy Committee: 2005 to 2009 • President, League Fiscal Officers Department: 2002 and 2003 • President, CSMFO: 2001
• Member, Board of Directors, CSMFO: 1997 to 2001
• Chair, CSMFO Task Force on “GASB 34” Implementation
• Fiscal Officers Representative on League Policy Committees: Community Services, Administrative Services and Environmental Quality: 1992 to 1998 • Chair, Vice-Chair and Senior Advisor for CSMFO Committees: Technology, Debt, Career Development, Professional and Technical Standards and Annual Seminar Committees: 1995 to 2010
• Member, League Proposition 218 Implementation Guide Task Force • Chair, CSMFO Central Coast Chapter: 1994 to 1996

TRAINER
 League of California Cities
 Institute for Local Government
 California Debt and Investment Advisory Commission
 Government Finance Officers Association of the United States and Canada  California Society of Municipal Finance Officers
 Municipal Management Assistants of Southern California and Northern California  National Federation of Municipal Analysts
 Probation Business Manager’s Association
 Humboldt County
 California Association of Local Agency Formation Commissions  American Planning Association

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Appendix D: Consultant Background
D-4
Topics included:
• Long-Term Financial Planning
• The Power of Fiscal Policies
• Financial Analysis and Reporting
• Fiscal Health Contingency Planning
• Effective Project Management
• Providing Great Customer Service in
Internal Service Organizations: The
Strategic Edge
• Strategies for Downsizing Finance
Departments in Tough Fiscal Times
• Top-Ten Skills for Finance Officers
• Telling Your Fiscal Story: Tips on
Making Effective Presentations
• What Happened in the City of Bell
and What We Can Learn from It
• Multi-Year Budgeting
• Top Challenges Facing Local
Government Finance Officers
• Fiscalization of Land Use
• Debt Management
• Transparency in Financial
Management: Meaningfully
Community Involvement in the
Budget Process
• Financial Management for NonFinancial Managers
• Preparing for Successful Revenue
Ballot Measures
• Integrating Goal-Setting and the
Budget Process
• Financial Management for Elected
Officials
• 12-Step Program for Recovery from
Fiscal Distress
• Strategies for Strengthening
Organizational Effectiveness
• Budgeting for Success Among
Uncertainty: Preparing for the Next
Downturn

PUBLICATIONS
• Guide to Local Government Finance in California, Solano Press, Second Edition, 2017 (Co-Author)
• Setting Reserve Policies – and Living Within Them, CSMFO Magazine, May 2017 • Presenting the Budget to Your Constituents, CSMFO Magazine, July 2016 • Planning for Fiscal Recovery, Government Finance Review, February 2014 • Managing Debt Capacity: Taking a Policy-Based Approach to Protecting Long-Term Fiscal Health, Government Finance Review, August 2011
• Fees in a Post-Proposition 218 World, League of California Cites, District Attorney's Department Spring Conference, May 2010
• Municipal Fiscal Health Contingency Planning, Western City Magazine, November 2009

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Appendix D: Consultant Background
D-5
• Understanding the Basics of County and City Revenue, Institute for Local Government, 2008 (Contributor)
• Financial Management for Elected Officials, Institute for Local Government, 2010 (Contributor)
• Getting the Most Out of Your City’s Current Revenues: Sound Fiscal Policies Ensure Higher Cost Recovery for Cities, Western City Magazine, November 2003 • Local Government Revenue Diversification, Fiscal Balance/Fiscal Share and Sustainability, Institute for Local Government, November 2002 (Co-Author) • Why Is GASB 34 Such a Big Deal?, Western City Magazine, November 2000 • Understanding Sales Tax Issues, Western Cities Magazine, June 1997 • Proposition 218 Implementation Guide, League of California Cities, 1997 (Contributor)

HONORS AND AWARDS
• Cal-ICMA Ethical Hero Award (for service to the City of Bell) • CSMFO Distinguished Service Award for Dedicated Service and Outstanding Contribution to the Municipal Finance Profession
• National Advisory Council on State and Local Government Budgeting: Recommended Best Practice (Fiscal Polices: User Fee Cost Recovery)
• GFOA Award for Distinguished Budget Presentation: Special Recognition as an Outstanding Policy Document, Financial Plan and Communications Device • CSMFO Awards for Excellence in Operating Budget, Capital Improvement Plan, Budget Communication and Innovation in Budgeting
• GFOA Award of Achievement for Excellence in Financial Reporting • CSMFO Certificate of Award for Outstanding Financial Reporting • National Management Association Silver Knight Award for Excellence in Leadership and Management
• American Institute of Planners Award for Innovation in Planning • Graduated with Honors, University of California, Santa Barbara Visit my web site for additional information at www.bstatler.com

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CITY OF TWENTYNINE PALMS

CITY COUNCIL RESOLUTION
NO. 23-

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TWENTYNINE

PALMS, CALIFORNIA, APPROVING AND ADOPTING THE GENERAL

FUND RESERVE POLICY
WHEREAS, the general purpose of the General Fund Reserve Policy is to provide the objectives and guidelines for the administration of the General Fund Balance of the City of Twentynine Palms; and
WHEREAS, the Government Finance Officers Association (GFOA), a leading financial organization which provides best practice guidance to governmental organizations in the United States and Canada, recommends a Reserves policy be in place; and WHEREAS, a comprehensive study as outlined by GFOA was undertaken by City Staff to analyze risks and financial drivers to establish reserve level targets; and WHEREAS, the Reserves policy provides multiple benefits to the City, including but not limited to planning for contingencies, ensuring cash availability, maintaining good standing with credit agencies, and provide a solid foundation for financial decision-making; and WHEREAS, the Reserves policy establishes reserve categories, target amounts and conditions for utilization of reserves; and
WHEREAS, a Reserves policy reflects fiscal responsibility and the prudent values of the City.

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Twentynine Palms to establish a 50-55% target amount for unrestricted/undesignated reserves and adopt the General Fund Reserve Policy enclosed as “Exhibit A” and incorporated herewith by this reference.

PASSED, APPROVED, AND ADOPTED on the 13th day of June 2023.

McArthur Wright, Mayor
ATTEST:

Cindy Villescas, City Clerk

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I hereby certify that the foregoing Resolution No. 23- was duly adopted by the City Council of the City of Twentynine Palms at a regular meeting thereof, held on the 13th day of June 2023, by the following vote of the Council:

AYES: COUNCILMEMBERS:

NOES: COUNCILMEMBERS:

ABSENT: COUNCILMEMBERS:

ABSTAIN: COUNCILMEMBERS:

Cindy Villescas, City Clerk

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General Fund
City/Town Oper. Budget Pop. Min. Up To Comments
Anaheim $286 Million 351,400 7% 10%
Auburn $10 Million 13,600 30%
Office of the City Auditor 484.4M 493,025 10% of GF Rev with a new goal of 17% Burbank 171M 105,033 15% Working Capital & 5% Emergency Res California 4.4M 14,000 15-20% of budgeted exp
Carlsbad 145.7M 110,000 30% Min, target is 40-50% of GF operating exp Cathedral City $33.4 Million 53,000 33%
Ceres $19.5 Million 46,500 25%
Clovis $59.2 Million 104,300 15% 20%
El Centro $25.5 Million 44,800 10% Plus additional amounts Galt 13.4M 25,000 25% of GF and P&R annual expenditures Glendale $188 Million 195,000 35%
Goleta 25M 31,760 33% Contingency Reserve
Hayward $140.4 Million 150,000 25%
Hemet $41 Million 82,000 20%
La Palma 10.6M 15,900 50%
La Puente $11.5 Million 40,700 25%
Laguna Hills $18.6 Million 31,000 35%
Lakewood $43 Million 81,600 20% Plus additional amounts Lodi $51 Million 67,000 16% Based on revenues
Madera 40M 65,000 30%
Mill Valley $30 Million 14,000 15% Plus an additional 10% in practice Mission Viejo $53.7 Million 96,700 40% 50% Based on revenues Moorpark $17.6 Million 35,700 17% $3 Million fixed amount Palo Alto $185.1 Million 66,000 15% 20%
Pittsburg $36.9 Million 67,000 30%
Portola Valley $4.5 Million 4,500 60%
Rancho Palos Verdes $21 Million 42,500 50%
Red Bluff 10% of GF Exp plus 5% for economic uncertanties Red Wood 130M 86,000 15%
Reserve Policy

GENERAL FUND RESERVE POLICY SURVEY

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Reedley $8.4 Million 25,500 17% Enough to cover 60 days expenses RivCoParks 18M 2,387,741 25% of current fiscal years operational exp The Population of Riverside County
Riverside $256 Million 315,000 15%
S. San Fran 116M 64,500 20%
Salinas $101.5 Million 154,700 8%
San Dimas $20 Million 34,000 78%
San Juan Capistrano $25 Million 35,900 25% 50%
San Leandro $93.5 Million 89,200 20%
Santee $37.2 Million 55,800 20%
Selma 12.8M 25,000 20% 15% working capital reserves + 5% emergency reserve
South El Monte $12 Million 20,300 20%
South San Francisco $84.5 Million 66,200 20% Based on revenues Stanton $19.2 Million 39,200 25%
Suisun City $12.7 illion 29,192 20% Emergency Reserve of Operating budget Truckee $26 Million 16,500 25% Annual Revenue
Villa Park $2.7 Million 5,900 50%
West Sacramento $40 Million 50,000 15% 20%
Woodland 50.1M 59,600 20% of Rev
Yorba Linda $29.4 Million 67,100 50%
Yuba City $37.4 Million 66,400 15%
Average 25%

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Anaheim $286 Million 351,400 7% 10%
Auburn $10 Million 13,600 30%
Cathedral City $33.4 Million 53,000 33%
Ceres $19.5 Million 46,500 25%
Clovis $59.2 Million 104,300 15% 20%
El Centro $25.5 Million 44,800 10% Plus additional amounts Glendale $188 Million 195,000 35%
Hayward $140.4 Million 150,000 25%
Hemet $41 Million 82,000 20%
La Puente $11.5 Million 40,700 25%
Laguna Hills $18.6 Million 31,000 35%
Lakewood $43 Million 81,600 20% Plus additional amounts Lodi $46.9 Million 63,000 16% Revenues
Mill Valley $25.5 Million 14,000 15% Plus an additional 10% in practice Mission Viejo $53.7 Million 96,700 40% 50% Revenues
Moorpark $17.6 Million 35,700 17% $3 Million
Palo Alto $185.1 Million 66,000 15% 20%
Pittsburg $36.9 Million 67,000 30%
Portola Valley (Town) $4.5 Million 4,500 60%
Rancho Palos Verdes $21 Million 42,500 50%
Reedley $8.4 Million 25,500 17% 60 Days
Riverside $256 Million 315,000 15%
Salinas $101.5 Million 154,700 8%
San Dimas $20 Million 34,000 78%
San Juan Capistrano $25 Million 35,900 25% 50%
San Leandro $93.5 Million 89,200 20%
Santee $37.2 Million 55,800 20%
South El Monte $12 Million 20,300 20%
South San Francisco $84.5 Million 66,200 20% Revenues
Stanton $19.2 Million 39,200 25%
Suisun City $10.9 Million 28,900 20%
Truckee (Town) $20 Million 16,500 25%
Villa Park $2.7 Million 5,900 50%
West Sacramento $40 Million 50,000 15% 20%
Yorba Linda $29.4 Million 67,100 50%
Yuba City $37.4 Million 66,400 15%
City GF Op Budget Pop Reserve
Arcata $13.8 Million 17,500 20%
Arroyo Grande $14 Million 17,300 15%
Brea $51.9 Million 42,400 8% 10%

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Burbank 20%
Calistoga 30%
Chula Vista 15%
Covina 20%
Cresent City 25%
Culver City 30%
Elk Grove 15% 20%
Grand Terrace 17%
Healdsburg 35%
Huntington Park 50%
Lafayette 60%
Lemon Grove 25%
Lewdale 100%
Madera 34%
Morgan Hill 15% 20%
Murrieta 25%
Oxnard 18%
Pacifica 10%
Poway 25%
Rancho Cordova 20%
Redwood City 15% 20%
Roseville 10%
Seal Beach 20% 25%
Temecula 20%
Twentynine Palms 120%
Vista 15%
Whittier 5%
Woodside 30%
Yountville 20%
Yucca Valley 50%

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us additional amounts
us additional amounts
us an additional 10% in practice

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RESERVE POLICY
The Government Finance Officers Association, a leading financial organization, which provides best practice guidance to governmental organizations on the United States and Canada, recommends a Reserve Policy be in place. 2

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BENEFITS OF A RESERVE POLICY

1. Planning for contingencies2. Ensures cash availability3. Provides a solid foundation for financial decision-making 3

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GENERAL FUND RESERVES
FY 24/25
Proposed
FY 23/24
Proposed
FY 22/23
Forecast
FY 21/22
Actuals
Unassigned Fund $6,503,162 $6,689,238 $6,215,385 $6,221,290balance Total Expenditures $10,359,955 $12,064,639 $13,391,969* $13,326,266 Reserves (%) 63% 55% 46% 47%
*Excludes $1.3M for termination of the Fire termination plan as this amount will be funded with funds previously assigned by Council 4

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PROPOSED USE OF RESERVES
Inactive Fire Safety Plan termination
5

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TOP REVENUES VS. MAJOR EXPENDITURES
6

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USE AND RESTORATION OF RESERVES
 Meeting cash flow needs during the fiscal year. Closing a projected short-term revenue-expenditure gap. Responding to unexpected expenditure requirements or revenue shortfalls.
 Making investments in unfunded liability reductions, economic development and revenue base improvements, productivity improvements and other strategic opportunities that will strengthen City revenues, reduce future costs or achieve highpriority City goals. 7

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RECOMMENDATIONS

1. City Council establish a 50-55% target amount for
unrestricted/undesignated reserves.

2. Authorize use of reserves to pay off a portion of the inactive Fire Safety Plan
8

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Questions/Comments
9

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Thank you
10

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Twentynine Palms City CouncilJune 27, 2023

Twentynine Palms City Council
June 27, 2023