Twentynine Palms City Council
December 12, 2023

TWENTYNINE PALMS CITY COUNCIL

REGULAR MEETING AGENDA
6136 Adobe Road
Twentynine Palms, CA 92277
www.29palms.org
(AMENDED AGENDA)
(Item #5 added)
Tuesday, December 12, 2023
NOTICE IS HEREBY GIVEN, that the City Council will hold a Regular Meeting on Tuesday, December 12, 2023 at City Hall, 6136 Adobe Road, Twentynine Palms, CA 92277 to consider the following:

REGULAR SESSION AGENDA
6:00 P.M.

CALL TO ORDER
Pledge of Allegiance.

Invocation - Rev. Casey Orndorf.

Roll Call.

Closed Session Announcements.

Changes to the Agenda.

ANNOUNCEMENTS
These proceedings may be viewed on demand on the City of Twentynine Palms website at www.29palms.org.

You may also Live Stream this meeting by going on our website and clicking on the "Meeting Agendas" link.

The December 26, 2023 regularly scheduled meeting of the City Council will be canceled due to the Holidays.

The next regularly scheduled meeting will be held on Tuesday, January 9, 2024.

AWARDS, PRESENTATIONS, APPOINTMENTS AND PROCLAMATIONS

1. Presentation to Semper Fi Girls Softball Team for their Participation in the Cash for Trash and Recycling Program.

2. Presentation to Ash Maharaj for her years of service to the Tourism Business Improvement District.

3. Introduction of "Naji" the newest addition to the Sheriff's Department Staff.

4. State of the Joshua Tree National Park (JTNP) Presentation by Jane Rogers, JTNP Superintendent.

5. Presentation of the City's Annual Comprehensive Financial Report (ACFR) for FY 2022-

23. RECOMMENDATION: The City Council receive and file.

Presentation of the City's Annual Comprehensive Financial Report (ACFR) for FY 2022-

23. - Pdf
5 - 173

6. Mayor Wright's Presentation of the State of the City Address.

7. Comments by Outgoing Mayor McArthur Wright and Presentation of Employee of the Year and Mayor's Recognition Award.

COUNCIL COMMENTS AND REPORTS OF MEETINGS ATTENDED

CONSENT CALENDAR
All matters listed under the Consent Calendar are to be considered routine by the City Council and will be enacted by one motion in the form listed. Any item may be removed from the Consent Calendar and considered separately by the City Council. The public will be given an opportunity to comment on Consent Calendar items prior to the City Council action

8. Waive the Reading of Ordinance and Approve the Reading by Title Only.

9. Approval of Minutes of the City Council Meeting Held on City Council - Regular Meeting - 14 Nov 2023 - Minutes - Pdf 175 - 180

10. Approval of Warrant Register Totaling $853,014.93.

Approval of Warrant Register Totaling $853,014.93. - Pdf 181 - 185

11. Reject All Bids for the High Crash Unsignalized Intersections Project.

RECOMMENDATION: The City Council:

1. Reject all bids for the High Crash Unsignalized Intersections Project.

2. Direct staff to readvertise the project.

Reject All Bids for the High Crash Unsignalized Intersections Project. - Pdf 187 - 214

12. Emergency Repair to the Septic System Leach Field at City Hall.

RECOMMENDATION: The City Council Award a Contract to Van Dyke Corporation in the amount of $35,760.00.

Emergency Repair to the Septic System Leach Field at City Hall. - Pdf 215 - 219

13. Upgrade and Replace Radar Signs.

RECOMMENDATION: The City Council Award a Contract to NextTech Systems in the amount of $70,489.36.

Upgrade and Replace Radar Signs. - Pdf
221 - 228

14. Revised Treasurer's Report - FY 2023-24 Quarter 1.

RECOMMENDATION: The City Council receive and approve the revised Treasurer's Report for the 1st Quarter of Fiscal Year 2023-24.

Revised Treasurer's Report - FY 2023-24 Quarter 1. - Pdf 229 - 231

15. CDBG Application Submission FY 2024/25.

RECOMMENDATION: The City Council approve the submission of the Community Development Block Grant funding application for Fiscal Year 2024/2025.

CDBG Application Submission FY 2024/25. - Pdf
233 - 252

16. DCA23-000015 DTSP Land Use Tables - Second Reading.

RECOMMENDATION: The City Council find the project exempt from CEQA and adopt the Ordinance, approving the Development Code Amendment for the Downtown Specific Plan land use tables.

DCA23-000015 DTSP Land Use Tables - Second Reading. - Pdf 253 - 267

17. DCA23-000012 Western Joshua Trees - Second Reading.

RECOMMENDATION: That the City Council find the project exempt from CEQA and adopt the Ordinance, approving the Development Code Amendment adding Chapter

19.98 Western Joshua Trees.

DCA23-000012 Western Joshua Trees - Second Reading. - Pdf 269 - 279

18. DCA23-000002 Nonconforming Building and Uses-Second Reading.

RECOMMENDATION: The City Council find the project exempt from CEQA, and adopt the Ordinance, approving the Development Code Amendment for Chapter 19.142 Nonconforming Buildings and Uses.

DCA23-000002 Nonconforming Building and Uses-Second Reading. - Pdf 281 - 295

19. Fire Department Emergency Response Report - November 2023.

Fire Department Emergency Response Report - November 2023. - Pdf TNP Monthly Totals - Nov 2023
297 - 299

20. Award a Professional Service Agreement for Audit Services.

RECOMMENDATION: The City Council approve the following:

1. Award the Audit Services contract to Rogers, Anderson, Malody & Scott, LLP, in the amount of $264,900 for the total term of the agreement of five years, plus two one-year option periods, subject to "Approval as to Form" by the City Attorney, and "Approval as to Content" by the City Manager.

2. Authorize the City Manager to execute all documents necessary to enter into the contract, including any necessary amendments thereto.

Award a Professional Service Agreement for Audit Services. - Pdf 301 - 387

ITEMS REMOVED FROM CONSENT CALENDAR FOR DISCUSSION

PUBLIC HEARING - NONE

DISCUSSION AND POTENTIAL ACTION ITEMS

21. Selection of Mayor and Mayor Pro Tem.

RECOMMENDATION: The City Council select a Mayor and Mayor Pro Tem for 2024.

Selection of Mayor and Mayor Pro Tem. - Pdf
389 - 390

22. Wastewater Alternate Sites and Cost.

RECOMMENDATION: The City Council provide direction based on the information provided by this Staff Report.
391 - 672

Wastewater Alternate Sites and Cost. - Pdf

FUTURE COUNCIL INITIATED ITEMS

PUBLIC COMMENTS
This is the time for the public to address the City Council on issues within the jurisdiction of the City Council that are NOT on this agenda. All comments are to be directed to the City Council and shall not consist of any personal attacks. Members of the public are expected to maintain a professional, courteous decorum during their comments. There is a time limitation of three minutes per person. If you haven’t already done so, please fill out name and address slips and give them to the City Clerk. The City Council is prohibited by State law from taking action or discussing items not included on the printed agenda. Public comments on specific agenda items will be deferred until consideration of the item on the agenda.

CITY MANAGER UPDATE

ADJOURNMENT
It is the intention of the City of Twentynine Palms to comply with the Americans with Disabilities Act in all respects. If you are a person with a disability who requires a disability-related modification or accommodation in order to participate in a meeting, including auxiliary aids or services, please request such modification or accommodation from the City Clerk at (760) 367- 4890 (facsimile). Notification at least 48 hours prior to the meeting will enable the City to make reasonable arrangements to assure accessibility to the meeting. Please advise us at the time whether you will require accommodations to participate in meetings on a regular basis. Any person affected by any application on this agenda may submit their concerns in writing prior to the meeting or appear in person and be heard in support or opposition to the proposal at the time the matter is considered on the agenda. The staff reports, applications and environmental documents may be viewed at either the office of Community Development or the office of the City Clerk, 6136 Adobe Road, from 7:00 a.m. until 6:00 p.m. Monday through Thursday, except legal holidays. The Invocation is given per Policy 10-01, and does not reflect the views of the City but rather is an expression of speech by a private citizen making the presentation. Telephone inquiries may be made at (760) 367-6799. If you challenge any agenda issue in court, you may be limited to raising only those issues that you or someone else raised at the public meeting described in this notice, or in written correspondence delivered to the City of Twentynine Palms at, or prior to, the public meeting.

This notice of agenda is hereby certified to have been posted on or before 6:00 p.m., December 5, 2023.

Cindy Villescas CMC, City Clerk Time/Date

STAFF REPORT
TO: City Council
FROM: Finance Director
FOR MEETING: Dec 12 2023
SUBJECT: Presentation of the City's Annual Comprehensive Financial Report (ACFR) for FY 2022-23.

RECOMMENDATION:

The City Council receive and file.

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:
• 2023 Final Annual
Comprehensive Financial
Report
• 2023 Final GAGAS (Generally
Accepted Auditing Standards)
Letter
• 2023 Final SAS (Statement of
Auditing Standards) 114 Letter
• 2023 Final GANN Limit Report
BACKGROUND:

The City’s Fiscal Year runs from July 1 through June 30. Rogers, Anderson, Malody, & Scott (RAMS), independent auditors who specialize in governmental audits, audited the City’s books for the Fiscal Year ending June 30, 2023. In addition to the audit, RAMS assisted City Staff in preparing the City’s Annual Comprehensive Financial Report (ACFR). The City has received an unmodified opinion from RAMS.

This means the ACFR represents fairly the financial position of the City; it is the highest opinion given by an auditor. The City’s ACFR is prepared in accordance with generally accepted accounting principles (GAAP) as promulgated by the Government Accounting Standards Board (GASB). The ACFR reports on the financial activities of the City and includes the Independent Auditors Report from RAMS, the City’s certified public accountants.

Financial Highlights

The General Fund is the chief operating fund of the City of Twentynine Palms. At the end of Fiscal Year 2022-23, the total unrestricted fund balance was $9,098,342 or 79% of total General Fund Expenditures, which is within the City's fund policy of 50-55% of operating expenditures.

The General Fund's fund balance increased by $968,203 primarily due to increased tax revenue and revenues from building permits. General Fund revenues for the Fiscal Year 2022-23 increased by $1,224,329, or 12%, over the prior year. The overall increase was due to the following factors:
 Sales and use taxes increased by $614,305 due to rising inflation and the stabilizing economy after the COVID-19 pandemic.
 Property assessed values increased by 11.16%, which resulted in an increase of $293,239 in property tax revenue.
 Property taxes In lieu of Vehicle License Fee (VLF) also increased by $381,011 as a result of the increase in assessed valuations.

General Fund expenditures for Fiscal Year 2022-23 increased by $1,204,767, or 12%, over the prior year. The overall increase was due to the following factors:
 General Government expenditures increased by $272,491 primarily due to increases in employee-related costs including cost of living adjustment (COLA) of 6.9%, CalPERS retirement system increases, merit increases, and employee reclassifications.
 Public Safety expenditures, generally the City’s largest cost, increased by $383,405 due to increased contract costs with the County of San Bernardino Sherriff’s Department.  Community Development expenditures increased by $119,862 primarily due to increased contract costs for engineering and building inspections.
 Community Services expenditures increased by $200,785 due to the City opening its Freedom Plaza (formerly known as Project Phoenix); this plaza is now fully operational and has added approximately $152,553 in additional operating costs.

The City has been a recipient of the Government Finance Officers Association's (GFOA) Certificate of Achievement for Excellence in Financial Reporting for the past Fiscal Years, including the Fiscal Year ended June 30, 2022. A copy of the award can be found on page vii of the attached ACFR. According to the GFOA, the certificate program was established in 1945 "to encourage and assist state and local governments to go beyond the minimum requirements of generally accepted accounting principles to prepare annual comprehensive financial reports that evidence the spirit of transparency and full disclosure and then to recognize individual governments that succeed in achieving that goal. The Certificate of Achievement is the highest form of recognition in governmental accounting and financial reporting." The City intends to continue its participation in the certificate program in future years.

ENVIRONMENTAL:

N/A
ALTERNATIVES:

The City Council could choose not to accept the Annual Comprehensive Financial Report.

FISCAL IMPACT:

N/A

Twentynine Palms, California

Annual Comprehensive Financial Report
For the fiscal year ended June 30, 2023
Prepared by the Finance Department

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City of Twentynine Palms
Table of Contents
June 30, 2023
Page

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

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

Government-wide Financial Statements:

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

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

Budgetary Comparison Schedule - General Fund .............................................................................. 66 Budgetary Comparison Schedule - CDBG Special Revenue Fund .................................................... 67 Budgetary Comparison Schedule – Tourism Business Improvement District Special Revenue Fund .................................................................................................................. 68 Budgetary Comparison Schedule - ARPA Special Revenue Fund ..................................................... 69 Schedule of the City’s Proportionate Share of the Plan’s Net Pension Liability and Related Ratios as of the Measurement Date ......................................................................... 70 Schedule of Plan Contributions ........................................................................................................... 71 Schedule of Changes in the Net OPEB Liability and Related Ratios .................................................. 72 Schedule of OPEB Contributions ........................................................................................................ 73 Notes to Required Supplementary Information ................................................................................... 74

City of Twentynine Palms
Table of Contents
June 30, 2023
Page
Other Supplementary Information:

Description of Funds ............................................................................................................................ 75 Nonmajor Funds
Combining Balance Sheet ............................................................................................................ 76 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ................... 80 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual:

Traffic Safety Special Revenue Fund ..................................................................................... 84 Gas Tax Special Revenue Fund ............................................................................................ 85 Lighting and Landscape A.D. Special Revenue Fund ............................................................ 86 Public Access Programming Special Revenue Fund ............................................................. 87 Recycling Special Revenue Fund .......................................................................................... 88 Measure I 2011 Special Revenue Fund ................................................................................. 89 Article 8 Special Revenue Fund ............................................................................................. 90 Traffic Relief Special Revenue Fund ...................................................................................... 91 SB 1 - Road Maintenance Rehab Special Revenue Fund ..................................................... 92 Capital Improvements Capital Projects Fund - Major Fund ................................................... 93 Curb, Gutter, Sidewalk Impact Fee Capital Projects Fund ..................................................... 94 Streets Capital Projects Fund ................................................................................................. 95 Nonmajor Funds
City Bonds Proceeds Capital Projects Fund ................................................................................. 96

STATISTICAL SECTION
Net Position by Component - Last Ten Fiscal Years ................................................................................. 97 Changes in Net Position - Last Ten Fiscal Years ...................................................................................... 99 Governmental Activities - Tax Revenues by Source - Last Ten Fiscal Years ......................................... 103 Fund Balances of Governmental Funds - Last Ten Fiscal Years ............................................................ 104 Changes in Fund Balances of Governmental Funds - Last Ten Fiscal Years ......................................... 106 General Government Revenues by Source - Last Ten Fiscal Years ....................................................... 108 Assessed Value and Estimated Actual Value of Taxable Property - Last Ten Fiscal Years ................... 110 Direct and Overlapping Property Tax Rates - Last Ten Fiscal Years ...................................................... 111 Property Tax Levies and Collections - Last Ten Fiscal Years ................................................................. 112 Ratio of Outstanding Debt by Type - Last Ten Fiscal Years .................................................................... 113 Legal Debt Margin Information - Last Ten Fiscal Years .......................................................................... 114 Pledged Revenue Coverage - Last Ten Fiscal Years .............................................................................. 115 Demographic and Economic Statistics - Last Ten Calendar Years ......................................................... 116 Full-Time Equivalent City Government Employees by Function - Last Ten Fiscal Years ....................... 117 Capital Asset Statistics by Function - Last Ten Fiscal Years ................................................................... 118 Operating Indicators by Function - Last Ten Fiscal Years ....................................................................... 120 Memo - Statistical Section ........................................................................................................................ 121

INTRODUCTORY SECTION

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CITY OFFICES:
6136 ADOBE ROAD
TWENTYNINE PALMS, CA 92277
(760) 367-6799
Fax (760) 367-4890
www.29palms.org

COUNCILMEMBERS
McArthur Wright, Mayor
Steven Bilderain, Mayor Pro Tem
Joel Klink
Daniel L. Mintz, Sr.

Octavious Scott
,17(5,0CITY MANAGER
/DUU\%RZGHQ
i
November 20, 2023
To the Honorable Mayor and City Council
of the City of Twentynine Palms
We are pleased to present the annual comprehensive financial report (ACFR) of the City of Twentynine Palms (City) for the fiscal year ended June 30, 2023. It is submitted with this letter fulfilling the requirements of the State of California. The basic financial statements have been presented in conformity with generally accepted accounting principles (GAAP) and are audited in accordance with generally accepted auditing standards by an independent firm of licensed certified public accountants.

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

The City’s basic financial statements have been audited by Rogers, Anderson, Malody & Scott, LLP, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City for the fiscal year ended June 30, 2023, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures on the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall presentation of the financial statements. Based upon their audit, the independent auditor concluded that there was reasonable basis for rendering an unmodified opinion that the City’s financial statements for the fiscal year ended June 30, 2023, are fairly presented in conformity with GAAP. The independent auditor’s report is presented as the first component of the financial section of this report.

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

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

ii
Profile of the City of Twentynine Palms, California
The City of Twentynine Palms, California was incorporated as a general law city on November 23, 1987 and is located in south-central San Bernardino County (a part of the Morongo Basin). The City limits cover an area of approximately 58 square miles, with a population of approximately 26,000. The City is empowered by state statute to extend its corporate limits by annexation, which occurs periodically when deemed appropriate by City Council.

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

The City provides a full range of services, including police (provided by the San Bernardino County Sheriff’s Department); construction and maintenance of streets and other infrastructure; recreational activities and cultural events; sanitation services; street lighting; planning and zoning; and general administrative services. The Twentynine Palms Water District provides water services for the City. Fire services are provided by the San Bernardino County Fire Department. Economic development activities which, in the past, were provided through a legally separate Twentynine Palms Redevelopment Agency (Agency). The activities of the Agency were included as an integral part of the City’s basic financial statements through January 31, 2012. All Redevelopment Agencies in the State of California ceased to exist on that date. The activity of closing the Twentynine Palms Redevelopment Agency passed to the City as “Successor Agency.”
In Fiscal Year 2020-21, the City began providing sewer services to customers in a relatively new small area developed within the City's downtown (aka Phoenix Project). This project is unique in that it has a limited number of customers and will have its own package treatment plant serving only those customers within the new development area.

The annual budget serves as the foundation for the City’s financial planning and control. In March, department heads submit requests for the following year to the City Manager. The City Manager and Finance Director estimate revenue and determine how much is available to cover the requested expenditures. A preliminary draft budget is submitted to the City Council. The City Manager conducts a study session with the Council. Changes directed by the Council are incorporated into the final draft, and the budget is approved by the Council at one of their regular meetings in June.

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

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

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

The General Fund financial statements show an increase of $1,224,329 in revenues this year.

Unemployment in the City was at 6.3% for 2023 compared with 4.9% for 2022. Sixteen single family residential building permits were issued during the year. Property valuations rose by 11.16% to $1,137,526,790.

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

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

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

Relevant financial policies
The General Fund balance has increased by $968,203 for fiscal year 2022-2023. The change is primarily attributed to increases in property taxes, sales taxes, and building permits, which are the City’s major revenue sources. A reasonable minimum unrestricted (unassigned) Fund Balance is maintained for the following purposes:

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

2. Provide stable tax rates and charges for services.

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

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

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

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

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

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

City of Twentynine Palms
Directory of City Officials
June 30, 2023
v
McArthur Wright Mayor
Steven Bilderain Mayor Pro Tem
Daniel L. Mintz, Sr. Council Member
Joel A. Klink Council Member
Octavious Scott Council Member
Cindy Villescas City Clerk
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Keith Gardner
Abigail Hernandez Conde Craig
Stacey
Kary Minatrea
Rick Boyd
Elijah Marshall
,QWHULPCity Manager
Community Development Director
Finance Director
Public Works Superintendent
Recreation Division Manager
Animal Control Manager
Information Services Director
Patrick Munoz City Attorney
Richard Pedersen City Engineer
Robert Warrick Chief of Police

CONTRACTORS

MANAGEMENT

APPOINTED OFFICIALS

ELECTED OFFICIALS

City of Twentynine Palms
Organizational Chart June 30, 2023
vi
City Council
McArthur Wright - Mayor
Steven Bilderain - Mayor Pro Tem
Joel A. Klink - Councilmember
Daniel L. Mintz Sr. – Councilmember
Octavious Scott - Councilmember
City Manager
/DUU\%RZGHQ - ,QWHULPCity Manager
Christina Benton – Executive Assistant
Chayanne Ryan – Office Assistant
City Attorney
Patrick Munoz
Public Works
Craig Stacey – Superintendent James Thompson - MWIII Roads John Ferrier - MWIII Roads Corey Sullivan - Lead MW Roads Brian Soster – Lead MW/Street Sweeper Roads Anthony Meyers – MWI Roads David Daly – MWI Roads Frank Romo - Lead MW Parks Steven Brannon - MWII Parks Andrew Smith - MWII Parks Jorge Muro - MWI Parks Nathan Yantes – MWI Parks Community Services
Kary Minatrea – Recreation Division Manager Haywood Adams - Rec Program Supervisor Jonas Childs - Rec Program Supervisor Scott Clinkscales - Community Events Coordinator Amy Tessier – Rec Coordinator &XUWLV0F&R\5HF&RRUGLQDWRU-RUJH*X]PDQ5HF&RRUGLQDWRU Finance
Abigail Hernandez Conde - Finance Director Cindy Keniry – Sr. Finance Tech Adessa Bigler – Finance Tech II Animal Control
Rick Boyd – A/C ManagerMorgan Cole - AC OfficerMatthew Klink - AC Tech Patrick Tenorio – AC Tech Klalyn Tschoepe – AC Tech Community Development
Keith Gardner – Community Development Director Diane
Olsen - Assistant Planner Shelley Green - Office Assistant II Katrina Bennett – Office Assistant I &DPHURQ+HSSHUO\ - Bldg & Safety Inspector 0LFKDHO&XPPLQJV%OGJ 6DIHW\,QVSHFWRUChris Giunta - Code Enforcement Officer Vanessa Cabrara - Code Enforcement Officer Richard Pedersen - Engineer City Clerk
Cindy Villescas - City Clerk /PIO
Citizens of
Twentynine Palms
Planning Commission
Jim Krushat - Chair
Max Walker - Vice Chair
Leslie Paahana - Commissioner
Jessica Cure - Commissioner
Alexander Garcia - Commissioner
PoliceRobert Warrick - Captain
Human
Resources
Jacqueline Palmer - Human Resources Manager
Information Services
Elijah Marshall - Director
Tourism Business Improvement District
(TBID)
Breanne Dusastre – Director of Marketing
D’Anne Albers – Office Assistant
0DULVVD.R]PD2IILFH$VVLVWDQW

vii

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FINANCIAL SECTION

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-1-
Independent Auditor’s Report
The Honorable City Council
City of Twentynine Palms, California
Report on the Audit of the Financial Statements
Opinions
We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Twentynine Palms (the City), as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.

In our opinion, the accompanying financial statements present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City, as of June 30, 2023, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

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

Other Matters
As discussed in Note 1 to the financial statements, in the year ended June 30, 2023, the City adopted new accounting guidance under Governmental Accounting Standards Board (GASB) Statement No. 96, Subscription-Based Information Technology Arrangements and Governmental Accounting Standards Board (GASB) Statement No. 101, Compensated Absences. Our opinions are not modified with respect to these matters.

-2-
Responsibilities of Management for the Financial Statements The City’s management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

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

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

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

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

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

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standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The combining and individual nonmajor fund financial statements, and the budgetary comparison schedules are presented for purposes of additional analysis and are not a required part of the basic financial statements.

The combining nonmajor fund financial statements and the budgetary comparison schedules are the responsibility of management and were derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information contain therein is fairly stated, in all material respects, in relation to the basic financial statements as a whole.

Other Information
Management is responsible for the other information included in the annual report. The other information comprises the introductory and statistical sections but does not include the financial statements and our auditor’s report thereon. Our opinions on the financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 20, 2023, on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.

San Bernardino, California
November 20, 2023

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Management’s Discussion and Analysis
As management of the City of Twentynine Palms, we offer readers of the City of Twentynine Palms’ financial statements this narrative overview and analysis of the financial activities of the City of Twentynine Palms for the fiscal year ended June 30, 2023. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages i-iv of this report.

Financial highlights
x The assets and deferred outflows of resources of the City of Twentynine Palms exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $67,868,045 (net position). Of this amount, $15,908,516 (unrestricted net position) may be used to meet the City’s ongoing obligations to citizens and creditors. x As of the close of the current fiscal year, the City of Twentynine Palms’ governmental funds reported combined ending fund balances of $20,743,572, an increase of $1,043,768 in comparison with the prior year. Approximately 44%, or $9,077,481, of the ending fund balance is available for spending at the City’s discretion (unassigned fund balance). x At the end of the current fiscal year, unassigned fund balance for the General Fund was $9,098,342, or 79% of the General Fund expenditures.
x The City of Twentynine Palms’ total long-term liabilities increased by $1,784,226 during the current fiscal year mainly as a result of a changes in the City’s net pension liability.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 27-65 of this report.

Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City’s budget versus actual results for the General Fund and any Special Revenue Major Fund, the City’s proportionate share of their pension plan’s liability and related ratios as of the measurement date, the City’s schedule of plan contribution, and the City’s schedule of changes in Net OPEB liability and the schedule of OPEB contributions. Required supplementary information can be found on pages 66-74 of this report.

The combining statements referred to earlier in connection with non-major governmental funds are presented immediately following the required supplementary information. Combining and individual fund statements and schedules can be found on pages 75-96 of this report.

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

Statement of Net Position. As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of the City of Twentynine Palms, assets and deferred outflows of resources exceeded liabilities and deferred inflows by $67,868,045 at the close of the most recent fiscal year.

A large portion of the City’s net position (69%) reflects its investment in capital assets (e.g., land, buildings, machinery, and equipment); less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

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2023 2022 2023 2022 2023 2022
Current and other assets 21,925,143 $ 24,169,204 $ 592,948 $ 244,297 $ 22,518,091 $ 24,413,501 $ Capital assets 45,821,035 39,579,993 2,748,343 1,478,017 48,569,378 41,058,010 Total assets 67,746,178 63,749,197 3,341,291 1,722,314 71,087,469 65,471,511 Deferred outflows of resources 3,762,501 3,352,582 - - 3,762,501 3,352,582 Other liabilities 813,895 1,325,676 148,920 151,052 962,815 1,476,728 Long-term liabilities 3,641,255 1,673,647 - - 3,641,255 1,673,647

Total liabilities 4,455,150 2,999,323 148,920 151,052 4,604,070 3,150,375 Deferred inflows of resources 2,377,855 3,260,100 - - 2,377,855 3,260,100 Net position:

Net investment in capital assets 44,406,583 38,345,205 2,748,343 1,478,017 47,154,926 39,823,222 Restricted 4,804,603 4,160,212 - - 4,804,603 4,160,212
Unrestricted 15,464,488 18,673,349 444,028 93,245 15,908,516 18,766,594 Total net position 64,675,674 $ 61,178,766 $ 3,192,371 $ 1,571,262 $ 67,868,045 $ 62,750,028 $ Governmental Activities
Statement of Net Position
Business-Type Activities Total
An additional portion of the City of Twentynine Palms’ net position (7%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position, $15,908,516 may be used to meet the government’s ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City of Twentynine Palms is able to report positive balances in all three categories of net position. The same situation held true for the prior fiscal year. 2023 2022 2023 2022 2023 2022
Revenues:

Program revenues:

Charges for services 1,124,836 $ 1,665,029 $ 14,349 $ 5,218 $ 1,139,185 $ 1,670,247 $ Operating grants and contributions 6,401,746 5,474,903 - - 6,401,746 5,474,903 Capital grants and contributions 2,773,636 7,367,880 803,021 475,437 3,576,657 7,843,317 Property taxes 2,871,282 2,578,043 - - 2,871,282 2,578,043 Other taxes 9,375,666 8,554,598 - - 9,375,666 8,554,598 Investment earnings 204,344 (179,141) - - 204,344 (179,141) Other 698,390 145,565 - - 698,390 145,565
Total revenues 23,449,900 25,606,877 817,370 480,655 24,267,270 26,087,532 Expenses:

General government 3,799,677 1,525,370 - - 3,799,677 1,525,370 Public safety 8,014,426 3,419,956 - - 8,014,426 3,419,956 Public works 3,423,803 1,042,868 131,211 262,334 3,555,014 1,305,202 Community development 1,924,784 4,125,011 - - 1,924,784 4,125,011 Economic development 268,388 223,036 - - 268,388 223,036 Health and sanitation 81,264 34,975 - - 81,264 34,975
Community services 1,467,340 585,416 - - 1,467,340 585,416 Interest on long-term debt 38,360 40,939 - - 38,360 40,939 Total expenses 19,018,042 10,997,571 131,211 262,334 19,149,253 11,259,905 Change in net position before transfers 4,431,858 14,609,306 686,159 218,321 5,118,017 14,827,627 Transfers in (out) (934,950) (623,487) 934,950 623,487 - - Change in net position 3,496,908 13,985,819 1,621,109 841,808 5,118,017 14,827,627 Net position, beginning of year, as restated 61,178,766 47,192,947 1,571,262 729,454 62,750,028 47,922,401 Net position, end of year 64,675,674 $ 61,178,766 $ 3,192,371 $ 1,571,262 $ 67,868,045 $ 62,750,028 $ Governmental Activities
Change in Net Position
Business-Type Activities Total

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The City’s net position increased by $5,118,017 during the current fiscal year. The increase is mainly attributed to increases in tax revenue and grant revenue. Tax revenues for the year increased primarily due to increased sales taxes and property taxes, which grew by 39% and 11%, respectively, as a result of a stabilized economy after the COVID-19 pandemic. Capital grants and contributions decreased by 54%, this is mainly due to City receiving less grants compared to the prior year. For instance, the City received two grants from the State of California Natural Resources Agency totaling $8M, of which 75%, or $6M, was earned and recognized in fiscal year 2022 for the City's downtown revitalization project, Project Phoenix. No grants for a similar amount were received in fiscal year 2023.

Expenses and program revenues - Governmental Activities Revenue by source - Governmental Activities
5%
27%
12% 29%
9%
18%
Charges for services
Operating gran ts and contributions
Capital gran ts and contributions
Property taxes
Sales taxes
Other taxes and revenues
Financial analysis of the government’s funds
As noted earlier, the City of Twentynine Palms uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

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

As of the end of the current fiscal year, the City of Twentynine Palms governmental funds reported combined ending fund balances of $20,743,572, an increase of $1,043,768 in comparison with the prior year. Approximately 44%, or $9,077,481, of the ending fund balance constitutes unassigned fund balance, which is available for spending at the government’s discretion. The remainder of fund balance is not available for new spending because it has either already been 1) restricted for a variety of purposes by outside sources, $4,804,603; 2) assigned by the government to a specific purpose, $6,767,525 or 3) in a non-spendable form $93,963.

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Major Funds
The General Fund is the chief operating fund of the City of Twentynine Palms. At the end of the current fiscal year, the unassigned fund balance of the General Fund was $9,098,342 while total fund balance was $11,610,172. As a measure of the General Fund’s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 79% of total General Fund expenditures, while total fund balance represents 100% of that same amount. The 79% of unassigned General Fund balance complies with the City’s Fund Balance policy.

The fund balance of the City’s General Fund increased by $968,203 during the current fiscal year, primarily due to increased tax revenue and revenues from building permits.

General Fund revenues for the fiscal year ended June 30, 2023, increased by $1,224,329, or 10%, over the prior year. The overall increase was due to the following factors:
x Tax revenues increased by $905,713 from the prior year, largely due to a $614,305 increase in Sales and use taxes as a result of rising inflation and the stabilizing economy after the COVID-19 pandemic. Property assessed values increased by 11.16%, which resulted in an increase of $293,239 in property tax revenue. Property taxes In lieu of Vehicle License Fee (VLF) also increased by $381,011 as a result of the increase in assessed valuations.

General Fund expenditures for the fiscal year ended June 30, 2023, increased by $1,204,767, or 12%, over the prior year. The overall increase was due to the following factors:
x General Government expenditures increased by $272,491 primarily due to increases in employee-related costs including cost of living adjustment (COLA) of 6.9%, CalPERS retirement system increases, merit increases, and employee reclassifications. x Public Safety expenditures, generally the City’s largest cost, increased by $383,405 due to increased contract costs with the County of San Bernardino Sherriff’s Department. x Community Development expenditures increased by $119,862 primarily due to increased contract costs for engineering and building inspections.
x Community Services expenditures increased by $200,785 due to the City opening its Freedom Plaza (formerly known as Project Phoenix), this plaza is now fully operational and has added approximately $152,553 in additional operating costs.

The General Fund transferred out $3,479,961 to the Capital Projects Fund to assist in funding several capital projects, including the reconstruction of the City’s community pool at Luckie Park, building improvements and remodels, and the replacement of light poles at Luckie Park. The General Fund also transferred out $30,000 to various nonmajor funds to cover costs incurred in the normal course of business, and $934,950 to the Sewer Fund to assist funding for both the Citywide wastewater project and Project Phoenix Package Treatment Plant. Various nonmajor funds transferred out a total of $20,000 to the General Fund for reimbursement of administrative costs based on approved cost allocations.

The Community Development Block Grant was established to account for the activities of the funding provided by the U.S. Department of Housing and Urban Development under the Community Development Block Grant for projects within the City. Current year revenues totaled $844,872 and current year expenditures totaled $333,745 resulting in an increase in fund balance of $511,127. The increase in fund balance is due to the timing of grant reimbursements for the Homekey project.

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The Tourism Business Improvement District is a special revenue fund established to account for the assessment levied on all existing and future hotels and short-time vacation rentals within the City at a rate of 1.5% per occupied room night rate. The revenues collected through this assessment are designated for marketing the City as a tourism destination. Current year revenues totaled $403,353 and current year expenditures totaled $268,388, resulting in an increase in fund balance of $134,965 for the current year.

The main increase is due to the City collecting a higher percentage of assessment fees as a result of a stabilizing economy, as well as receiving higher investment earnings compared to prior year. This fund ended the current fiscal year with a fund balance of $639,556 as current year revenues offset the prior year’s deficit fund balance.

The American Rescue Plan Act (ARPA) was established to account for the activities of the funding provided by the U.S. Department of Treasury under Coronavirus State and Local Fiscal Recovery Funds program. The City received its second installment during FY 2022-23. Current year revenues totaled $3,118,608. A total of $3,118,608 was transfer to the general fund to replace lost public sector revenue as provided under the U.S. Treasury's Final Rule. This fund ended the current fiscal year with a fund balance of $0 as current year revenues offset current year expenditures and transfers.

The Capital Improvements Fund was established to account for financial resources, other than Community Development Block Grants, used for the planning, construction, repair and rehabilitation of the City’s major capital facilities and infrastructure. Current year revenues and transfers in totaled $2,624,303 and $3,479,961, respectively, and current year expenditures totaled $6,891,327, resulting in an decrease in fund balance of $787,063 for the current year. This decrease is due to timing of grant reimbursements for various capital projects. At the end of the current fiscal year, the fund balance totaled $3,877,614, which is assigned for specific capital project as approved by Council. Transfers into the fund are appropriated from the unassigned fund balance of the General Fund as directed by Council from prior year excess fund balances.

Business-type Activities. Revenues and contributions of the City’s business-type activities were $949,299 and $803,021, respectively for the fiscal year ending June 30, 2023. Expenses for the City’s business-type activities were $131,211 for the year, resulting in a net increase in net position of $1,621,109.

Fiduciary fund. The private-purpose trust fund accounts for the assets and liabilities transferred from the former Redevelopment Agency to the City as Successor Agency. The net deficit held for RDA dissolution is $8,867,964.

General fund budgetary highlights
Revenue was more than budgeted by $1,275,298 as a result of, the City receiving more tax revenues and fees from licenses and permits during the year than was projected.

The total expenditure was under budget by 4%, or $442,342. The following functions had expenditures over budget: Public Safety - $33,239, Debt Service - $18,603, and Capital Outlay - $73,110.

Capital asset and debt administration
Capital assets
The City’s investment in capital assets for its governmental activities and business-type activities as of June 30, 2023, amounts to $48,569,378 (net of accumulated depreciation). This investment in capital assets includes land, buildings and improvements, machinery and equipment, park facilities, roads, and related facilities. The total increase in the City’s investment in capital assets for the current fiscal year was 18%. The increase was primarily due to the increased activity for construction and reconstruction of the City’s community pool at Luckie Park.

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2023 2022 2023 2022 2023 2022
Land and improvements 5,304,219 $ 5,575,859 $ - $ - $ 5,304,219 $ 5,575,859 $ Right-of-ways 17,686 17,686 - - 17,686 17,686
Construction in progress 3,876,867 3,289,274 1,844,475 542,982 5,721,342 3,832,256 Building and improvements 21,216,651 14,978,245 - - 21,216,651 14,978,245 Machinery and equipment 1,198,819 913,199 - - 1,198,819 913,199 Office equipment 68,611 21,893 - - 68,611 21,893
Vehicles 85,212 67,517 - - 85,212 67,517
Infrastructure 13,944,470 14,706,463 903,868 935,035 14,848,338 15,641,498 Right-to-use - leases 28,035 - - - 28,035 -
Right-to-use - subscriptions 80,465 - - - 80,465 -
Total capital assets 45,821,035 $ 39,570,136 $ 2,748,343 $ 1,478,017 $ 48,569,378 $ 41,048,153 $ Governmental Activities
Capital Assets
Total
(Net of depreciation)
Business-Type Activities
Additional information on the City’s capital assets can be found in Note 6 of this report.

Long-term liabilities
At the end of the current fiscal year, the City had no bonded debt because of the dissolution of the Redevelopment Agency and the transfer of its debt to the Successor Agency. 2023 2022 2023 2022 2023 2022
Net OPEB liability (Asset) - $ 153,371 $ - $ - $ - $ 153,371 $ Net pension liability 1,881,330 183,382 - - 1,881,330 183,382 Lease liability 28,231 9,888 - - 28,231 9,888
Subscription liability 62,149 - - - 62,149 -
Facility improvements loan 1,185,555 1,224,900 - - 1,185,555 1,224,900 Compensated absences 483,990 285,488 - - 483,990 285,488 Total long-term liabilities 3,641,255 $ 1,857,029 $ - $ - $ 3,641,255 $ 1,857,029 $ Governmental Activities Business-Type Activities
Non-Current Liabilities
Total
The City’s total long-term liabilities increased by $1,784,196, or 96%, during the current fiscal year mainly due to changes in the City’s CalPERS net pension liability.

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

Economic factors and next year’s budgets and rates
The unemployment rate for the City of Twentynine Palms on June 30, 2023 was 6.30%. The unemployment rate for San Bernardino County was 4.9% and the unemployment rate for the State of California was 4.6%.

Property tax collections for FY 2023-2024 will rise from the 2022-2023 collections because of the increase in property valuations. Property valuations rose by 11.16% from $1,023,303,791 in FY 2021- 2022 to $1,137,526,790 in FY 2022-2023.

Housing prices in Twentynine Palms rose. The median home price declined by 4.22% from $281,909 in 2022 to $270,000 in 2023.

Construction activity in the community has remained steady. The City issued 16 single-family building permits during FY 2022-2023, which is the same as compared to prior year. The high point for the City was FY 2005- 2006 when 330 single-family residence permits were issued.

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Sales tax collections increased from $1,586,033 in FY 2021-2022 to $2,200,338 in FY 2022- 2023. Taxable sales are expected to decline slightly in the coming fiscal year due to the continued high inflation, labor shortages, supply chain issues, and rising interest rates.

All of these factors were considered in preparing the budget for the 2023-2024 fiscal year.

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

BASIC FINANCIAL STATEMENTS

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City of Twentynine Palms
Statement of Net Position
June 30, 2023
The accompanying notes are an integral part of these financial statements. -13-
Governmental Business-Type
Activities Activities Total
Assets
Cash and investments 16,530,615 $ - $ 16,530,615 $
Cash and investments with fiscal agent - restricted 714,936 - 714,936 Receivables:

Intergovernmental 47,382 - 47,382
Taxes - 1,161,513 1,161,513
Interest - 100,143 100,143
Grants 742,790 2,691,801 3,434,591
Leases - 286,020 286,020
Other 146 105,725 105,871
Prepaid expense 25,200 - 25,200
Internal balances 149,988 (149,988) -
Land held for resale 93,963 - 93,963
Net OPEB Asset 17,857 - 17,857
Capital assets, not being depreciated 9,198,772 1,844,475 11,043,247 Capital assets, depreciated, net 36,622,263 903,868 37,526,131 Total assets 67,746,178 3,341,291 71,087,469
Deferred outflows of resources
Pension related 3,545,117 - 3,545,117
OPEB related 217,384 - 217,384
Total deferred outflows of resources 3,762,501 - 3,762,501 Liabilities
Accounts payable and accrued liabilities 558,327 148,920 707,247 Deposits payable 117,051 - 117,051
Retentions payable 138,517 - 138,517
Noncurrent liabilities:

Due within one year
Compensated absences 96,798 - 96,798
Long term liabilities 74,378 - 74,378
Due beyond one year
Compensated absences 387,192 - 387,192
Long term liabilities 1,201,557 - 1,201,557
Net pension liability 1,881,330 - 1,881,330
Total liabilities 4,455,150 148,920 4,604,070
Deferred inflows of resources
Pension related 1,155,064 - 1,155,064
OPEB related 945,279 - 945,279
Leases - 277,512 277,512
Total deferred inflows of resources 2,377,855 - 2,377,855 Net position
Net investment in capital assets 44,406,583 2,748,343 47,154,926 Restricted for:

Public safety 406,426 406,426
Streets, highways, bikeways, public transit and
other related purposes 2,347,191 - 2,347,191
Community development 1,195,707 - 1,195,707
Economic development 639,556 - 639,556
Health and sanitation 215,646 215,646
Community services 77 77
Unrestricted 15,464,488 444,028 15,908,516
Total net position 64,675,674 $ 3,192,371 $ 67,868,045 $

City of Twentynine Palms
Statement of Activities
For the year ended June 30, 2023
The accompanying notes are an integral part of these financial statements. -14-
Charges Operating Capital
for grants and grants and
Expenses services contributions contributions
Governmental activities:

General government 3,799,677 $ 96,705 $ 3,164,600 $ - $ Public safety 8,014,426 108,726 165,306 -
Public works / streets 3,423,803 184,109 1,413,436 934,068 Community development 1,924,784 534,853 92,238 -
Economic development 268,388 - - -
Health and sanitation 81,264 - 52,966 -
Community services 1,467,340 200,443 1,513,200 1,839,568 Interest on long-term debt 38,360 - - -
Total governmental activities 19,018,042 1,124,836 6,401,746 2,773,636 Business-type activities:

Sewer 131,211 14,349 - 803,021
Total business-type activities 131,211 14,349 - 803,021 Total Primary Government 19,149,253 $ 1,139,185 $ 6,401,746 $ 3,576,657 $ General revenues:

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

The accompanying notes are an integral part of these financial statements. -15-
Governmental Business-type
Activities Activities Total
$ - (538,372) $ (538,372) $
- (7,740,394) (7,740,394)
- (892,190) (892,190)
- (1,297,693) (1,297,693)
- (268,388) (268,388)
- (28,298) (28,298)
- 2,085,871 2,085,871
- (38,360) (38,360)
- (8,717,824) (8,717,824)
686,159 - 686,159
686,159 - 686,159
686,159 (8,717,824) (8,031,665)
2,871,282 - 2,871,282
2,200,338 - 2,200,338
3,794,419 - 3,794,419
- 930,375 930,375
2,346,125 - 2,346,125
76,031 - 76,031
28,378 - 28,378
- 204,344 204,344
698,390 - 698,390
934,950 (934,950) -
934,950 12,214,732 13,149,682
1,621,109 3,496,908 5,118,017
1,571,262 61,178,766 62,750,028
$ 3,192,371 64,675,674 $ 67,868,045 $

City of Twentynine Palms
Balance Sheet
Governmental Funds
June 30, 2023
The accompanying notes are an integral part of these financial statements.

Ͳ16-
Special Revenue
Community Tourism Business
Development Improvement
General Block Grant District ARPA
Assets
Cash and investments 9,739,176 $ - $ 539,707 $ - $
Cash and investments with
fiscal agents - restricted - - - -
Receivables:

Intergovernmental - - - -
Taxes 888,091 - - -
Interest 64,716 - 4,562 -
Grants 11,021 248,746 - -
Leases 286,020 - - -
Other - - 98,786 -
Prepaid expenses 25,200 - -
Land held for resale 93,963 - - -
Due from other funds 1,202,729 - - -
Total assets 12,310,916 $ 248,746 $ 643,055 $ - $
Liabilities, Deferred Inflows of
Resources and Fund Balances
Liabilities:

Accounts payable and accrued liabilities 301,729 $ - $ 3,499 $ - $ Deposits payable 117,051 - - -
Retentions payable - - - -
Due to other funds - 248,669 - -
Total liabilities 418,780 248,669 3,499 -
Deferred Inflows of Resources
Unavailable revenues 4,452 - - -
Leases 277,512 - - -
Total deferred inflows of resources 281,964 - - -
Fund balances:

Nonspendable 93,963 - - -
Restricted 406,426 77 639,556 -
Assigned 2,011,441 - - -
Unassigned 9,098,342 - - -
Total fund balances (deficit) 11,610,172 77 639,556 -
Total liabilities, deferred inflows of
resources and fund balances 12,310,916 $ 248,746 $ 643,055 $ - $

-17-
Capital Projects Total
Nonmajor Total
Capital Governmental Governmental
Improvements Funds Funds
$ 3,729,304 2,522,428 $ 16,530,615 $
714,936 - 714,936
47,382 - 47,382
273,422 - 1,161,513
30,865 - 100,143
825,161 1,606,873 2,691,801
- - 286,020
6,939 - 105,725
25,200
- - 93,963
- - 1,202,729
$ 5,628,009 4,129,301 $ 22,960,027 $
$ 106,136 146,963 $ 558,327 $
- - 117,051
52,386 86,131 138,517
804,072 - 1,052,741
962,594 233,094 1,866,636
49,262 18,593 72,307
- - 277,512
49,262 18,593 349,819
- - 93,963
3,758,544 - 4,804,603
878,470 3,877,614 6,767,525
(20,861) - 9,077,481
4,616,153 3,877,614 20,743,572
$ 5,628,009 4,129,301 $ 22,960,027 $

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City of Twentynine Palms
Reconciliation of the Balance Sheet of
Governmental Funds to the Statement of Net Position
June 30, 2023
The accompanying notes are an integral part of these financial statements. -18-
$ 20,743,572
62,512,587
(16,800,052)
126,307
(17,807)
17,857
(1,881,330)
Long-term liabilities (1,275,935)
(483,990)
3,545,117
217,384
(1,155,064)
(945,279)
72,307
$ 64,675,674
Capital assets and right to used asset used in governmental activities are not current financial resources and, therefore, are not reported in the governmental funds:
p p, ,
Statement of Net Position, any excesses or deficiencies in contributions in relation to the Deferred outflows and inflows of resources related to pension and OPEB are not reported in the governmental funds:

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

Unavailable revenues
Pension related deferred inflows of resources
Pension related deferred outflows of resources
Capital assets
Non current liabilities are not due and payable in the current period and, therefore, are not reported in the governmental funds:

Net OPEB obligation
Net pension liability
Compensated absences
Intangible asset
Accumulated amortization
OPEB related deferred outflows of resources
OPEB related deferred inflows of resources
Amounts reported for governmental activities in the Statement of Net Position are different because:

Fund balances of governmental funds
Accumulated depreciation

City of Twentynine Palms
Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds
For the year ended June 30, 2023
The accompanying notes are an integral part of these financial statements. -19-
Special Revenue
Community Tourism Business
Development Improvement
General Block Grant District ARPA
Revenues
Taxes 11,580,509 $ - $ - $ - $
Licenses, permits and fees 1,063,598 - 391,021 -
Intergovernmental 330,950 844,872 - 3,118,608
Charges for services 477,587 - - -
Fines, forfeitures and penalties 23,307 - - -
Use of money and property 98,635 - 10,809 -
Other 175,530 - 1,523 -
Total revenues 13,750,116 844,872 403,353 3,118,608
Expenditures
Current:

General government 2,639,084 - - -
Public safety 5,725,463 - - -
Public works 756,396 - - -
Community development 1,241,325 - - -
Economic development - - 268,388 -
Health and sanitation - - - -
Community services 1,029,515 18,745 - -
Debt service:

Principal 61,481 - - -
Interest 38,348 - - -
Capital outlay 73,110 315,000 - -
Total expenditures 11,564,722 333,745 268,388 -
Excess/(deficiency)
of revenues under expenditures 2,185,394 511,127 134,965 3,118,608 Other financing sources (uses)
Subscription acquisition 68,310 - - -
Lease acquisition 20,802 - - -
Transfers in 3,138,608 - - -
Transfers out (4,444,911) - - (3,118,608)
Total other financing sources (uses) (1,217,191) - - (3,118,608) Net change in fund balances 968,203 511,127 134,965 -
Fund balances (deficit), beginning of year 10,641,969 (511,050) 504,591 - Fund balances, end of year 11,610,172 $ 77 $ 639,556 $ - $

-20-
Capital Projects Total
Nonmajor Total
Capital Governmental Governmental
Improvements Funds Funds
$ 1,963,281 - $ 13,543,790 $
146,990 - 1,601,609
2,623,870 1,017,114 7,935,414
43,352 - 520,939
3,934 - 27,241
94,468 433 204,345
- - 177,053
3,269,139 2,624,303 24,010,391
63,687 - 2,702,771
- - 5,725,463
1,689,550 - 2,445,946
133,731 - 1,375,056
- - 268,388
58,054 - 58,054
- - 1,048,260
4,788 - 66,269
12 - 38,360
6,891,327 1,131,085 8,410,522
3,080,907 6,891,327 22,139,089
188,232 (4,267,024) 1,871,302
18,304 - 86,614
- - 20,802
3,479,961 30,000 6,648,569
(20,000) - (7,583,519)
28,304 3,479,961 (827,534)
216,536 (787,063) 1,043,768
4,399,617 4,664,677 19,699,804
$ 4,616,153 3,877,614 $ 20,743,572 $

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City of Twentynine Palms
Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the year ended June 30, 2023
The accompanying notes are an integral part of these financial statements.

Ͳ21-
Net changes in fund balances - total governmental funds $ 1,043,768 7,791,787
(1,550,745)
(560,491)
66,269
(107,416)
(198,502)
(3,574,784)
587,022
Change in net position of governmental activities $ 3,496,908 Unavailable revenues
The issuance of long term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes current financial resources.

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

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

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

Net OPEB liability related net adjustments
Depreciation/Amortization expense
Cost of assets capitalized, less the net book value of disposals Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds:

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

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

Loan repayments
Change in compensated absences payable

City of Twentynine Palms
Statement of Net Position
Proprietary Funds
June 30, 2023
The accompanying notes are an integral part of these financial statements.

Ͳ22-
Enterprise Fund
Sewer
Assets
Current assets:

Grants receivable $ 742,790
Other receivable 146
Total current assets 742,936
Non-current assets:

Capital assets, not being depreciated 1,844,475
Capital assets, depreciated, net 903,868
Total non-current assets 2,748,343
Total assets 3,491,279
Liabilities
Current liabilities:

Accounts payable 148,920
Due to other funds 149,988
Total current liabilities 298,908
Net position
Investment in capital assets 2,748,343
Unrestricted 444,028
Total net position 3,192,371 $

City of Twentynine Palms
Statement of Changes in Net Position
Proprietary Funds
For the year ended June 30, 2023
The accompanying notes are an integral part of these financial statements.

Ͳ23-
Enterprise Fund
Sewer
Operating revenues
Charge for services $ 14,349
Total operating revenues 14,349
Operating expenses
Other operating expenses 100,044
Depreciation expense 31,167
Total operating expenses 131,211
Operating income (loss) (116,862)
Non-operating revenues (expenses)
Transfers in 934,950
Total nonoperating revenues (expenses) 934,950
Income before contributions 818,088
Contributions
Contributions 803,021
Total contributions 803,021
Change in net position 1,621,109
Net position, beginning of year 1,571,262
Net position, end of year 3,192,371 $

City of Twentynine Palms
Statement of Cash Flows
Proprietary Funds
For the year ended June 30, 2023
The accompanying notes are an integral part of these financial statements.

Ͳ24-
Enterprise Fund
Sewer
Cash flows from operating activities
Cash received for services provided 14,602 $
Cash paid to suppliers for goods and services (102,176) Net cash used for operating activities (87,574)
Cash flows from noncapital financing activities
Transfers from other funds 934,950
Due to other funds 149,988
Net cash provided by noncapital
financing activities 1,084,938
Cash flows from capital financing activities
Cash received from capital grant 219,059
Acquisition of construction in progress (1,301,493)
Net cash used for capital financing activities (1,082,434) Net change in cash and cash equivalents (85,070)
Cash and cash equivalents, beginning of year 85,070
Cash and cash equivalents, end of year $ -
Reconciliation of operating income (loss) to
net cash used for operating activities
Operating income (loss) (116,862) $
Adjustments to reconcile operating income (loss) to
net cash used for operating activities:

Depreciation expense 31,167
Decrease (Increase) in grants receivables 253
Increase (Decrease) in accounts payable (2,132)
Net cash provided by (used for) operating activities (87,574) $

City of Twentynine Palms
Statement of Fiduciary Net Position
Fiduciary Fund – Private-Purpose Trust Fund
June 30, 2023
The accompanying notes are an integral part of these financial statements.

Ͳ25-
Successor Agency
to the Twentynine
Palms Redevelopment
Agency
Assets
Current assets:

Cash and investments $ 670,362
Prepaid bond insurance 122,802
Total assets 793,164
Deferred outflows of resources
Deferred loss on refunding 1,625,214
Liabilities
Current liabilities:

Interest payable 154,854
Noncurrent liabilities:

Long-term liabilities, due within one year 390,000
Long-term liabilities, due beyond one year 10,741,488
Total liabilities 11,286,342
Net position
Net position (deficit) (8,867,964)
Total net position (deficit) (8,867,964) $

City of Twentynine Palms
Statement of Changes in Fiduciary Net Position
Fiduciary Fund – Private-Purpose Trust Fund
For the year ended June 30, 2023
The accompanying notes are an integral part of these financial statements.

Ͳ26-
Successor Agency
to the Twentynine
Palms Redevelopment
Agency
Additions
Property taxes $ 961,452
Total additions 961,452
Deductions
Program expenses 126,368
Interest expense 564,407
Total deductions 690,775
Change in net position 270,677
Net position (deficit), beginning of year (9,138,641)
Net position (deficit), end of year (8,867,964) $

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-27-
Note 1: Summary of significant accounting policies
The accounting policies of the City of Twentynine Palms (the City) conform to accounting principles generally accepted in the United States of America as applicable to governments. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for governmental accounting and financial reporting principles. The following is a summary of the significant accounting policies. (a) Reporting entity
The City was incorporated November 23, 1987, under the general laws of the State of California and enjoys all the rights and privileges pertaining to such "General Law" cities. The City is governed by a five member governing council with the mayor appointed by the council.

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

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

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

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

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

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

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

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

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-28-
Note 1: Summary of significant accounting policies (continued) (b) Measurement focus and basis of accounting (continued) Amounts paid to acquire capital assets are capitalized as assets in the government-wide financial statements, rather than reported as expenditures. Proceeds of long-term debt are recorded as a liability in the government-wide financial statements, rather than as other financing sources. Amounts paid to reduce long-term indebtedness of the reporting government are reported as a reduction of the related liability, rather than as expenditures.

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

Operating revenues in the proprietary funds are those revenues that are generated from the primary operations of the fund. All other revenues are reported as non-operating revenues. Operating expenses are those expenses that are essential to the primary operations of the fund. All other expenses are reported as non-operating expenses.

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

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

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

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

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

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-29-
Note 1: Summary of significant accounting policies (continued) (c) Fund classifications (continued)
American Rescue Plan Act (ARPA) Special Revenue Fund – this fund is used to track the activities of the funding provided by the U.S. Department of Treasury under Coronavirus State and Local Fiscal Recovery Funds program.

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

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

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

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

The City reports the following proprietary fund:

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

Additionally, the City reports the following fiduciary fund types:

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

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

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

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

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-30-
Note 1: Summary of significant accounting policies (continued) (e) Receivables and payables
Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to/from other funds" (i.e., the current portion of inter-fund loans) or "advances to/from other funds" (i.e., the noncurrent portion of inter-fund loans). All other outstanding balances between funds are reported as "due to/from other funds." Noncurrent portions of long-term inter-fund loan receivables are reported as advances and such amounts are offset equally by a fund balance classification which indicates that they do not constitute expendable available financial resources and therefore are not available for appropriation.

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

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

Lien date March 1
Levy date June 30
Due date November 1 and February 1
Collection dates December 10 and April 10
(g) Inventories
Inventories of material and supplies are carried at cost on an average cost basis. The City uses the consumption method of accounting for inventories.
(h) Prepaid items
Payments made to vendors for services that will benefit periods beyond June 30, 2023 are recorded as prepaid items and are offset equally by a fund balance reserve account which indicates that they do not constitute expendable available resources and therefore are not available for appropriation. (i) Capital assets
Capital assets, which include land, machinery and equipment (furniture, vehicles, computers, etc.), buildings and improvements, and infrastructure assets (street systems, storm drains, bridges, etc.), are reported in governmental activities column of the government-wide financial statements. Capital assets are defined by the City as non-infrastructure assets with an initial, individual cost of more than $5,000 and infrastructure assets with a total project cost of more than $50,000 with a useful life of at least three years. Such assets are capitalized at historical cost or estimated historical cost if purchased or constructed. Donated or annexed capital assets are recorded at acquisition value at the date acquired or annexed.

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

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-31-
Note 1: Summary of significant accounting policies (continued) (i) Capital assets (continued)
Assets Years
Structures and improvements 40
Public domain infrastructure 50
System infrastructure 30
Vehicles 3 to 15
Other equipment and furnishings 3 to 20
Computer equipment 3 to 10
Periodic restoration and maintenance costs on particular items are charged to expense as incurred. (j) Claims and judgments
The City records a liability for litigation, judgments, and claims when it is probable that an asset has been impaired or a liability has been incurred prior to fiscal year end and the probable amount of loss (net of any insurance coverage) can be reasonably estimated. (k) Unearned revenue
In the government-wide financial statements and the fund financial statements, unearned revenue, represents cash advances by various entities that have not been spent; therefore, no revenue has been recognized.
(l) Net position and fund equity
In the government-wide financial statements and the fiduciary fund financial statements, net position is reported in three categories: net investment in capital assets, restricted net position; and unrestricted. The restricted portion of net position represents net position restricted by parties outside of the City (such as creditors, grantors, contributors, and laws and regulations of other governments) and includes unspent proceeds of bonds issued to acquire or construct capital assets.

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

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-32-
Note 1: Summary of significant accounting policies (continued) (o) Net position flow assumption
Sometimes the City will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted net position and unrestricted net position in the government-wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the government’s policy to consider restricted net position to have been depleted before unrestricted net position is applied. (p) Fund balance
Generally Accepted Accounting Principles (GAAP) require the following classifications of fund balance which describe the relative strength of the spending constraints placed on the purposes for which resources can be used:
x Non-spendable – amounts that are not in a spendable form (such as inventory) or are required to be maintained intact.
x Restricted – amounts constrained to specific purposes by their providers (such as grantors, bondholders and higher levels of government), through constitutional provisions or by enabling legislation.
x Committed – amounts constrained to specific purposes by a government itself, using the highest level of decision-making authority; to be reported as committed, amounts cannot be used for any other purpose unless the government takes the same highest level action to remove or change the constraint.
x Assigned – amounts a government intends to use for a specific purpose; intent can be expressed by the governing body or by an official or body to which the governing body delegates the authority.
x Unassigned – amounts that are for any purpose; positive amounts are reported only in a general fund.

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

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

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-33-
Note 1: Summary of significant accounting policies (continued) (r) Pension plan
For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Plan and additions to/deductions from the Plan’s fiduciary net position have been determined on the same basis. For this purpose, benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value.

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

Valuation Date June 30, 2021
Measurement Date June 30, 2022
Measurement Period July 1, 2021 to June 30, 2022
(s) Other Postemployment Benefits (OPEB)
For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the City’s plan (OPEB Plan) and additions to/deductions from the OPEB Plan’s fiduciary net position have been determined on the same basis. For this purpose, benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value.

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

Valuation date (VD) June 30, 2023
Measurement date (MD) June 30, 2023
Measurement period (MP) July 1, 2022 to June 30, 2023
(t) Implementation of new pronouncement
For the year ended June 30, 2023, the financial statements include the adoption of GASB Statement No. 96 – Subscription-Based Information Technology Arrangements. This Statement provides guidance on the accounting and financial reporting for subscription-based information technology arrangements (SBITAs) for government end users. Under this Statement, a lessee is required to recognize a SBITA liability and an intangible right-to-use lease asset. For additional information, refer to the disclosures for capital assets and long-term liabilities.

For the year ended June 30, 2023, the financial statements include the adoption of GASB Statement No. 101 – Compensated Absences. The objective of this Statement is to better meet the information needs of financial statement users by updating the recognition and measurement guidance for compensated absences.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-34-
Note 2: Stewardship, compliance and accountability
Appropriations limit
Under Article XIIIB of the California Constitution (the GANN Spending Limitation Initiative), the City is restricted as to the amount of annual appropriations from the proceeds of taxes, and if proceeds of taxes exceed allowed appropriations, the excess must either be refunded to the State Controller or returned to the taxpayers through revised tax rates, revised fee schedules or other refund arrangements. For the fiscal year ended June 30, 2023, proceeds of taxes did not exceed appropriations.

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

Deficit fund balance
The following funds contained deficit fund balances:

Amount
Non Major Funds:

Special Revenue Funds:

Traffic Safety (8,444) $
Capital Projects Fund:

Streets (12,417)
Fund
Note 3: Cash and investments
Cash and investments as of June 30, 2023 are classified in the accompanying financial statements as follows:

Statement of Net Position
Cash and investments 16,530,615 $
Cash and investments with fiscal agent - restricted 714,936 Statement of Fiduciary Net Position
Cash and investments 670,362
Total cash and investments 17,915,913 $
Cash and investments as of June 30, 2023 consist of the following:

Deposits with financial institutions 1,905,034 $
Petty cash 740
Investments 16,010,139
Total cash and investments 17,915,913 $

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-35-
Note 3: Cash and investments (continued)
Investments authorized by the California Government Code and the City’s investment policy The table below identifies the investment types that are authorized for the City by the City’s investment policy. The table also identifies certain provisions of the California Government Code (or the City’s investment policy, where more restrictive) that address interest rate risk, credit risk, and concentration of credit risk.

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

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

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

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-36-
Note 3: Cash and investments (continued)
Information about the sensitivity of the fair values of the City’s investments (including investments held by bond trustee) to market interest rate fluctuations is provided by the following table that shows the distribution of the City’s investments by maturity:

Amount 12 or less 13 to 24 25 to 60 More than 60
State investment pool 9,896,206 $ 9,896,206 $ - $ - $ - $ Certificates of deposit 4,908,832 500,784 480,402 3,927,646 - U.S. Treasury Securities 490,165 490,165 - - -
Held by bond trustee:

Federated institutional
tax-free cash trust 714,936 714,936 - - -
Total investments 16,010,139 $ 11,602,091 $ 480,402 $ 3,927,646 $ - $ Investment type
Remaining maturity (in months)
Investments with fair values highly sensitive to interest rate fluctuations The City has no investments (including investments held by bond trustees) that are highly sensitive to interest rate fluctuations (to a greater degree than already indicated in the information provided above).

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

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

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-37-
Note 3: Cash and investments (continued)
Fair value measurements (continued)
The three levels of the fair value hierarchy under GAAP are described as follows:

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

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

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

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

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

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

The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the City believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. There have been no changes in the methodologies used at June 30, 2023.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-38-
Note 3: Cash and investments (continued)
Fair value measurements (continued)
The City has the following recurring fair value measurements as of June 30, 2023:

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

Certificates of deposit 4,908,832 $ - $ 4,908,832 $ - $ U.S. Treasury Securities 490,165 490,165 - -
Held by bond trustee:

Federated institutional
tax-free cash trust 714,936 714,936 - -
Total investments at fair value 1,205,101 $ 4,908,832 $ - $ Investments not subject to the fair value hierarchy:

State investment pool 9,896,206
Total investments 16,010,139 $
Investment type
Credit risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code, the City’s investment policy, or debt agreement, and the actual rating as of the fiscal year end for each investment type.

Minimum
legal
Amount rating AA+ Not rated
State investment pool 9,896,206 $ N/A - $ 9,896,206 $
Certificates of deposit 4,908,832 N/A - 4,908,832
U.S. Treasury Securities 490,165 N/A - 490,165
Held by bond trustee:

Federated institutional
tax-free cash trust 714,936 Aaa 714,936 -
Total investments 16,010,139 $ 714,936 $ 15,295,203 $
Investment type
Rating as of year end

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-39-
Note 3: Cash and investments (continued)
Custodial credit risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party.

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

As of June 30, 2023, none of the City’s deposits with financial institutions in excess of federal depository insurance limits were held in uncollateralized accounts. As of June 30, 2023, City’s investments in the following investment types were held by the same broker-dealer (counterparty) that was used by the City to buy the securities:

Amount
Federated institutional tax-free cash trust 714,936 $
Investment type
Investment in State investment pool
The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by the California Government Code under the oversight of the Treasurer of the State of California. The fair value of the City’s investment in this pool is reported in the accompanying financial statements at amounts based upon the City’s pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-40-
Note 4: Inter-fund activity
The following represents the inter-fund activity of the City for the fiscal year ended June 30, 2023:

Transfers
Amount
General Fund ARPA - Major Special Revenue Fund a 3,118,608 $ Nonmajor funds b 20,000
Capital Improvements - Major Capital Projects Fund General Fund c 3,479,961 Nonmajor funds General Fund d 30,000
Sewer Fund General Fund e 934,950
Total interfund transfers $ 7,583,519
Transfers in Transfers out
Significant transfers included in the accompanying financial statements are described as follows:
a. Transfer from the ARPA Fund to General Fund for government services. b. Transfer to the General Fund is for administrative costs incurred for administering the disbursing funds (e.g., Measure I, and Gas Tax). Disbursing funds receive money which are to be used to fund expenditures in other funds.
c. Transfer from the General Fund to Capital Projects Funds to assist with the funding of several capital projects.
d. Transfer from the General Fund to assist the receiving fund in covering costs incurred in the normal course of business.
e. Transfer to Sewer fund to assist funding for both the Citywide wastewater project and Project Phoenix Package Treatment Plant.

Due to/from other funds
Amount
General CDBG 248,669 $
Nonmajor fund:

Traffic Safety 9,061
SB-1 - Road Maintenance Rehab 23,576
Streets 771,435
Sewer 149,988
Total interfund borrowing 1,202,729 $
Receivable fund Payable fund
Amounts due to/from other funds represent short-term borrowings to cover cash deficits on June 30, 2023.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-41-
Note 5: Lease receivable
On July 1, 2021, the City entered into a 24 month lease as Lessor for the use of Fire Station - 6560 Adobe Road. An initial lease receivable was recorded in the amount of $67,995. As of June 30, 2023, the value of the lease receivable is $0. The lessee is required to make monthly fixed payments of $2,822.

The lease has an interest rate of 0.5930%. The building’s estimated useful life was 372 months as of the contract commencement. The value of the deferred inflow of resources as of June 30, 2023 was $0, and the City recognized lease revenue of $33,998 during the fiscal year.

On March 11, 2022, the City entered into a 216 month lease as Lessor for the use of ATM Kiosk. An initial lease receivable was recorded in the amount of $222,585. As of June 30, 2023, the value of the lease receivable is $212,173. The lessee is required to make monthly fixed payments of $1,153. The lease has an interest rate of 1.9830%. The land estimated useful life was 0 months as of the contract commencement. The value of the deferred inflow of resources as of June 30, 2023 was $206,491 and the City recognized lease revenue of $12,328 during the fiscal year. The lessee has 5 extension options, each for 36 months.

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

An initial lease receivable was recorded in the amount of $70,732. As of June 30, 2023, the value of the lease receivable is $68,971. The lessee is required to make annual fixed payments of $1,800. The lease has an interest rate of 1.8040%. The land estimated useful life was 0 months as of the contract commencement. The value of the deferred inflow of resources as of June 30, 2023 was $66,156, and the City recognized lease revenue of $2,288 during the fiscal year. The lessee has 1 extension option, for 240 months.

On February 1, 2022, the City entered into a 24 month lease as Lessor for the use of 7125 Mantonya #A Property. An initial lease receivable was recorded in the amount of $16,679. As of June 30, 2023, the value of the lease receivable is $4,876. The lessee is required to make monthly fixed payments of $698.

The lease has an interest rate of 0.3800%. The building’s estimated useful life was 168 months as of the contract commencement. The value of the deferred inflow of resources as of June 30, 2023 was $4,865, and the City recognized lease revenue of $8,340 during the fiscal year.

As of June 30, 2023, the City had total outstanding lease receivables of $286,020 and related deferred inflows of resources of $277,512.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-42-
Note 6: Capital assets
Capital assets for governmental activities for the fiscal year ended June 30, 2023 were as follows:

Beginning Ending
balance Additions Deletions balance
Governmental activities:

Capital assets, not being depreciated:

Land and improvements 4,435,408 $ 868,811 $ - $ 5,304,219 $ Right-of-Way 17,686 - - 17,686
Construction in progress 3,289,274 7,840,587 (7,252,994) 3,876,867 Total capital assets, not being
depreciated 7,742,368 8,709,398 (7,252,994) 9,198,772
Capital assets, being depreciated:

Building and improvements 19,289,328 6,115,519 (668,887) 24,735,960 Machinery and equipment 2,923,799 448,952 (30,766) 3,341,985 Office equipment 231,265 52,447 (25,825) 257,887
Vehicles 1,254,417 38,597 - 1,293,014
Infrastructure 23,684,969 - - 23,684,969
Right-to-use - leases 11,291 20,802 - 32,093
Right-to-use - subscriptions - 94,214 - 94,214
Total capital assets, being
depreciated 47,395,069 6,770,531 (725,478) 53,440,122
Less accumulated depreciation for:

Building and improvements (3,170,632) (582,416) 233,739 (3,519,309) Machinery and equipment (2,010,600) (163,332) 30,766 (2,143,166) Office equipment (209,372) (5,729) 25,825 (189,276)
Vehicles (1,186,900) (20,902) - (1,207,802)
Infrastructure (8,978,506) (761,993) - (9,740,499)
Right-to-use - leases (1,434) (2,624) - (4,058)
Right-to-use - subscriptions - (13,749) - (13,749)
Total accumulated depreciation (15,557,444) (1,550,745) 290,330 (16,817,859) Total capital assets being depreciated, net 31,837,625 5,219,786 (435,148) 36,622,263 Total capital assets, governmental activities 39,579,993 $ 13,929,184 $ (7,688,142) $ 45,821,035 $ Current year capital outlay accounts included certain project costs related to repairs, maintenance, and improvements that were not capitalized.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-43-
Note 6: Capital assets (continued)
Capital assets for business-type activities for the fiscal year ended June 30, 2023, were as follows:

Beginning Ending
balance Additions Deletions balance
Business-type activities:

Capital assets, not being depreciated:

Construction in progress 542,982 $ 1,301,493 $ - $ 1,844,475 $ Total capital assets, not being
depreciated 542,982 1,301,493 - 1,844,475
Capital assets, being depreciated:

Infrastructure 935,035 - - 935,035
Total capital assets, being
depreciated 935,035 - - 935,035
Less accumulated depreciation for:

Infrastructure - (31,167) - (31,167)
Total accumulated depreciation - (31,167) - (31,167)
Total capital assets being depreciated, net 935,035 (31,167) - 903,868 Total capital assets, business-type activities 1,478,017 $ 1,270,326 $ - $ 2,748,343 $ Depreciation expense was charged to functions/programs of the primary government as follows:

Governmental
activities
General government 326,885 $
Public safety 657,778
Public works 281,006
Community development 157,975
Health and sanitation 6,670
Community services 120,431
Total depreciation expense 1,550,745 $

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-44-
Note 7: Long-term liabilities
Long-term liability activity of the City for the fiscal year ended June 30, 2023, was as follows:

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

Facility improvements loan $ - 1,224,900 $ (39,345) $ 1,185,555 $ 40,592 $ Lease liability 20,802 9,888 (2,459) 28,231 6,108
Subscription liability 86,614 - (24,465) 62,149 27,678
Total long-term liabilities 1,234,788 $ 107,416 $ (66,269) $ 1,275,935 $ 74,378 $ Direct Borrowings - Facility improvements loan
On April 1, 2019, the City entered into an agreement to finance certain Energy Efficiency Projects under the Infrastructure State Revolving Fund Program (ISRF Program) in an amount not to exceed $1,300,000.

The proceeds of such obligation will be used to reimburse the City for expenditures incurred or paid prior to incurring the obligation (reimbursement basis). The loan has a term not to exceed 25 years, with an interest rate of 3.17%. The City financed the origination fee of 1.00% or $13,000 upon loan closing. In addition, the loan calls for additional annual payments in an amount equal to 0.3% of the outstanding principal, totaling $54,528 over the life of the loan. The remaining balance of the additional payments is presented in the table below. As of June 30, 2023, the outstanding principal balance of the loan was $1,185,555.

Estimated future debt service requirements are as follows:

Year ending
June 30, Principal
Additional
payments Interest
2024 40,592 $ 3,557 $ 36,939 $
2025 41,879 3,435 35,632
2026 43,206 3,309 34,283
2027 44,576 3,180 32,892
2028 45,989 3,046 31,456
2029-2033 252,761 13,070 134,105
2034-2038 295,444 9,031 90,744
2039-2043 345,336 4,309 40,061
2044 75,772 227 1,201
Totals $ 43,164 1,185,555 $ 437,311 $
Facility improvements loan

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-45-
Note 7: Long-term liabilities (continued)
Upon default, the Lessor or its assignee, in addition to all other rights and remedies it may have at law or in equity, shall have the option to terminate the Financing Lease on account of default by the City, notwithstanding any retaking of possession or re-letting of the leased asset. In the event of such termination, the City agreed to surrender immediately possession of the leased asset, without let or hindrance, and to pay the Lessor or its assignee all damages recoverable at law that the Lessor or its assignee may incur by reason of default by the City, including, without limitation, any costs, loss or damage whatsoever arising out of, in connection with, or incident to any such retaking possession of the leased asset. The City Hall was pledged as collateral for this loan. The Financing Lease and the interest of the City in the leased asset may not be assigned or encumbered by the City except as permitted by Section 2.04 of the Financing Lease. Failure to comply with this provision constitutes an event of default.

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

As of June 30, 2023, the value of the lease liability is $7,771. The City is required to make monthly fixed payments of $199. The lease has an interest rate of 1.082%. The equipment estimated useful life was 60 months as of the contract commencement. The value of the right-to-use asset as of June 30, 2023, of $11,291 with accumulated amortization of $3,584 is included with lease assets, detailed in Note 6.

On May 20, 2023, the City entered into a 60 month lease as Lessee for the use of Community Development Printer - Xerox C8170-H2. An initial lease liability was recorded in the amount of $20,802.

As of June 30, 2023, the value of the lease liability is $20,460. The City is required to make monthly fixed payments of $420. The lease has an interest rate of 2.31%. The equipment estimated useful life was 60 months as of the contract commencement. The value of the right-to-use asset as of June 30, 2023, of $20,802 with accumulated amortization of $474 is included with lease assets, detailed in Note 6.

Estimated future debt service requirements are as follows:

Year ending
June 30, Principal Interest Total
2024 6,108 $ 511 $ 6,619 $
2025 6,231 388 6,619
2026 6,349 270 6,619
2027 5,547 150 5,697
2028 3,996 46 4,042
Totals $ 1,365 28,231 $ 29,596 $
Lease liability

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-46-
Note 7: Long-term liabilities (continued)
Subscription Liability
For the year ended June 30, 2023, the financial statements include the adoption of GASB Statement No. 96, Subscription-Based Information Technology Arrangements. The primary objective of this statement is to enhance the relevance and consistency of information about governments' subscription activities. This statement establishes a single model for subscription accounting based on the principle that subscriptions are financings of the right to use an underlying asset. Under this Statement, an organization is required to recognize a subscription liability and an intangible right-to-use subscription asset. For additional information, refer to the disclosures below.

On December 12, 2022, the City entered into a 48 month subscription for the use of GeoViewer Online License Software - Public. An initial subscription liability was recorded in the amount of $18,304. As of June 30, 2023, the value of the subscription liability is $13,515. The City is required to make annual fixed payments of $4,800. The subscription has an interest rate of 3.238%. The value of the right-to-use asset as of June 30, 2023, of $21,104 with accumulated amortization of $2,916 is included with subscription assets, detailed in Note 6. The City has 1 extension option for 12 months.

On December 12, 2022, The City entered into a 48 month subscription for the use of GeoViewer Online License Software - City. An initial subscription liability was recorded in the amount of $37,371. As of June 30, 2023, the value of the subscription liability is $27,594. The City is required to make annual fixed payments of $9,800. The subscription has an interest rate of 3.238%. The value of the right-to-use asset as of June 30, 2023 of $42,170 with accumulated amortization of $5,828 is included with Subscription assets, detailed in Note 6. The City has 1 extension option for 12 months.

On January 1, 2023, The City entered into a 24 month subscription for the use of Parks and Recreation Management SaaS. An initial subscription liability was recorded in the amount of $16,633. As of June 30, 2023, the value of the subscription liability is $13,233. The City is required to make annual fixed payments of $6,800. The subscription has an interest rate of 2.56%. The value of the right-to-use asset as of June 30, 2023 of $16,633 with accumulated amortization of $3,992 is included with Subscription assets, detailed in Note 6. The City has 1 extension option for 12 months.

On May 10, 2023, The City entered into a 24 month subscription for the use of DebtBook Platform. An initial subscription liability was recorded in the amount of $14,307. As of June 30, 2023, the value of the subscription liability is $7,807. The City is required to make annual fixed payments of $6,500. The subscription has an interest rate of 2.47%. The value of the right-to-use asset as of June 30, 2023 of $14,307 with accumulated amortization of $1,013 is included with Subscription assets, detailed in Note 6.

Estimated future debt service requirements are as follows:

Year ending
June 30, Principal Interest Total
2024 27,678 $ 1,722 $ 29,400 $
2025 20,329 1,071 21,400
2026 14,142 458 14,600
Totals $ 3,251 62,149 $ 65,400 $
Subscription liability
Long-term liabilities are generally liquidated by the General Fund.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-47-
Note 8: Compensated absences
For governmental funds, accumulated vacation and sick leave benefits payable in future years when used by the City employees amounted to $483,990 at June 30, 2023. These amounts are payable from future resources and therefore have been recorded in long-term liabilities in the government-wide financial statements. Vacation benefits and sick leave are recorded as expenditures in the related governmental fund financial statements when used. Upon retirement or termination, the expenditures are recorded in the fund which incurred the original obligation. Compensated absences liabilities are generally liquidated by the General Fund. The following is a summary of changes in compensated absences for the year ended June 30, 2023:

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

Governmental funds 285,488 $ 198,502 $ 483,990 $ 96,798 $ Total compensated absences 285,488 $ 198,502 $ 483,990 $ 96,798 $ Note 9: Property held for resale
The City’s Redevelopment Agency had acquired property from the City as part of its primary purpose to develop unimproved properties. The Redevelopment Agency’s Capital Improvements Fund had carried the land at the lower of cost or estimated net realizable value which was $126,850 at June 30, 2012. As of February 1, 2012, the Agency ceased to exist, and the property was transferred to the Successor Agency. The Successor Agency sold these four properties to the City.

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

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

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-48-
Note 10: Successor Agency long-term debt
The debt of the Successor Agency as of June 30, 2023 is as follows:

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

Direct placements:
2018 Tax Allocation Refunding 11,750,000 $ - $ (375,000) $ 11,375,000 $ 390,000 $ Less deferred amounts:
2018 TARB (256,328) - 12,816 (243,512) -
Total bonds payable $ - 11,493,672 $ (362,184) $ 11,131,488 $ 390,000 $ Description
Future debt service requirements are as follows:

Year ending
June 30, Principal Interest
2024 390,000 $ 457,981 $
2025 400,000 444,400
2026 410,000 429,969
2027 435,000 414,653
2028 450,000 398,613
2029-2033 2,480,000 1,707,753
2034-2038 3,045,000 1,133,869
2039-2043 3,765,000 413,206
Totals $ 5,400,444 11,375,000 $
2018 Tax Allocation Refunding Bonds
On April 19, 2011, the Twentynine Palms Redevelopment Agency (the Redevelopment Agency) issued its 2011 Tax Allocation Bonds, Series A and B (the Bonds) in order to fund the Redevelopment Agency’s Project Phoenix. Subsequently, on December 29, 2011, the California Supreme Court upheld Assembly Bill X1 26 that provided for the dissolution of all redevelopment agencies in the State of California as of February 1, 2012. Subsequent to December 29, 2011, the City and the Successor Agency to the Twentynine Palms Redevelopment Agency (the Successor Agency) entered into an agreement in which the City was to take over the responsibilities of overseeing the completion of Project Phoenix. Therefore, on June 29, 2012, the Successor Agency, in accordance with the above-mentioned agreement, transferred to the City the remaining proceeds of the Bonds in the amount of $11,034,138 in order for the City to commence with the project. The outstanding balance of the bonds was transferred to the Successor Agency on February 1, 2012, as part of the former Agency’s dissolution in accordance with AB X1 26 and AB 1484.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-49-
Note 10: Successor Agency long-term debt (continued)
In accordance with the provisions of ABX 1 26 (Bill) and the California Supreme Court’s decision to uphold the Bill, the obligations of the former redevelopment agency became vested with the funds established for the successor agency upon the date of dissolution, February 1, 2012. Former tax increment revenues pledged to fund the debts of the former redevelopment agency will be distributed to the Successor Agency subject to the reapportionment of such revenues as provided by the Bill.

On June 6, 2018, the Successor Agency to the Redevelopment Agency issued its Tax Allocation Refunding Bonds, Series 2018 (Federally Taxable) to fully refund the former Redevelopment Agency’s 2011 Tax Allocation Bonds, Series A & B. The refunding resulted in significant annual savings by lowering the annual debt service payments. The balance of the refunding debt as of June 20, 2023, is $11,375,000.

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

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

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

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

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-50-
Note 11: Pension Plan (continued)
A. General information about the Pension Plan (continued) Plan description (continued)
The City sponsors four rate plans (two miscellaneous and two inactive safety). In 2016, the City of Twentynine Palms accepted the Twentynine Palms Water District (Water District) PERS Pension Liability within the LAFCO (Local Agency Formation Commission) proceedings that transferred the fire responsibility from the Water District to the County of San Bernardino Fire District. As part of the financial obligation, the Water District not only obligated the Pension Liability but also transferred cash to offset the Liability held in a PARS (Public Agency Retirement System) account. This represents the two safety rates of the inactive plan (PEPRA and Miscellaneous Safety) provided by the City. Benefit provisions under the Plan are established by State statute and City’s resolution. CalPERS issues publicly available reports that include a full description of the pension plan regarding benefit provisions, assumptions and membership information that can be found on the CalPERS’ website, at www.calpers.ca.gov.

Benefits provided
CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full-time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 5 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost-of-living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law.

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

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

Hire date
Prior to
January 1, 2013
On or after
January 1, 2013
Benefit formula 2.5 % @ 55 2% @ 62
Benefit vesting schedule 5 years service 5 years service Benefit payments monthly for life monthly for life
Retirement age 50 - 67 52- 67
Monthly benefits, as a % of eligible compensation 2.0% to 2.5% 1.0% to 2.5% Required employer contribution rates 12.210% 7.470%
Hire date
Prior to
January 1, 2013
Benefit formula 3% @55
Benefit vesting schedule 5 years service
Benefit payments monthly for life
Retirement age 50
Monthly benefits, as a % of eligible compensation 2.4% to 3.0% Required employer contribution rates 0.000%
Miscellaneous
Safety

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-51-
Note 11: Pension Plan (continued)
A. General information about the Pension Plan (continued) Contributions
Section 20814(c) of the California Public Employees’ Retirement Law (PERL) requires that the employer contribution rates for all public employers are determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. The total plan contributions are determined through CalPERS’ annual actuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. Employer contribution rates may change if plan contracts are amended. Payments made by the employer to satisfy contribution requirements that are identified by the pension plan terms as plan member contribution requirements are classified as plan member contributions. Employer Contributions to the Plan for the fiscal year ended June 30, 2023, were $376,725. The actual employer payments of $311,225 made to CalPERS by the City during the measurement period ended June 30, 2022, differed from the City’s proportionate share of the employer’s contributions of $1,203,745 by $892,520, which is being amortized over the expected average remaining service lifetime in the Public Agency Cost-Sharing Multiple Employer Plan.

B. Net Pension Liability
The City’s net pension liability for the Plan is measured as the total pension liability, less the pension plan’s fiduciary net position. The net pension liability of the Plan is measured as of June 30, 2022, using an annual actuarial valuation as of June 30, 2021 rolled forward to June 30, 2022 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is as follows.

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City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-52-
Note 11: Pension Plan (continued)
B. Net Pension Liability (continued)
Actuarial Methods and Assumptions Used to Determine Total Pension Liability Valuation Date June 30, 2021
Measurement Date June 30, 2022
Actuarial Cost Method Entry Age Normal in accordance with the requirements of GASB 68 Asset Valuation Method Fair Value of Assets
Actuarial Assumptions:

Discount Rate 6.90%
Inflation 2.30%
Salary Increases Varies by Entry Age and Service
Mortality Rate Table (1)
Post Retirement Benefit Increase
Derived using CALPERS' membership data for all funds
The lesser of contract COLA or 2.30% until Purchasing Power Protection Allowance floor on purchasing power applies, 2.30% thereafter.
(1) The mortality table used was developed based on CalPERS-specific data. The probabilities of mortality are based on the 2021 CalPERS Experience Study for the period from 2001 to 2019. Pre-retirement and Post-retirement mortality rates include generational mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries. For more details on this table, please refer to the CalPERS Experience Study and Review of Actuarial Assumptions report from November 2021 that can be found on the CalPERS website.

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

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

In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations. Using historical returns of all of the funds’ asset classes, expected compound (geometric) returns were calculated over the next 20 years using a building-block approach.

The expected rate of return was then adjusted to account for assumed administrative expenses of 10 Basis points.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-53-
Note 11: Pension Plan (continued)
B. Net Pension Liability (continued)
The expected real rates of return by asset class are as follows:

Asset Class
Assumed
Asset
Allocation Real Return1,2
Global equity - cap-weighted 30.00% 4.54%
Global equity - non-cap-weighted 12.00% 3.84%
Private equity 13.00% 7.28%
Treasury 5.00% 0.27%
Mortgage-backed securities 5.00% 0.50%
Investment grade corporates 10.00% 1.56%
High yield 5.00% 2.27%
Emerging market debt 5.00% 2.48%
Private debt 5.00% 3.57%
Real assets 15.00% 3.21%
Leverage (5.00%) (0.59%)
2 Figures are based on the 2021 Asset Liability Management study. 1 An expected inflation of 2.30% used for this period.

Change of assumptions
Effective with the June 30, 2021, valuation date (2022 measurement date), the accounting discount rate was reduced from 7.15% to 6.90%. In determining the long-term expected rate of return, CalPERS took into account long-term market return expectations as well as the expected pension fund cash flows.

Projected returns for all asset classes are estimated, combined with risk estimates, and are used to project compound (geometric) returns over the long term. The discount rate used to discount liabilities was informed by the long-term projected portfolio return. In addition, demographic assumptions and the inflation rate assumption were changed in accordance with the 2021 CalPERS Experience Study and Review of Actuarial Assumptions.

Discount rate
The discount rate used to measure the total pension liability for PERF C was 6.90%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-54-
Note 11: Pension Plan (continued)
B. Net Pension Liability (continued)
Subsequent events
On July 12, 2021, CalPERS reported a preliminary 21.3% net return on investments for fiscal year 2020-

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

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

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

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

C. Proportionate Share of Net Pension Liability
The following table shows the Plan’s proportionate share of the net pension liability over the measurement period.

Increase (Decrease)
Plan Total Pension
Liability
(a)
Plan Fiduciary Net
Position
(b)
Plan Net Pension
Liability (Asset)
(c ) = (a) - (b)
Balance at: 6/30/2021 (VD) 22,482,931 $ 24,674,990 $ (2,192,059) $ Balance at: 6/30/2022 (MD) 24,046,583 22,165,253 1,881,330 Net changes during 2021-22 1,563,652 (2,509,737) 4,073,389 Valuation Date (VD), Measurement Date (MD).

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-55-
Note 11: Pension Plan (continued)
C. Proportionate Share of Net Pension Liability (continued) The City’s proportion of the net pension liability was determined by CalPERS using the output from the Actuarial Valuation System and the fiduciary net position, as provided in the CalPERS Public Agency Cost-Sharing Allocation Methodology Report, which is a publicly available report that can be obtained at CalPERS’ website, at www.calpers.ca.gov. The City’s proportionate share of the net pension liability for the total Plan as of the June 30, 2021 and 2022 measurement dates was as follows:

Proportionate share of NPL - June 30, 2022 (0.04053) %
Proportion share of NPL - June 30, 2023 0.01629 %
Change - Increase (Decrease) 0.05682 %
Sensitivity of the proportionate share of the net pension liability to changes in the discount rate The following presents the City’s proportionate share of the net pension liability of the Plan as of the measurement date, calculated using the discount rate of 6.9 percent, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower (5.9 percent) or 1 percentage-point higher (7.9 percent) than the current rate:

Discount Rate - 1%
(5.90%)
Current Discount
Rate (6.90%)
Discount Rate + 1%
(7.90%)
Plan's Net Pension
Liability/(Asset) - Misc. $ 1,179,461 3,865,747 $ (1,030,686) $ Plan's Net Pension
Liability/(Asset) - Safety 701,869 1,301,294 211,975
Total $ 1,881,330 5,167,041 $ (818,711) $
Amortization of deferred outflows and deferred inflows of resources Under GASB 68, gains and losses related to changes in total pension liability and fiduciary net position are recognized in pension expense systematically over time.

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

The amortization period differs depending on the source of the gain or loss:

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

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-56-
Note 11: Pension Plan (continued)
C. Proportionate Share of Net Pension Liability (continued) Amortization of deferred outflows and deferred inflows of resources (continued) The expected average remaining service lifetime (EARSL) is calculated by dividing the total future service years by the total number of plan participants (active, inactive, and retired) in the Public Agency CostSharing Multiple-Employer Plan (PERF C).

The EARSL for PERF C for the measurement period ending June 30, 2022 is 3.7 years, which was obtained by dividing the total service years of 574,665 (the sum of remaining service lifetimes of the active employees) by 153,587 (the total number of participants: active, inactive, and retired) in PERF C.

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

D. Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions
As of the start of the measurement period (July 1, 2021), the City’s net pension liability/(asset) was $(2,192,059). For the measurement period ending June 30, 2022 (the measurement date), the City incurred a pension expense of $3,951,510.

As of June 30, 2023, the City has deferred outflows and deferred inflows of resources related to pensions as follows:

Miscellaneous
Deferred Outflows Deferred Inflows
of Resources of Resources
Changes of assumptions 120,860 $ - $
Differences between expected and actual experience 23,686 15,864 Differences between projected and actual investment earnings 216,046 - Differences between employer's contributions
and proportionate share of contributions - 862,167
Change in employer's proportion 2,305,249 -
Pension contributions made subsequent to measurement date 319,836 - Totals $ 878,031 2,985,677 $
Safety
Deferred Outflows Deferred Inflows
of Resources of Resources
Changes of assumptions 70,770 $ - $
Differences between expected and actual experience 29,048 7,622 Differences between projected and actual investment earnings 110,835 - Differences between employer's contributions
and proportionate share of contributions - 269,411
Change in employer's proportion 291,898 -
Pension contributions made subsequent to measurement date 56,889 - Totals $ 277,033 559,440 $

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-57-
Note 11: Pension Plan (continued)
D. Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions (continued)
The amounts above are net of outflows and inflows recognized in the 2021-22 measurement period expense. Contributions subsequent to the measurement date of $376,725 reported with deferred outflows of resources will be recognized as a reduction of the net pension liability in the upcoming fiscal year.

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

Fiscal year ending
June 30: Miscellaneous Safety Total
2024 603,819 $ 52,662 $ 656,481 $
2025 640,649 63,507 704,156
2026 411,201 41,738 452,939
2027 132,141 67,611 199,752
2028 - - -
Thereafter - - -
$ 225,518 1,787,810 $ 2,013,328 $
E. Payable to the Pension Plan
At June 30, 2023, the City reported a payable of $-0- for the outstanding amount of contributions to the pension plan required for the year then ended.

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City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-58-
Note 12: Other post-employment benefits (OPEB)
Plan description
The City has established a Retiree Healthcare Plan (OPEB Plan), and participates in an agent multipleemployer defined benefit retiree healthcare plan. The City pays the first $500 per month for each current employee hired before 9/1/2017; employees hired on or after 9/1/17 receive only the PEMHCA minimum.

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

Employees covered
As of the June 30, 2023 actuarial valuation, the following current and former employees were covered by the benefit terms under the OPEB Plan:

Active employees 39
Inactive employees or beneficiaries currently receiving benefits 25 Total 64
Contributions
The contribution requirements of plan members and the City are established and may be amended by the City. The City contributes 100% of the retiree and dependent up to the maximum of cost of $500 per month. For the fiscal year ended June 30, 2023, the City’s did not make any cash contributions to the trust. In Fiscal Year 2010, the City created a California Employer’s Retiree Benefit Trust (CERBT) with California Public Employees Retirement System (CalPERS) for the purpose of prefunding obligations for past services. The City terminated the contract with CalPERS in November 2021 and transferred assets to an OPEB trust held with PARS.

Net OPEB Liability
The City’s net OPEB liability was based on an actuarial valuation as of June 30, 2023, and a measurement date of June 30, 2023. The Total OPEB Liability was determined using an actuarial valuation as of June 30, 2023, using the following actuarial assumptions:

Discount Rate 5.75%
Inflation 2.50%
Salary Increases 2.75%
Investment Rate of Return 5.75%
Mortality Rate Pre-retirement mortality rates were based on the 2021 CalPERS Retiree Mortality for All Employees table created by CalPERS Healthcare Trend Rate 4.00%
Actuarial Assumptions:

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-59-
Note 12: Other post-employment benefits (OPEB) (continued) Net OPEB Liability (continued)
The long-term expected rate of return (LTROR) on OPEB plan investments was determined by CERBT using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The table below provides the long-term expected real rates of return by asset class (based on published capital market assumptions):

Asset Class
Percentage of
Portfolio
Assumed Gross
Return
All Domestic Equities 50% 7.25%
All Fixed Income 45% 4.25%
Short-Term Gov't Fixed 5% 3.00%
Total 100%
The General Fund typically has been used in prior years to liquidate net OPEB liabilities.

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

Change of assumptions
There were no changes in assumptions in the current valuation.

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City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-60-
Note 12: Other post-employment benefits (OPEB) (continued) Changes in the OPEB Liability
The changes in the net OPEB liability for the OPEB Plan are as follows:

Total OPEB
Liability (a)
Plan Fiduciary
Net Position (b)
Net OPEB
Liability/(Asset)
(c)= (a) - (b)
Balance at June 30, 2022
(Valuation Date June 30, 2023) 2,382,508 $ 2,229,137 $ 153,371 $ Changes recognized for the
measurement period:

Service Cost 53,743 - 53,743
Interest on the total OPEB
liability/return on FNP 166,880 133,281 (33,599)
Changes in assumptions 9,789 - 9,789
Plan experience differences (31,507) - (31,507)
Contributions - employer - 182,885 (182,885)
Benefit payments (182,885) (182,885) -
Administrative expenses - (13,231) 13,231
Net Changes 153,649 (17,579) (171,228)
Balance at June 30, 2023
(Measurement Date June 30, 2023) 2,364,929 $ 2,382,786 $ (17,857) $ Sensitivity of the Net OPEB Liability to changes in the discount rate The following presents the net OPEB liability of the City if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate, for measurement period ended June 30, 2023:

Current
1% Decrease Discount Rate 1% Increase

4.75% 5.75% 6.75%
Net OPEB Liability/(Asset) 211,323 $ (17,857) $ (213,100) $ Sensitivity of the Net OPEB Liability to changes in the health care cost trend rates The following presents the net OPEB liability of the City if it were calculated using health care cost trend rates that are one percentage point lower or one percentage point higher than the current rate, for measurement period ended June 30, 2023:

Current Healthcare
1% Decrease Cost Trend Rates 1% Increase
Net OPEB Liability/(Asset) (84,581) $ (17,857) $ 58,405 $

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-61-
Note 12: Other post-employment benefits (OPEB) (continued) Sensitivity of the Net OPEB Liability to changes in the health care cost trend rates (continued) Gains and losses related to changes in total OPEB liability and fiduciary net position are recognized in OPEB expense systematically over time. Amounts are first recognized in OPEB expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to OPEB and are to be recognized in future OPEB expense. The recognition period differs depending on the source of the gain or loss.

Recognition of deferred outflows and deferred inflows of resources Net difference between projected and 5 years
actual earnings on OPEB plan
investments
All other amounts Expected average remaining service
lifetime (EARSL) (7.4 Years at June 30, 2023)
OPEB plan fiduciary net position
PARS issues a publicly available financial report that may be obtained from the Public Agency Retirement Services, 4350 Von Karman Ave, Newport Beach, CA 92660.

OPEB expense related to OPEB
For the fiscal year ended June 30, 2023, the City recognized OPEB credit of $404,137. As of fiscal year, ended June 30, 2023, the City reported deferred outflows of resources related to OPEB from the following sources:

Deferred Deferred
Outflows Inflows
of Resources of Resources
Changes of assumptions 86,593 $ 915,916 $
Differences between expected
and actual experience 33,891 29,363
Net difference between projected and actual earnings on OPEB plan investments - 96,900
Total 217,384 $ 945,279 $
Other amounts reported as deferred outflows and inflows of resources related to OPEB will be recognized as expense as follows:

Fiscal Year Ended
June 30:

Deferred (Inflows) of
Resources
2024 (469,739) $
2025 (344,930)
2026 72,247
2027 436
2028 8,461
Thereafter: 5,630
$ (727,895)

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-62-
Note 13: Jointly controlled government
On October 16, 1989, the Morongo Basin Transit Authority (the Authority) was created as a joint powers agency by the County of San Bernardino, the City of Twentynine Palms, and the Town of Yucca Valley.

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

Summarized audited financial information of the Morongo Basin Transit Authority for the year ended June 30, 2022, is as follows:

Current assets 8,704,368 $
Noncurrent assets 5,611,287
Total assets 14,315,655
Deferred outflows of resources 882,604
Total liabilities 7,251,412
Deferred inflows of resources 1,088,008
Total net position $ 6,858,839
Operating revenue 600,150 $
Operating expenses (5,294,261)
Operating loss (4,694,111)
Non-operating revenue 3,700,710
Net loss before contributed capital (993,401)
Contributed capital 981,408
Change in net position $ (11,993)
The financial statements can be obtained from the Authority at 62405 Verbena Road, Joshua Tree, CA 92252.

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-63-
Note 14: Risk management
The City of Twentynine Palms (the City) is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters for which the Member Entity obtains insurance coverage.

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

Liabilities of the City are reported when it is probable that a loss has occurred, and the amount of the loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported (IBNRs). The result of the process to estimate the claims liability is not an exact amount as it depends on many complex factors, such as inflation, changes in legal doctrines, and damage awards.

Accordingly, claims are reevaluated periodically to consider the effects of economic and social factors.

The estimate of the claims liability also includes amounts for incremental claim adjustment expenses related to specific claims and other claim adjustment expenses regardless of whether allocated to specific claims. Estimated recoveries, for example from salvage or subrogation, are another component of the claim’s liability estimate.

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

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

Claims activity for the year ended June 30, 2023 and the two previous years was as follows:

Current year
claims and
Fiscal year Beginning changes in Actual claim End of
ended June 30, of year estimates payments year
2021 50,000 $ 10,500 $ (41,721) $ 18,779 $
2022 39,774 18,779 (27,110) 31,443
2023 22,300 31,443 (5,211) 48,532

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-64-
Note 14: Risk management (continued)
At June 30, 2023, total estimated claims payable is held in unassigned fund balances in the General Fund with an amount equal to $48,532. The City retains a risk of loss due to the fact there is a deductible per occurrence and that actual losses may exceed estimated claims or coverage amounts. The City pays an annual premium to the PARSAC and may share in any surplus revenues or may be required to pay additional assessments based upon the PARSAC operating results.

There was no significant reduction in insurance coverage by major categories of risk from the fiscal year ended June 30, 2022 to the fiscal year ended June 30, 2023. Furthermore, there was no settlement which exceeded the insurance coverage for the past three fiscal years.

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

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

Note 16: Governmental fund balances
The specific purposes/functions for fund balances classified as non-spendable, restricted, committed, assigned, and unassigned, as of June 30, 2023, are displayed below:

Capital Projects Total
Community Tourism Business Nonmajor Total
Development Improvement Capital Governmental Governmental General Block Grant District ARPA Improvements Funds Funds Nonspendable:

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

Public safety 406,426 - - - - - 406,426
Public works - - - - - 2,347,191 2,347,191
Community development - - - - - 1,195,707 1,195,707
Economic development - - 639,556 - - - 639,556
Health and sanitation - - - - - 215,646 215,646
Community services - 77 77
Assigned:

Fire Safety pension plan payout 1,689,686 - - - - - 1,689,686 Animal Control Vehicle 105,000 - - - - - 105,000
Housing & Homelessness Programs 81,678 - - - - - 81,678 Risk Management Activities 60,077 - - - - - 60,077
Community Event Activities 50,000 50,000
Emergency Plan 25,000 25,000
Public works - - - - 3,877,614 878,470 4,756,084
Unassigned 9,098,342 - - - - (20,861) 9,077,481
Total fund balances (deficit) 11,610,172 $ 77 $ 639,556 $ - $ 3,877,614 $ 4,616,153 $ 20,743,572 $ Special Revenue

City of Twentynine Palms
Notes to the Basic Financial Statements
For the year ended June 30, 2023
-65-
Note 17: Prior period restatement
The City identified and corrected an accounting error in the prior year for the amounts listed below.

The $1,333,886 restatement in the governmental activities is for the correction of the deferred outflows, deferred inflows and net pension liability in the government-wide financial statements.

The beginning net position has been restated due to the correction.

Governmental Activities
Governmental
Activities
Net position, beginning of year, as previously reported 59,844,880 $ Prior period restatement 1,333,886
Net position, beginning of year, as restated 61,178,766 $ Note 18: Subsequent event
On July 6, 2023, the City received the final termination actuarial valuation of the Safety Pension Plan of Twentynine Palms Water District of the California Public Employees’ Retirement System (CalPERS) which was performed by CalPERS’ as of April 26, 2023. The City was provided with a settlement amount of $4,442,406 payable to CalPERS on August 1, 2023.

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REQUIRED SUPPLEMENTARY INFORMATION

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City of Twentynine Palms
Required Supplementary Information
Budgetary Comparison Schedule
General Fund
For the year ended June 30, 2023
-66-
Actual Variance with
Original Final amounts final budget
Revenues
Taxes 10,180,996 $ 10,707,944 $ 11,580,509 $ 872,565 $
Licenses, permits and fees 572,500 904,500 1,063,598 159,098 Intergovernmental 291,335 337,165 330,950 (6,215)
Charges for services 426,100 387,500 477,587 90,087
Fines, forfeitures and penalties 5,000 11,100 23,307 12,207 Use of money and property 60,000 65,000 98,635 33,635
Other 50,000 61,609 175,530 113,921
Total revenues 11,585,931 12,474,818 13,750,116 1,275,298 Expenditures
Current:

General government 2,681,347 2,824,886 2,639,084 185,802 Public safety 5,560,810 5,692,224 5,725,463 (33,239)
Public works 828,867 827,522 756,396 71,126
Community development 1,182,759 1,398,473 1,241,325 157,148 Community services 1,133,245 1,182,733 1,029,515 153,218 Debt service
Principal 43,020 43,020 61,481 (18,461)
Interest 38,206 38,206 38,348 (142)
Capital outlay - - 73,110 (73,110)
Total expenditures 11,468,254 12,007,064 11,564,722 442,342 Excess (deficiency) of revenues
over (under) expenditures 117,677 467,754 2,185,394 1,717,640 Other financing sources (uses)
Subscription acquisition - - 68,310 68,310
Lease acquisition - - 20,802 20,802
Transfers in 3,249,151 3,249,151 3,138,608 (110,543)
Transfers out (5,370,200) (4,521,069) (4,444,911) 76,158 Total other financing sources (uses) (2,121,049) (1,271,918) (1,217,191) 54,727 Net change in fund balance (2,003,372) $ (804,164) $ 968,203 1,772,367 $ Fund balance, beginning of year 10,641,969
Fund balance, end of year 11,610,172 $
Budgeted amounts

City of Twentynine Palms
Required Supplementary Information
Budgetary Comparison Schedule
CDBG Special Revenue Fund
For the year ended June 30, 2023
-67-
Actual Variance with
Original Final amounts final budget
Revenues
Intergovernmental 377,310 $ 888,436 $ 844,872 $ (43,564) $ Total revenues 377,310 888,436 844,872 (43,564)
Expenditures
Current:

Community services 62,310 62,310 18,745 43,565
Capital outlay 315,000 315,000 315,000 -
Total expenditures 377,310 377,310 333,745 43,565
Net change in fund balance - $ 511,126 $ 511,127 1 $
Fund balance (deficit), beginning of year (511,050)
Fund balance, end of year $ 77
Budgeted amounts

City of Twentynine Palms
Required Supplementary Information
Budgetary Comparison Schedule
Tourism Business Improvement District Special Revenue Fund For the year ended June 30, 2023
-68-
Actual Variance with
Original Final amounts final budget
Revenues
Licenses, permits and fees 285,000 $ 285,000 $ 391,021 $ 106,021 $ Use of money and property 500 2,000 10,809 8,809
Other 4,000 4,000 1,523 (2,477)
Total revenues 289,500 291,000 403,353 112,353
Expenditures
Current:

Economic development 285,539 357,337 268,388 88,949
Total expenditures 285,539 357,337 268,388 88,949
Net change in fund balance 3,961 $ (66,337) $ 134,965 201,302 $ Fund balance, beginning of year 504,591
Fund balance, end of year 639,556 $
Budgeted amounts

City of Twentynine Palms
Required Supplementary Information
Budgetary Comparison Schedule
ARPA Special Revenue Fund
For the year ended June 30, 2023
-69-
Actual Variance with
Original Final amounts final budget
Revenues
Intergovernmental 3,118,608 $ 3,118,608 $ 3,118,608 $ - $ Total revenues 3,118,608 3,118,608 3,118,608 -
Expenditures
Current:

Total expenditures - - - -
Excess (deficiency) of revenues
over (under) expenditures 3,118,608 3,118,608 3,118,608 - Other financing sources (uses)
Transfers out (3,118,608) (3,118,608) (3,118,608) -
Total other financing sources (uses) (3,118,608) (3,118,608) (3,118,608) - Net change in fund balance - $ - $ - - $
Fund balance, beginning of year -
Fund balance, end of year $ -
Budgeted amounts

City of Twentynine Palms
Required Supplementary Information Schedule of the City’s Proportionate Share of the Plan’s Net Pension Liability and Related Ratios as of the Measurement Date Last 10 Years * -70-
Measurement Date
Employer's
Proportion of the
Collective Net
Pension
Liability/(Asset)1
Employer's
Proportionate
Share of the
Collective Net
Pension
Liability/(Asset) Covered Payroll
Employer's
Proportionate Share of the Collective Net
Pension
Liability/(Asset) as a
percentage of the
Covered Payroll
Pension Plan's
Fiduciary Net
Position as a
percentage of the
Total Pension
Liability/(Asset)
6/30/2014 0.102% 2,530,753 $ 1,829,632 $ 138.32% 77.53% 6/30/2015 0.074% 2,515,772 1,882,894 133.61% 82.58%
6/30/2016 0.081% 2,904,210 1,948,280 149.07% 81.00%
6/30/2017 0.085% 3,474,126 2,006,275 173.16% 80.10%
6/30/2018 0.001% 70,807 2,191,491 3.23% 99.62%
6/30/2019 0.005% 506,204 2,310,926 21.90% 97.46%
6/30/2020 0.007% 793,186 2,342,734 33.86% 96.23%
6/30/2021 0.003% (2,192,059) 2,239,339 -97.89% 109.75%
6/30/2022 0.057% 1,881,330 2,533,623 74.25% 92.18%
* Measurement date 6/30/2014 (fiscal year 2015) was the first year of implementation. Additional years will be presented as information becomes available. 1 Proportion of the net pension liability represents the plan's proportion of PERF C, which includes both the Miscellaneous and Safety Risk Pools excluding the 1959 Survivors Risk Pool.

City of Twentynine Palms
Required Supplementary Information Schedule of Plan Contributions Last 10 Years* -71-
Fiscal Year
Actuarially
Determined
Contribution
Contributions in Relation
to the Actuarially
Determined Contribution
Contribution
Deficiency
(Excess) Covered Payroll
Contributions as a
Percentage of
Covered Payroll
6/30/2015 327,005 $ (1,327,005) $ (1,000,000) $ 1,882,894 $ 17.37% 6/30/2016 278,084 (278,084) - 1,948,280 14.27%
6/30/2017 302,837 (302,837) - 2,006,275 15.09%
6/30/2018 331,853 (3,434,678) (3,102,825) 2,191,491 15.14%6/30/2019 388,590 (388,590) - 2,310,926 16.82%6/30/2020 317,991 (317,991) - 2,342,734 13.57%6/30/2021 262,161 (262,161) - 2,239,339 11.71% 6/30/2022 311,225 (311,225) - 2,533,623 12.28%6/30/2023 376,725 (376,725) - 2,802,498 13.44% * Measurement date 6/30/2014 (fiscal year 2015) was the first year of implementation. Additional years will be presented as information becomes available.

Notes to Schedule:Changes in Benefit Terms: There were no changes to benefit terms that applied to all members of the Public Agency Pool. Additionally, the figuresabove do not include any liability impact that may have resulted from Golden Handshakes that occurred after the June 30, 2021 valuation date, unlessthe liability impact is deemed to be material to the Public Agency Pool.Changes in Assumptions: Effective with the June 30, 2021 valuation date (2022 measurement date), the accounting discount rate was reduced from7.15% to 6.90%. In determining the long-term expected rate of return, CalPERS took into account long-term market return expectations as well as theexpected pension fund cash flows. Projected returns for all asset classes are estimated, combined with risk estimates, and are used to projectcompound (geometric) returns over the long term. The discount rate used to discount liabilities was informed by the long-term projected portfolio return.

In addition, demographic assumptions and the inflation rate assumption were changed in accordance with the 2021 CalPERS Experience Study andReview of Actuarial Assumptions.There were no assumption changes for 2021. For 2020, the Plan adopted a new amortization policy effective with the2019 actuarial valuation. The new amortization policy shortens the period over which actuarial gains and losses are amortized from 30 years to 20 yearswith the payments computed as a level dollar amount. In addition, the new policy does not utilize a five-year ramp-up and ramp-down on UAL basesattributable to assumption changes and non-investment gains/losses. The new policy also does not utilize a five-year ramp-down on investmentgains/losses. These changes apply only to new UAL bases established on or after June 30, 2019. There were no changes in assumptions in 2019. In2018, demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and Review of Actuarial AssumptionsDecember 2017. There were no changes in the discount rate in 2019. In 2017, the accounting discount rate was reduced from 7.65 percent to 7.15percent. In 2016, there were no changes in the discount rate. In 2015, amounts reported reflect an adjustment of the discount rate from 7.5 percent (netof administrative expense) to 7.65 percent (without a reduction for pension plan administrative expense). In 2014, amounts reported were based on the7.5 percent discount rate.

City of Twentynine Palms
Required Supplementary Information Schedule of Changes in the Net OPEB Liability and Related Ratios Last Ten Years* -72-
2017 2018 2020 (1) 2021 2022 2023
Total OPEB LiabilityService Cost 313,725 $ 326,274 $ 57,138 $ 58,852 $ 47,520 $ 53,743 $ Interest on the Total OPEB Liability 162,816 178,572 237,641 132,377 138,014 133,281 Adjustments - - 190,379 - - -Actual and expected experience difference - - 12,104 49,018 (2,215) (31,507) Changes in assumptions - (1,142,700) (1,879,505) (65,346) 104,420 9,789 Benefit payments (72,988) (92,484) (145,291) (150,740) (181,613) (182,885) Net change in Total OPEB Liability 403,553 (730,338) (1,527,534) 24,161 106,126 (17,579) Total OPEB Liability - beginning 4,106,540 4,510,093 3,779,755 2,252,221 2,276,382 2,382,508Total OPEB Liability - ending (a) 4,510,093 3,779,755 2,252,221 2,276,382 2,382,508 2,364,929 Plan Fiduciary Net PositionContribution - employer 197,988 217,484 270,291 150,740 67,584 182,885 Net investment income 96,920 96,935 120,137 297,985 (250,791) 166,880 Adjustments - - 250,431 - - -
Differences between projected and actual investments - - (8,018) 130,475 - - Benefit payments (72,988) (92,484) (145,291) (150,740) (181,613) (182,885) Investment expense - - (756) - - -
Administrative expense (1,189) (1,406) (1,034) (2,040) (8,068) (13,231) Net change in Plan Fiduciary Net Position 220,731 220,529 485,760 426,420 (372,888) 153,649 Plan Fiduciary Net Position - beginning 1,248,585 1,469,316 1,689,845 2,175,605 2,602,025 2,229,137 Plan Fiduciary Net Position - ending (b) 1,469,316 1,689,845 2,175,605 2,602,025 2,229,137 2,382,786 Net OPEB Liability (Asset) - ending (a) - (b) 3,040,777 $ 2,089,910 $ 76,616 $ (325,643) $ 153,371 $ (17,857) $ Plan fiduciary net position as a percentage of the total OPEB liability 32.58% 44.71% 96.60% 87.49% 93.56% 100.76%Covered-employee payroll 2,006,275 $ 2,191,491 $ 2,342,733 $ 2,239,339 $ 2,533,623 $ 2,802,498 $ Net OPEB liability (asset) as a percentage of covered-employee payroll 151.56% 95.36% 3.27% -14.54% 6.05% -0.64%Notes to Schedule:Contributions are fixed and not based on a measure of pay, therefore covered-employee payroll is used in the schedule. * Measurement date 6/30/2017 (fiscal year 2018) was the first year of implementation. Additional years will be presented as information becomes available.(1) This reconciliation covers the one-year period from the June 30, 2019 reporting date to the June 30, 2020 reporting date. This was a one-time change concurrent with the change in actuarial firms from one reporting period to the next. As a result of this change, the plan's measurement period will henceforth coincide with its reporting period.

Measurement Date

City of Twentynine Palms
Required Supplementary Information Schedule of OPEB Contributions Last Ten Years* -73-
2017 2018 2019 2020 2021 2022 2023
Statutorily Required Contributions (SRC) 197,988 $ 217,484 $ 217,484 $ 270,291 $ 150,740 $ 67,584 $ 182,885 $ Contributions in relation to the SRC (197,988) (217,484) (217,484) (270,291) (150,740) (67,584) (182,885) Contribution deficiency/(excess) - $ - $ - $ - $ - $ - $ - $ Covered-employee payroll 2,006,275 $ 2,191,491 $ 2,310,926 $ 2,342,733 $ 2,239,339 $ 2,533,623 $ 2,802,498 $ Contribution as a percentage of covered-employee payroll 9.87% 9.92% 9.41% 11.54% 6.73% 2.67% 6.53%Notes to schedule:Changes in assumptions: NoneMethods and assumptions used to determine contributions:Valuation Date: June 30, 2023Actuarial Cost MethodAsset Valuation Method5 Year Assets SmoothingSalary Increases

2.75%Investment Rate of Return5.75%Retirement Age
The retirement assumptions are based on the 2021 CalPERS 2.0%@62 and 2.5%@55 Rates for Miscellaneous Employees table created by CalPERS.

Mortality
The mortality assumptions are based on the 2021 CalPERS Retiree Mortality for All Employees table created by CalPERS * Measurement date 6/30/2017 (fiscal year 2018) was the first year of implementation. Additional years will be presented as information becomes available.

Entry Age Normal
Fiscal Year

City of Twentynine Palms
Notes to Required Supplementary Information
For the year ended June 30, 2023
-74-
Note 1: Budgetary data
Revenues and expenditures accounted for in the governmental funds are controlled by a formal integrated budgetary accounting system in accordance with various legal requirements which govern the City’s operations.

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

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

The legal level of budgetary control is at the fund level. Once the budget has been adopted, the City Manager or his/her designee is authorized to transfer appropriations between accounts within each fund as long as the total adopted budget allocation of that fund is not exceeded. Transfers from fund to fund require approval of the City Council, if not approved in the budget. Budgeted amounts are as originally adopted and as further amended by City Council, on a basis consistent with accounting principles generally accepted in the United States of America (GAAP).

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

Total Final Budgeted
Expenditures
Total Actual
Expenditures
Excess Of
Expenditures Over
Budgeted Amounts
Non-major funds:

SB-1 Road Maintenance Rehab 663,593 $ 668,518 $ (4,925) $ City Bond Proceeds 123,143 133,731 (10,588)

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OTHER SUPPLEMENTARY INFORMATION

City of Twentynine Palms
Description of Funds
Ͳ75-
Special revenue funds:

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

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

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

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

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

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

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

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

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

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

Capital Project Funds:

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

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

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

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

City of Twentynine Palms
Combining Balance Sheet
Nonmajor Funds
June 30, 2023
Ͳ76-
Traffic Lighting and
Safety Gas Tax Landscape A.D.

Assets
Cash and investments - $ 223,336 $ 88,253 $
Cash and investments with
fiscal agents - restricted
Receivables:

Intergovernmental 2,088 - -
Taxes - 61,673 -
Interest - 2,267 716
Grants - - -
Other - - 459
Total assets 2,088 $ 287,276 $ 89,428 $
Liabilities and fund balances
Liabilities:
accrued liabilities 1,471 $ 39,867 $ 653 $
- - -
Due to other funds 9,061 - -
Total liabilities 10,532 39,867 653
Deferred inflows of resources:

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

Restricted for:

Public works - 247,409 88,775
Community development - - -
Health and sanitation - - -
Assigned - - -
Unassigned (8,444) - -
Total fund balances (deficit) (8,444) 247,409 88,775
Total liabilities and fund balances 2,088 $ 287,276 $ 89,428 $ Retentions payable
Accounts payable and
Special Revenue

(Continued)
Ͳ77-
Public Access Measure I
Programming Recycling 2011 Article 8
$ 245,794 67,148 $ 1,786,244 $ 22,951 $
45,294 - - -
- - 101,983 -
635 1,589 13,941 158
- - - -
5,491 - - 989
$ 292,677 73,274 $ 1,902,168 $ 24,098 $
$ 33,769 - $ 3,240 $ - $
- - - -
- - - -
33,769 - 3,240 -
43,262 - - -
43,262 - - -
- - 1,898,928 24,098
- 73,274 - -
215,646 - - -
- - - -
- - - -
215,646 73,274 1,898,928 24,098
$ 292,677 73,274 $ 1,902,168 24,098 $
Special Revenue

City of Twentynine Palms
Combining Balance Sheet
Nonmajor Funds
June 30, 2023
Ͳ78-
Capital Projects
SB 1 - Road
Maintenance
Curb, Gutter &
Sidewalks
Traffic Relief Rehab Impact Fee
Assets
Cash and investments 315 $ - $ 880,485 $
Cash and investments with
fiscal agents - restricted
Receivables:

Intergovernmental - - -
Taxes - 109,766 -
Interest 2 1,474 6,765
Grants - - -
Other - - -
Total assets 317 $ 111,240 $ 887,250 $
Liabilities and fund balances
Liabilities:
accrued liabilities - $ - $ 8,780 $
- - -
Due to other funds - 23,576 -
Total liabilities - 23,576 8,780
Deferred inflows of resources:

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

Restricted for:

Public works 317 87,664 -
Community development - - -
Health and sanitation - - -
Assigned - - 878,470
Unassigned - - -
Total fund balances (deficit) 317 87,664 878,470
Total liabilities and fund balances 317 $ 111,240 $ 887,250 $ Special Revenue
Retentions payable
Accounts payable and

Ͳ79-
City
Streets Bond Proceeds
$ 414,778 - $ 3,729,304 $
714,936 714,936
- - 47,382
- - 273,422
3,318 30,865 -
- 825,161 825,161
- - 6,939
$ 1,133,032 825,161 $ 5,628,009 $
$ 10,599 7,757 $ 106,136 $
- 52,386 52,386
771,435 - 804,072
10,599 831,578 962,594
- 6,000 49,262
- 6,000 49,262
- - 2,347,191
1,122,433 - 1,195,707
- - 215,646
- - 878,470
- (12,417) (20,861)
1,122,433 (12,417) 4,616,153
$ 1,133,032 825,161 $ 5,628,009 $
Total Nonmajor
Governmental
Funds
Capital Projects

City of Twentynine Palms
Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Funds
For the year ended June 30, 2023
Ͳ80-
Traffic Lighting and
Safety Gas Tax Landscape A.D.

Revenues
Taxes - $ 707,359 $ - $
Licenses, permits and fees - - -
Intergovernmental - - -
Charges for services - - 20,546
Fines, forfeitures and penalties 3,934 - -
Use of money and property - 7,491 2,227
Total revenues 3,934 714,850 22,773
Expenditures
Current:

General government - - -
Public works 29,856 790,225 27,660
Community development - - -
Health and sanitation - - -
Debt service
Principal - - -
Interest - - -
Capital outlay - - -
Total expenditures 29,856 790,225 27,660
Excess (deficiency) of revenues
over (under) expenditures (25,922) (75,375) (4,887)
Other financing sources (uses)
Subscription acquisition - - -
Transfers in 30,000 - -
Transfers out - (10,000) -
Total other financing sources (uses) 30,000 (10,000) -
Net change in fund balances 4,078 (85,375) (4,887)
Fund balances (deficit), beginning of year (12,522) 332,784 93,662 Fund balances (deficit), end of year (8,444) $ 247,409 $ 88,775 $ Special Revenue

(Continued)
Ͳ81-
Public Access Measure I
Programming Recycling 2011 Article 8
$ - - $ 638,062 $ - $
- - - -
52,966 - - -
22,806 - - -
- - - -
4,807 2,678 29,333 5,635
57,773 25,484 667,395 5,635
63,687 - - -
- - - 167,597
- - - -
58,054 - - -
4,788 - - -
12 - - -
21,104 - 86,639 3,545
83,958 63,687 86,639 171,142
(26,185) (38,203) 580,756 (165,507)
18,304 - - -
- - - -
- - (10,000) -
18,304 - (10,000) -
(7,881) (38,203) 570,756 (165,507)
223,527 111,477 1,328,172 189,605
$ 215,646 73,274 $ 1,898,928 $ 24,098 $
Special Revenue

City of Twentynine Palms
Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Funds
For the year ended June 30, 2023
-82-
Capital Projects
SB 1 - Road
Maintenance
Curb, Gutter &
Sidewalks
Traffic Relief Rehab Impact Fee
Revenues
Taxes - $ 617,860 $ - $
Licenses, permits and fees - - 146,990
Intergovernmental - - -
Charges for services - - -
Fines, forfeitures and penalties - - -
Use of money and property 173 4,262 18,194
Total revenues 173 622,122 165,184
Expenditures
Current:

General government - - -
Public works 5,694 668,518 -
Community development - - -
Health and sanitation - - -
Debt service
Principal - - -
Interest - - -
Capital outlay - - 47,673
Total expenditures 5,694 668,518 47,673
Excess (deficiency) of revenues
over (under) expenditures (5,521) (46,396) 117,511
Other financing sources (uses)
Subscription acquisition - - -
Transfers in - - -
Transfers out - - -
Total other financing sources (uses) - - -
Net change in fund balances (5,521) (46,396) 117,511
Fund balances (deficit), beginning of year 5,838 134,060 760,959 Fund balances (deficit), end of year 317 $ 87,664 $ 878,470 $ Special Revenue

-83-
City
Streets Bond Proceeds
$ - - $ 1,963,281 $
- - 146,990
964,148 - 1,017,114
- - 43,352
- - 3,934
19,668 - 94,468
19,668 964,148 3,269,139
- - 63,687
- - 1,689,550
133,731 - 133,731
- - 58,054
- - 4,788
- - 12
972,124 - 1,131,085
133,731 972,124 3,080,907
(114,063) (7,976) 188,232
- - 18,304
- - 30,000
- - (20,000)
- - 28,304
(114,063) (7,976) 216,536
1,236,496 (4,441) 4,399,617
$ 1,122,433 (12,417) $ 4,616,153 $
Total Nonmajor
Governmental
Funds
Capital Projects

City of Twentynine Palms
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Traffic Safety Special Revenue Fund
For the year ended June 30, 2023
-84-
Actual Variance with
Original Final amounts final budget
Revenues
Fines, forfeitures and penalties 2,000 $ 2,000 $ 3,934 $ 1,934 $ Total revenues 2,000 2,000 3,934 1,934
Expenditures
Current:

Public works 17,000 30,000 29,856 144
Total expenditures 17,000 30,000 29,856 144
Excess (deficiency) of revenues
over (under) expenditures (15,000) (28,000) (25,922) 2,078 Other financing sources (uses)
Transfers in 30,000 30,000 30,000 -
Total other financing sources (uses) 30,000 30,000 30,000 - Net change in fund balance 15,000 $ 2,000 $ 4,078 2,078 $ Fund balance, (deficit) beginning of year (12,522)
Fund balance, (deficit) end of year (8,444) $
Budgeted amounts

City of Twentynine Palms
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Gas Tax Special Revenue Fund
For the year ended June 30, 2023
-85-
Actual Variance with
Original Final amounts final budget
Revenues
Taxes 833,889 $ 833,889 $ 707,359 $ (126,530) $
Use of money and property - - 7,491 7,491
Total revenues 833,889 833,889 714,850 (119,039)
Expenditures
Current:

Public works 823,889 881,889 790,225 91,664
Total expenditures 823,889 881,889 790,225 91,664
Excess (deficiency) of revenues
over (under) expenditures 10,000 (48,000) (75,375) (27,375) Other financing sources (uses)
Transfers out (10,000) (10,000) (10,000) -
Total other financing sources (uses) (10,000) (10,000) (10,000) - Net change in fund balance - $ (58,000) $ (85,375) (27,375) $ Fund balance, beginning of year 332,784
Fund balance, end of year 247,409 $
Budgeted amounts
.

City of Twentynine Palms
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Lighting and Landscape A.D. Special Revenue Fund
For the year ended June 30, 2023
-86-
Actual Variance with
Original Final amounts final budget
Revenues
Charges for services 21,870 $ 21,870 $ 20,546 $ (1,324) $ Use of money and property - - 2,227 2,227
Total revenues 21,870 21,870 22,773 903
Expenditures
Current:

Public works 32,683 32,683 27,660 5,023
Total expenditures 32,683 32,683 27,660 5,023
Net change in fund balance (10,813) $ (10,813) $ (4,887) 5,926 $ Fund balance, beginning of year 93,662
Fund balance, end of year $ 88,775
Budgeted amounts
.

City of Twentynine Palms
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Public Access Programming Special Revenue Fund
For the year ended June 30, 2023
-87-
Actual Variance with
Original Final amounts final budget
Revenues
Charges for services 24,000 $ 24,000 $ 22,806 $ (1,194) $ Use of money and property - - 2,678 2,678
Total revenues 24,000 24,000 25,484 1,484
Expenditures
Current:

General government 37,081 80,081 63,687 16,394
Total expenditures 37,081 80,081 63,687 16,394
Net change in fund balance (13,081) $ (56,081) $ (38,203) 17,878 $ Fund balance, beginning of year 111,477
Fund balance, end of year $ 73,274
Budgeted amounts

City of Twentynine Palms
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Recycling Special Revenue Fund
For the year ended June 30, 2023
-88-
Actual Variance with
Original Final amounts final budget
Revenues
Intergovernmental 92,362 $ 98,362 $ 52,966 $ (45,396) $ Use of money and property - - 4,807 4,807
Total revenues 92,362 98,362 57,773 (40,589)
Expenditures
Current:

Health and sanitation 151,024 151,024 58,054 92,970
Debt service
Principal - - 4,788 (4,788)
Interest - - 12 (12)
Capital outlay - - 21,104 (21,104)
Total expenditures 151,024 151,024 83,958 67,066
Excess (deficiency) of revenues
over (under) expenditures (58,662) (52,662) (26,185) 26,477 Other financing sources (uses)
Subscription acquisition - - 18,304 18,304
Total other financing sources (uses) - - 18,304 18,304
Net change in fund balance (58,662) $ (52,662) $ (7,881) 44,781 $ Fund balance, beginning of year 223,527
Fund balance, end of year 215,646 $
Budgeted amounts

City of Twentynine Palms
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Measure I 2011 Special Revenue Fund
For the year ended June 30, 2023
-89-
Actual Variance with
Original Final amounts final budget
Revenues
Taxes 672,105 $ 672,105 $ 638,062 $ (34,043) $
Use of money and property - - 29,333 29,333
Total revenues 672,105 672,105 667,395 (4,710)
Expenditures
Current:

Public works 300,000 300,000 - 300,000
Capital outlay 901,681 901,681 86,639 815,042
Total expenditures 1,201,681 1,201,681 86,639 1,115,042 Excess (deficiency) of revenues
over (under) expenditures (529,576) (529,576) 580,756 1,110,332 Other financing sources (uses)
Transfers out (10,000) (10,000) (10,000) -
Total other financing sources (uses) (10,000) (10,000) (10,000) - Net change in fund balance (539,576) $ (539,576) $ 570,756 1,110,332 $ Fund balance, beginning of year 1,328,172
Fund balance, end of year 1,898,928 $
Budgeted amounts

City of Twentynine Palms
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Article 8 Special Revenue Fund
For the year ended June 30, 2023
-90-
Actual Variance with
Original Final amounts final budget
Revenues
Use of money and property - $ - $ 5,635 $ 5,635 $
Total revenues - - 5,635 5,635
Expenditures
Current:

Public works 150,000 170,000 167,597 2,403
Capital outlay 6,699 6,699 3,545 3,154
Total expenditures 156,699 176,699 171,142 5,557
Net change in fund balance (156,699) $ (176,699) $ (165,507) 11,192 $ Fund balance, beginning of year 189,605
Fund balance, end of year $ 24,098
Budgeted amounts

City of Twentynine Palms
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Traffic Relief Special Revenue Fund
For the year ended June 30, 2023
-91-
Actual Variance with
Original Final amounts final budget
Revenues
Use of money and property - $ - $ 173 $ 173 $
Total revenues - - 173 173
Expenditures
Current:

Public works - - 5,694 (5,694)
Capital outlay 5,905 5,859 - 5,859
Total expenditures 5,905 5,859 5,694 165
Net change in fund balance (5,905) $ (5,859) $ (5,521) 338 $ Fund balance, beginning of year 5,838
Fund balance, end of year $ 317
Budgeted amounts

City of Twentynine Palms
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual SB 1 - Road Maintenance Rehab Special Revenue Fund
For the year ended June 30, 2023
-92-
Actual Variance with
Original Final amounts final budget
Revenues
Taxes 663,593 $ 663,593 $ 617,860 $ (45,733) $
Use of money and property - - 4,262 4,262
Total revenues 663,593 663,593 622,122 (41,471)
Expenditures
Current:

Public works 663,593 663,593 668,518 (4,925)
Total expenditures 663,593 663,593 668,518 (4,925)
Net change in fund balance - $ - $ (46,396) (46,396) $
Fund balance, beginning of year 134,060
Fund balance, end of year $ 87,664
Budgeted amounts

City of Twentynine Palms
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Capital Improvements Capital Projects Fund – Major Fund For the year ended June 30, 2023
-93-
Actual Variance with
Original Final amounts final budget
Revenues
Intergovernmental 2,230,482 $ 2,213,985 $ 2,623,870 $ 409,885 $ Use of money and property - - 433 433
Total revenues 2,230,482 2,213,985 2,624,303 410,318
Expenditures
Capital outlay 9,961,813 9,904,858 6,891,327 3,013,531
Total expenditures 9,961,813 9,904,858 6,891,327 3,013,531 Excess (deficiency) of revenues
over (under) expenditures (7,731,331) (7,690,873) (4,267,024) 3,423,849 Other financing sources (uses)
Transfers in 3,473,450 3,558,119 3,479,961 (78,158)
Total other financing sources (uses) 3,473,450 3,558,119 3,479,961 (78,158) Net change in fund balance (4,257,881) $ (4,132,754) $ (787,063) 3,345,691 $ Fund balance, beginning of year, as restated 4,664,677
Fund balance, end of year $ 3,877,614
Budgeted amounts

City of Twentynine Palms
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Curb, Gutter, & Sidewalk Impact Fee Capital Projects Fund For the year ended June 30, 2023
-94-
Actual Variance with
Original Final amounts final budget
Revenues
Licenses, permits and fees 80,000 $ 85,000 $ 146,990 $ 61,990 $ Use of money and property - - 18,194 18,194
Total revenues 80,000 85,000 165,184 80,184
Expenditures
Capital outlay 196,507 220,596 47,673 172,923
Total expenditures 196,507 220,596 47,673 172,923
Net change in fund balance (116,507) $ (135,596) $ 117,511 253,107 $ Fund balance, beginning of year 760,959
Fund balance, end of year $ 878,470
Budgeted amounts

City of Twentynine Palms
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Streets Capital Projects Fund
For the year ended June 30, 2023
-95-
Actual Variance with
Original Final amounts final budget
Revenues
Intergovernmental 5,819,244 $ 5,820,970 $ 964,148 $ (4,856,822) $ Total revenues 5,819,244 5,820,970 964,148 (4,856,822)
Expenditures
Capital outlay 5,819,244 5,778,441 972,124 4,806,317
Total expenditures 5,819,244 5,778,441 972,124 4,806,317 Net change in fund balance - $ 42,529 $ (7,976) (50,505) $ Fund balance (deficit), beginning of year (4,441)
Fund balance (deficit), end of year $ (12,417)
Budgeted amounts

City of Twentynine Palms
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual City Bonds Proceeds Capital Projects Fund
For the year ended June 30, 2023
-96-
Actual Variance with
Original Final amounts final budget
Revenues
Use of money and property - $ 6,800 $ 19,668 $ 12,868 $ Total revenues - 6,800 19,668 12,868
Expenditures
Current:

Community development 214,000 123,143 133,731 (10,588)
Total expenditures 214,000 123,143 133,731 (10,588)
Net change in fund balance (214,000) $ (116,343) $ (114,063) 2,280 $ Fund balance, beginning of year, as restated 1,236,496
Fund balance, end of year $ 1,122,433
Budgeted amounts

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STATISTICAL SECTION

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City of Twentynine Palms

Statistical Section
For the year ended June 30, 2023
This part of the City’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City’s overall financial health.

PAGE
Financial trend information:

Intended to assist users in understanding and assessing how a government’s financial position has changed over time. 97
Revenue capacity information:

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

Debt capacity information:

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

Demographic and economic information:

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

Operating information:

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

Statistical section memo:

This section includes miscellaneous information regarding the statistical information. 106
111
116
117
121

City of Twentynine Palms
Net Position by Component
Last Ten Fiscal Years
(accrual basis of accounting)
-97-
2014 2015 2016 2017 2018
Governmental activities:

Net investment in
capital assets 25,086,454 $ 24,982,095 $ 25,289,476 $ 25,570,868 $ 25,182,407 $ Restricted for:

Public safety 591,580 573,199 111,737 383,926 287,250
Streets, highways, etc. 5,056,505 4,391,078 2,879,535 1,737,290 1,348,879 Community development 10,961,203 10,939,744 10,475,971 9,159,551 7,796,791 Economic development - - - - -
Health and sanitation - - - - -
Community services - - - - -
Unrestricted 9,511,650 7,419,328 8,451,620 8,984,900 8,104,479 Total governmental activities
net position 51,207,392 $ 48,305,444 $ 47,208,339 $ 45,836,535 $ 42,719,806 $ Business-type activities:

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

Net investment in
capital assets 25,086,454 $ 24,982,095 $ 25,289,476 $ 25,570,868 $ 25,182,407 $ Restricted for:

Public safety 591,580 573,199 111,737 383,926 287,250
Streets, highways, etc. 5,056,505 4,391,078 2,879,535 1,737,290 1,348,879 Community development 10,961,203 10,939,744 10,475,971 9,159,551 7,796,791 Economic development - - - - -
Health and sanitation - - - - -
Community services - - - - -
Unrestricted 9,511,650 7,419,328 8,451,620 8,984,900 8,104,479 Total primary government
net position 51,207,392 $ 48,305,444 $ 47,208,339 $ 45,836,535 $ 42,719,806 $ Fiscal Year
Source: City of Twentynine Palms, Finance Department

-98-
2019 2020 2021 2022 2023
Governmental activities:

Net investment in
capital assets 24,577,166 $ 25,593,799 $ 31,856,477 $ 38,345,205 $ 44,406,583 $ Restricted for:

Public safety 59,140 59,704 21,925 - 406,426
Streets, highways, etc. 3,295,513 4,866,518 4,090,554 2,084,121 2,347,191 Community development 7,355,824 7,240,136 5,168,824 1,347,973 1,195,707 Economic development - - - 504,591 639,556
Health and sanitation - - - 223,527 215,646
Community services - - - - 77
Unrestricted 7,191,979 5,801,220 5,638,921 17,339,463 15,464,488 Total governmental activities
net position 42,479,622 $ 43,561,377 $ 46,776,701 $ 59,844,880 $ 64,675,674 $ Business-type activities:

Net investment in
capital assets - $ - $ 923,579 $ 1,478,017 $ 2,748,343 $ Unrestricted - 603,592 (194,125) 93,245 444,028
Total business-type activities:
net position - $ 603,592 $ 729,454 $ 1,571,262 $ 3,192,371 $ Primary Government:

Net investment in
capital assets 24,577,166 $ 25,593,799 $ 32,780,056 $ 39,823,222 $ 47,154,926 $ Restricted for:

Public safety 59,140 59,704 21,925 - 406,426
Streets, highways, etc. 3,295,513 4,866,518 4,090,554 2,084,121 2,347,191 Community development 7,355,824 7,240,136 5,168,824 1,347,973 1,195,707 Economic development - - - 504,591 639,556
Health and sanitation - - - 223,527 215,646
Community services - - - - 77
Unrestricted 7,191,979 6,404,812 5,444,796 17,432,708 15,908,516 Total primary government
net position 42,479,622 $ 44,164,969 $ 47,506,155 $ 61,416,142 $ 67,868,045 $ Fiscal Year

City of Twentynine Palms
Changes in Net Position
Last Ten Fiscal Years
(accrual basis of accounting)
-99-
2014 2015 2016 2017 2018
Expenses
Governmental activities:

General government 1,765,044 $ 2,708,000 $ 1,609,010 $ 2,162,115 $ 4,930,008 $ Public safety 4,115,618 3,862,568 4,104,813 4,864,815 4,345,660 Public works 1,433,752 2,076,929 2,583,689 3,261,813 2,904,357 Community development 626,332 370,244 607,888 598,898 564,289 Economic development - - - - -
Health and sanitation 67,126 72,751 48,990 75,989 52,207 Community services 1,622,653 1,744,000 1,905,921 2,118,064 1,049,906 Interest on long-term debt 76 - - - -
Total governmental activities expenses 9,630,601 10,834,492 10,860,311 13,081,694 13,846,427 Business-type activities:

Sewer - - - - -
Total business-type activities expenses - - - - -
Total primary government expenses 9,630,601 10,834,492 10,860,311 13,081,694 13,846,427 Program revenues
Governmental activities:

Charges for services:

General government 68,120 58,182 75,375 130,574 135,646 Public safety 154,636 143,800 138,401 116,582 123,217
Public works 263,839 71,949 96,296 571,605 59,783
Community development 155,301 144,106 160,860 422,876 180,919 Health and sanitation 6,299 6,596 5,935 6,113 8,093
Community services 205,037 214,706 246,714 279,490 373,805 Operating grants and
contributions 1,081,447 943,002 748,743 1,046,376 1,304,672 Capital grants and
contributions 866,466 1,292,770 1,132,585 1,067,289 1,947,712 Total governmental activities program revenues 2,801,145 2,875,111 2,604,909 3,640,905 4,133,847 Business-type activities:

Sewer:

Charges for services - - - - -
Operating grants and
contributions - - - - -
Capital grants and
contributions - - - - -
Total business-type activities program revenues - - - - - Total primary government program revenues 2,801,145 2,875,111 2,604,909 3,640,905 4,133,847 Net revenue (expense):

Governmental activities (6,829,456) (7,959,381) (8,255,402) (9,440,789) (9,712,580) Business-type activities - - - - -
Total primary government net (expense)/revenues (7,959,381) (6,829,456) (8,255,402) (9,440,789) (9,712,580) Fiscal Year
Source: City of Twentynine Palms, Finance Department

(continued)
-100-
2019 2020 2021 2022 2023
Expenses
Governmental activities:

General government 2,915,204 $ 2,602,747 $ 2,815,709 $ 1,811,690 $ 3,799,677 $ Public safety 5,653,861 6,221,681 6,008,474 4,026,069 8,014,426 Public works 2,701,125 2,465,187 1,879,159 1,231,982 3,423,803 Community development 906,338 1,031,762 1,144,676 4,259,566 1,924,784 Economic development - - - 223,036.00 268,388
Health and sanitation 59,863 79,151 124,465 41,618 81,264 Community services 1,349,768 1,464,616 593,713 696,557 1,467,340 Interest on long-term debt - - 40,625 40,939 38,360
Total governmental activities expenses 13,586,159 13,865,144 12,606,821 12,331,457 19,018,042 Business-type activities:

Sewer - - 83,356 262,334 131,211
Total business-type activities expenses - - 83,356 262,334 131,211 Total primary government expenses 13,586,159 13,865,144 12,690,177 12,593,791 19,149,253 Program revenues
Governmental activities:

Charges for services:

General government 322,903 283,628 172,682 170,079 96,705 Public safety 127,397 113,590 90,944 118,975 108,726
Public works 57,609 73,857 169,822 155,458 184,109
Community development 189,569 339,357 598,084 883,279 534,853 Health and sanitation 6,785 5,129 9,595 7,752 -
Community services 382,737 286,848 212,906 329,486 200,443 Operating grants and
contributions 1,423,950 1,515,075 2,791,174 5,474,903 6,401,746 Capital grants and
contributions 1,192,110 2,658,324 1,644,374 7,367,880 2,773,636 Total governmental activities program revenues 3,703,060 5,275,808 5,689,581 14,507,812 10,300,218 Business-type activities:

Sewer:

Charges for services - - - 5,218 14,349
Operating grants and
contributions - 603,592 - - -
Capital grants and
contributions - - 209,218 475,437 803,021
Total business-type activities program revenues - 603,592 209,218 480,655 817,370 Total primary government program revenues 3,703,060 5,879,400 5,898,799 14,988,467 11,117,588 Net revenue (expense):

Governmental activities (9,883,099) (8,589,336) (6,917,240) 2,176,355 (8,717,824) Business-type activities - 603,592 125,862 218,321 686,159 Total primary government net (expense)/revenues (7,985,744) (9,883,099) (6,791,378) 2,394,676 (8,031,665) Fiscal Year

City of Twentynine Palms
Changes in Net Position
Last Ten Fiscal Years
(accrual basis of accounting)
-101-
2014 2015 2016 2017 2018
General revenues and
other changes in net position
Governmental activities:

Taxes
Property tax, levied for
general purpose 1,977,219 $ 2,046,167 $ 2,057,945 $ 2,085,053 $ 2,188,281 $ Sales and use taxes 834,747 860,948 902,439 1,156,390 1,156,390 Sales tax in lieu 296,087 264,288 204,050 - 97,927
Property tax in lieu 2,688,079 2,747,309 2,807,033 2,831,097 2,869,122 Franchise taxes 624,084 622,531 615,767 613,152 704,961 Transient occupancy tax 816,017 878,195 943,747 1,110,536 1,445,085 Real property transfer taxes 22,161 25,404 33,287 30,427 38,728 Motor vehicle in lieu tax - 12,635 10,428 11,711 14,170 Total taxes 7,258,394 7,457,477 7,574,696 7,838,366 8,514,664 Investment earnings 27,938 27,429 29,548 132,600 29,613 Other 83,360 193,340 127,653 98,019 127,784
Special item - - (573,600) - -
Extraordinary item 440,453 - - - -
Transfers in(out) - - - - -
Total governmental activities 7,810,145 7,678,246 7,158,297 8,068,985 8,672,061 Business-type activities
Transfers in(out) - - - - -
Change in net position:

Governmental activities 980,689 (281,135) (1,097,105) (1,371,804) (1,040,519) Business-type activities - - - - -
Total primary government 980,689 $ (281,135) $ (1,097,105) $ (1,371,804) $ (1,040,519) $ Fiscal Year
Source: City of Twentynine Palms, Finance Department

-102-
2019 2020 2021 2022 2023
General revenues and
other changes in net position
Governmental activities:

Taxes
Property tax, levied for
general purpose 2,235,565 $ 2,363,787 $ 2,480,111 $ 2,578,043 $ 2,871,282 $ Sales and use taxes 1,156,390 1,226,377 1,445,428 1,586,033 2,200,338 Sales tax in lieu 246,094 - - - -
Property tax in lieu 2,975,088 3,095,032 3,228,065 3,413,408 3,794,419 Franchise taxes 719,642 666,066 766,859 844,290 930,375 Transient occupancy tax 1,554,321 1,288,869 1,927,425 2,481,175 2,346,125 Real property transfer taxes 42,352 47,868 90,417 126,323 76,031 Motor vehicle in lieu tax 12,982 22,919 21,454 103,369 28,378 Total taxes 8,942,434 8,710,918 9,959,759 11,132,641 12,246,948 Investment earnings 223,370 234,897 40,917 (179,141) 204,344 Other 477,111 129,549 131,888 145,565 698,390
Special item - - - - -
Extraordinary item - - - - -
Transfers in(out) - - - - (934,950)
Total governmental activities 9,642,915 9,075,364 10,132,564 11,099,065 12,214,732 Business-type activities
Transfers in(out) - - - - 934,950
Change in net position:

Governmental activities (240,184) 486,328 3,215,324 13,275,420 3,496,908 Business-type activities - 603,592 125,862 218,321 1,621,109 Total primary government (240,184) $ 1,089,920 $ 3,341,186 $ 13,493,741 $ 5,118,017 $ Fiscal Year

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City of Twentynine Palms
Governmental Activities - Tax Revenues by Source
Last Ten Fiscal Years
(accrual basis of accounting)
-103-
Property
Fiscal Transient Sales Sales tax Other
year Property occupancy Franchise and use in lieu in lieu taxes Total 2014 1,977,219 $ 816,017 $ 624,084 $ 834,747 $ 296,087 $ 2,688,079 $ 22,161 $ 7,258,394 $ 2015 2,046,167 878,195 622,531 860,948 264,288 2,747,309 38,039 7,457,477 2016 2,057,945 943,747 615,767 902,439 204,050 2,807,033 43,715 7,574,696 2017 2,085,053 1,110,536 613,152 1,156,390 - 2,831,097 42,138 7,838,366 2018 2,188,281 1,445,085 704,961 1,254,317 97,927 2,869,122 52,898 8,612,591 2019 2,235,565 1,554,321 719,642 1,156,390 246,094 2,975,088 55,334 8,942,434 2020 2,363,787 1,288,869 666,066 1,226,377 - 3,095,032 70,787 8,710,918 2021 2,480,111 1,927,425 766,859 1,445,428 - 3,228,065 111,871 9,959,759 2022 2,578,043 2,481,175 844,290 1,586,033 - 3,413,408 229,692 11,132,641 2023 2,871,282 2,346,125 930,375 2,200,338 - 3,794,419 104,409 12,246,948 Source: City of Twentynine Palms, Finance Department

City of Twentynine Palms
Fund Balances of Governmental Funds
Last Ten Fiscal Years
(modified accrual basis of accounting)
-104-
2014 2015 2016 2017 2018
General fund
Nonspendable - $ 93,963 $ 93,963 $ 138,142 $ 120,329 $
Restricted for:

Public safety 467,393 467,393 - 323,368 231,946
Public works 1,366,558 1,366,558 - - -
Assigned 50,000 50,000 80,000 - -
Unassigned 9,287,164 8,837,625 10,750,067 11,305,480 9,190,062 $ 10,721,576 11,171,115 $ 10,830,067 $ 11,766,990 $ 9,542,337 $ All other governmental funds
Restricted for:

Public safety 124,187 105,806 111,737 60,558 55,304
Public works 3,689,947 3,024,520 2,879,535 1,200,717 791,939 Community development 10,961,203 10,939,744 10,475,971 9,159,551 7,796,791 Economic development - - - - -
Health and sanitation - - - - -
Community services - - - - -
Assigned 376,918 338,899 339,312 1,739,983 1,895,228
Unassigned - (84,722) (37,597) (355,494) 61,088
Total all other governmental funds 15,152,255 $ 14,324,247 $ 13,768,958 $ 11,805,315 $ 10,600,350 $ Fiscal Year
Source: City of Twentynine Palms, Finance Department

-105-
2019 2020 2021 2022 2023
General fund
Nonspendable 184,401 $ 1,199,327 $ 1,848,527 $ 93,963 $ 93,963 $ Restricted for:

Public safety - - - - 406,426
Public works - - - - -
Assigned 1,300,000 1,300,000 1,300,000 3,599,844 2,011,441 Unassigned 6,528,376 5,596,053 6,804,533 6,948,162 9,098,342 $ 8,095,380 8,012,777 $ 9,953,060 $ 10,641,969 $ 11,610,172 $ All other governmental funds
Restricted for:

Public safety 59,140 59,704 21,925 - -
Public works 841,749 2,110,737 1,891,858 2,084,121 2,347,191 Community development 7,355,824 7,240,136 5,168,824 1,347,973 1,195,707 Economic development - - - 504,591.00 639,556
Health and sanitation - - - 223,527.00 215,646
Community services - - - - 77
Assigned 4,324,172 3,314,664 2,872,561 5,425,636 4,756,084 Unassigned (117,934) (231,808) (2,348,723) (528,013) (20,861) Total all other governmental funds 12,462,951 $ 12,493,433 $ 7,606,445 $ 9,057,835 $ 9,133,400 $ Fiscal Year

City of Twentynine Palms
Changes in Fund Balances of Governmental Funds
Last Ten Fiscal Years
(modified accrual basis of accounting)
-106-
2014 2015 2016 2017 2018
Revenues
Taxes 7,259,023 $ 7,458,034 $ 7,575,288 $ 7,839,267 $ 8,500,494 $ Licenses, permits and fees 202,197 188,755 206,678 234,946 256,673 Intergovernmental 1,922,219 2,189,528 1,869,087 2,339,955 3,129,917 Charges for services 578,935 390,507 459,100 1,021,910 574,146 Fines, forfeitures, and penalties 60,985 53,192 49,439 28,302 22,343 Use of money and property 50,880 47,345 43,625 122,221 141,749 Other 67,219 145,351 133,588 116,432 180,586
Total revenues 10,141,458 10,472,712 10,336,805 11,703,033 12,805,908 Expenditures
Current:

General government 1,566,836 2,570,015 1,442,203 1,857,763 5,172,731 Public safety 3,712,403 3,854,540 4,038,181 4,247,967 4,446,864 Public works 1,175,174 1,414,470 1,624,365 2,137,014 2,971,995 Community development 582,704 360,708 370,474 519,306 577,433 Economic development - - - - -
Health and sanitation 60,769 72,751 48,990 66,555 53,424 Community services 1,595,465 1,651,970 1,641,196 1,703,505 1,074,549 Debt service:

Principal retirement 6,247 - - - -
Interest and fiscal charges 76 - - - -
Capital outlay 1,892,966 1,786,427 1,618,194 2,298,463 1,938,530 Total expenditures 10,592,640 11,710,881 10,783,603 12,830,573 16,235,526 Excess of revenues
over (under) expenditures (451,182) (1,238,169) (446,798) (1,127,540) (3,429,618) Other financing sources (uses)
Contributions
from successor agency 19,544 - - - -
Issuance of debt, lease and
subscription acquisition - - - - -
Transfers in 520,610 64,549 728,669 202,000 255,493
Transfers out (520,610) (64,549) (728,669) (202,000) (255,493) Proceeds from sale of
capital assets 7,800 54,585 - 6,857 -
Total other financing sources (uses) 27,344 54,585 - 6,857 - Net change in fund balances (423,838) $ (1,183,584) $ (446,798) $ (1,120,683) $ (3,429,618) $ Debt service as a percentage of
non-capital expenditures 0.07% 0.00% 0.00% 0.00% 0.00%
Fiscal Year
Source: City of Twentynine Palms, Finance Department

-107-
2019 2020 2021 2022 2023
Revenues
Taxes 9,425,427 $ 9,222,044 $ 10,508,177 $ 11,265,424 $ 13,543,790 $ Licenses, permits and fees 262,507 430,948 803,988 1,465,591 1,601,609 Intergovernmental 2,198,744 3,761,678 3,863,183 11,744,430 7,935,414 Charges for services 570,966 420,078 348,021 517,656 520,939 Fines, forfeitures, and penalties 31,023 23,921 13,894 28,505 27,241 Use of money and property 364,827 347,953 48,273 (179,141) 204,345 Other 207,865 87,218 186,034 145,857 177,053
Total revenues 13,061,359 14,293,840 15,771,570 24,988,322 24,010,391 Expenditures
Current:

General government 2,279,072 1,997,590 2,309,932 2,403,872 2,702,771 Public safety 4,534,322 4,803,036 4,999,233 5,342,058 5,725,463 Public works 2,166,267 1,903,083 1,563,517 1,634,676 2,445,946 Community development 726,871 796,503 952,405 1,121,463 1,375,056 Economic development - - - 223,036.00 268,388
Health and sanitation 48,008 61,104 103,559 55,221 58,054 Community services 1,082,497 1,130,660 493,987 924,238 1,048,260 Debt service:

Principal retirement - - 36,964 39,539 66,269
Interest and fiscal charges - - 40,624 39,505 38,360
Capital outlay 2,695,212 4,172,514 8,290,657 10,955,905 8,410,522 Total expenditures 13,532,249 14,864,490 18,790,878 22,739,513 22,139,089 Excess of revenues
over (under) expenditures (470,890) (570,650) (3,019,308) (3,019,308) 1,871,302 Other financing sources (uses)
Contributions
from successor agency - - - - -
Issuance of debt, lease and
subscription acquisition 569,315 691,235 - 11,291 107,416 Transfers in 3,039,076 1,543,467 850,225 7,420,352 6,648,569 Transfers out (3,089,076) (1,550,967) (860,225) (8,043,839) (7,583,519) Proceeds from sale of
capital assets 284,616 - - - -
Total other financing sources (uses) 803,931 683,735 (10,000) (612,196) (827,534) Net change in fund balances 333,041 $ 113,085 $ (3,029,308) $ (3,631,504) $ 1,043,768 $ Debt service as a percentage of
non-capital expenditures 0.00% 0.00% 0.74% 0.67% 0.73%
Fiscal Year

City of Twentynine Palms
General Government Revenues by Source
Last Ten Fiscal Years
(modified accrual basis of accounting)
-108-
Fiscal year
ended June 30
Property
taxes
Property tax
in lieu
Sales &
use taxes
Franchise
taxes
Business
Licenses
Room
taxes
2014 1,977,219 $ 2,688,079 $ 1,130,834 $ 624,084 $ 39,587 $ 816,017 $ 2015 2,046,167 2,747,309 1,125,236 622,531 38,328 878,195 2016 2,057,945 2,807,033 1,016,489 615,767 42,560 943,747 2017 2,085,053 2,831,097 1,156,390 613,152 39,954 1,110,536 2018 2,188,281 2,869,122 1,156,390 704,961 24,519 1,445,085 2019 2,235,565 2,975,088 1,402,484 719,642 46,670 1,332,569 2020 2,363,787 3,095,032 1,226,377 666,066 48,029 1,288,869 2021 2,480,111 3,228,065 1,445,428 766,859 60,131 1,927,425 2022 2,578,043 3,413,408 1,586,033 844,290 89,617 2,481,175 2023 2,871,282 3,794,419 2,200,338 930,375 69,387 2,346,125 Source: City of Twentynine Palms, Finance Department

-109-
Fiscal year
ended June 30
Other
taxes
Permits &
fees
Use of
money and
property
Intergovernmental
revenues &
charges for
services
Other
revenues Total
2014 114,777 $ 131,606 $ 50,880 $ 2,501,154 $ 67,219 $ 10,141,456 $ 2015 115,377 126,836 47,345 2,580,035 145,351 10,472,710 2016 132,720 125,174 43,625 2,328,187 133,588 10,246,835 2017 123,935 142,388 122,221 3,361,865 116,432 11,703,023 2018 141,954 256,673 141,749 3,696,588 180,586 12,805,908 2019 522,680 262,507 364,827 2,742,814 456,513 13,061,359 2020 581,913 382,919 347,953 4,181,756 111,139 14,293,840 2021 660,294 743,857 48,273 4,211,204 199,923 15,771,570 2022 390,980 1,375,974 (179,141) 12,262,086 145,857 24,988,322 2023 1,401,251 1,532,222 204,345 8,456,353 204,294 24,010,391

City of Twentynine Palms
Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years
-110-
Total taxable
Fiscal year Secured Unsecured SBE assessed
ended June 30 property property nonunitary value
2014 781,792,218 $ 20,057,318 $ 86,754 $ 801,936,290 $ 0.28055 % 2015 802,424,517 20,937,193 252,649 823,614,359 0.28055 % 2016 819,140,029 22,126,150 252,649 841,518,828 0.28055 % 2017 829,433,547 19,046,841 252,649 848,733,037 0.28056 % 2018 841,474,081 18,405,803 252,649 860,132,533 0.28057 % 2019 874,065,397 17,581,904 252,649 891,899,950 0.28057 % 2020 908,885,222 18,715,010 257,656 927,857,888 0.28506 % 2021 949,184,759 18,295,839 257,656 967,738,254 0.28472 % 2022 1,003,153,814 19,892,321 257,656 1,023,303,791 0.28493 % 2023 1,116,657,102 20,612,032 257,656 1,137,526,790 0.28539 % direct tax
rate
Total
Source: San Bernardino County Assessor Combined Tax Rolls Note 1:

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

City of Twentynine Palms
Direct and Overlapping Property Tax Rates
Last Ten Fiscal Years
-111-
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Basic Levy 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 Copper Mountain Community
College Bond 0.02660 0.02830 0.02020 0.02600 0.02420 0.02420 0.02430 0.02350 0.02180 0.01930 Morongo Unified School Bond 0.05280 0.05250 0.04660 0.05000 0.04970 0.04970 0.04360 0.04100 0.03910 0.03130 Total Direct & Overlapping
Tax Rates 1.07940 1.08080 1.06680 1.07600 1.07390 1.07390 1.06790 1.06450 1.06090 1.05060 City's Share of 1% Levy
Per Prop 13 0.28073 0.28073 0.28073 0.28073 0.28073 0.28073 0.28073 0.28073 0.28073 0.28073 Total Direct Rate 0.28055 0.28055 0.28055 0.02056 0.28057 0.28057 0.28056 0.28472 0.28493 0.28539 Agency Fiscal Year
Source: San Bernardino County Assessor annual tax increment tables.

City of Twentynine Palms
Property Tax Levies and Collections
Last Ten Fiscal Years
-112-
Total tax Collections in
Fiscal year levy for Percentage subsequent Percentage
ended June 30 fiscal year Amount of levy years Amount of levy 2014 1,977,219 $ 1,977,219 $ 100.00% - 1,977,219 $ 100.00% 2015 2,046,167 2,046,167 100.00% - 2,046,167 100.00%
2016 2,057,945 2,057,945 100.00% - 2,057,945 100.00%
2017 2,085,053 2,085,053 100.00% - 2,085,053 100.00%
2018 2,188,281 2,188,281 100.00% - 2,188,281 100.00%
2019 2,235,565 2,235,565 100.00% - 2,235,565 100.00%
2020 2,363,787 2,363,787 100.00% - 2,363,787 100.00%
2021 2,480,111 2,480,111 100.00% - 2,480,111 100.00%
2022 2,578,043 2,578,043 100.00% - 2,578,043 100.00%
2023 2,871,282 2,871,282 100.00% 2,871,282 100.00%
Collected within the
fiscal year of the levy Total collections to date
Source: City of Twentynine Palms, Finance Department

City of Twentynine Palms
Ratio of Outstanding Debt by Type
Last Ten Fiscal Years
-113-
Total Percentage
Fiscal year governmental of personal Per
ended June 30 Leases Subscriptions Loans activities income (1) capita (1) 2014 - $ - $ - $ - $ 0.0000% -
2015 - - - - 0.0000% -
2016 - - - - 0.0000% -
2017 - - - - 0.0000% -
2018 - - - - 0.0000% -
2019 - - 569,315 569,315 0.1081% 18.19
2020 - - 1,260,550 1,260,550 0.2323% 18.54
2021 - - 1,263,036 1,263,036 0.2279% 18.49
2022 - - 1,224,900 1,224,900 0.2183% 20.26
2023 28,231 62,149 1,185,555 1,275,935 0.2013% 24.44
Source: (1) 2010 and later: US Census Bureau, most recent American Community Survey Note: Details regarding the City’s outstanding debt can be found in the notes to the basic financial statements.

City of Twentynine Palms
Legal Debt Margin Information
Last Ten Fiscal Years
-114-
Fiscal year 2023
Assessed value 1,137,526,790 $
Debt Limit (15% of assessed value) 170,629,019 $
Fiscal year Debt limit (in thousands)
2014 120,290 $
2015 123,517
2016 126,228
2017 127,310
2018 129,020
2019 133,785
2020 139,179
2021 145,160
2022 153,496
2023 170,629
Source: San Bernardino County Auditor/Controller
Note: The City has no applicable outstanding debt.

City of Twentynine Palms
Pledged Revenue Coverage
Last Ten Fiscal Years
-115-
Fiscal year Tax
ended June 30 increment Principal Interest Coverage
2014 - $ - $ - $ 0%
2015 - - - 0%
2016 - - - 0%
2017 - - - 0%
2018 - - - 0%
2019 - - - 0%
2020 - - - 0%
2021 - - - 0%
2022 - - - 0%
2023 - - - 0%
Tax allocation bonds
Debt service
Source: City of Twentynine Palms, Finance Department
Notes: Details regarding the City’s outstanding debt can be found in the notes to the basic financial statements.

City of Twentynine Palms
Demographic and Economic Statistics
Last Ten Calendar Years
-116-
Calendar
year Population(1)
Personal
income
(in thousands
of dollars) (2)
Per capita
personal
income (2)
Unemployment
rate (3)
2013 26,576 537,340 $ 20,219 $ 10.1%
2014 26,550 524,894 19,770 10.3%
2015 26,138 529,408 20,089 8.4%
2016 26,919 535,226 19,882 7.4%
2017 27,046 519,560 19,210 8.3%
2018 28,958 526,768 18,190 5.3%
2019 29,258 542,569 18,544 5.0%
2020 29,967 554,193 18,493 9.2%
2021 27,685 561,087 20,266 7.8%
2022 25,929 633,875 24,446 4.9%
Sources: (1) California State Department of Finance
(2) US Census Bureau, most recent American Community Survey (3) California Employment Development Department

City of Twentynine Palms
Full-time Equivalent City Government Employees by Function Last Ten Fiscal Years
-117-
Fiscal Year
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Function
General government 7 7 7 7 7 8 8 8 9 9
Animal control
Animal control officers 2 2 2 2 2 2 2 2 2 3
Kennel workers 2 2 2 2 2 1 1 2 2 2
Public works
Maintenance 10 10 10 11 11 11 11 10 11 12
Community development 3 2 3 3 4 4 4 5 5 6
Economic development - - - - 1 1 1 1 1 1
Community services 7 6 6 6 6 6 6 5 7 7
Total 31 29 30 31 32 32 32 32 37 40
Source: City of Twentynine Palms, Finance Department

City of Twentynine Palms
Capital Asset Statistics by Function
Last Ten Fiscal Years
-118-
Fiscal Year
Function 2014 2015 2016 2017 2018
Public works
Streets (miles) 177 177 177 177 177
Streetlights 327 327 327 327 327
Traffic Signals 7 7 7 8 8
Community Services
Parks acreage 80 80 80 80 80
Parks 3 3 3 3 3
Swimming pools 2 2 2 2 2
Community Centers 2 2 2 2 2
EV Charger Stations - - - - 1
Source: City of Twentynine Palms, Finance Department

City of Twentynine Palms
Capital Asset Statistics by Function (continued)
Last Ten Fiscal Years
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Fiscal Year
Function 2019 2020 2021 2022 2023
Public works
Streets (miles) 177 177 177 178 178
Streetlights 327 327 325 325 325
Traffic Signals 8 9 9 9 10
Community Services
Parks acreage 80 80 80 80 80
Parks 3 3 3 3 3
Swimming pools 2 2 2 2 1
Community Centers 2 2 2 4 4
EV Charger Stations 1 1 1 5 5

City of Twentynine Palms
Operating Indicators by Function
Last Ten Fiscal Years
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Fiscal Year
Function 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Animal Control:

Adopted 662 637 549 558 480 678 663 437 482 430
Animal licenses issued 523 539 401 573 423 491 461 433 409 252 Community Development:

Building permits, including Plan checks
Issued 777 703 741 804 697 999 1,193 1,462 1,488 1,248
New single family residential 8 11 1 9 2 3 3 8 16 16
New multi family residential - - - - 8 - 4 2 - 3
Public Works:

Street resurfacing
In-house (miles) 4 6 1 3 2 3 4 1 1 5
Contract (miles) 7 - 3 14 9 2 8 - 1 4
Berms in-house (miles) - - 14.8 - - - - - - -
Parks and Recreation:

Number of youth sports participants 848 944 1,000 1,096 893 917 889 193 709 821 Recreation classes participants 94 156 106 121 181 172 374 301 563 574 Source: City of Twentynine Palms, Finance Department

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

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

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

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

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

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

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

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

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REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT

OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH

GOVERNMENT AUDITING STANDARDS
Independent Auditor’s Report
To the Honorable City Council
City of Twentynine Palms, California
We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Twentynine Palms (the City) as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated November 20, 2023.

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

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

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

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

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

San Bernardino, California
November 20, 2023

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November 20, 2023
To the Honorable City Council
City of Twentynine Palms, California
We have audited the financial statements of the City of Twentynine Palms as of and for the year ended June 30, 2023, and have issued our report thereon dated November 20, 2023. Professional standards require that we advise you of the following matters relating to our audit.

Our Responsibility in Relation to the Financial Statement Audit As communicated in our engagement letter dated April 14, 2023, our responsibility, as described by professional standards, is to form and express opinions about whether the financial statements that have been prepared by management with your oversight are presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of your respective responsibilities.

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

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

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

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

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

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

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

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

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

Qualitative Aspects of the Entity’s Significant Accounting Practices Significant Accounting Policies
Management has the responsibility to select and use appropriate accounting policies. A summary of the significant accounting policies adopted by the City is included in Note 1 to the financial statements. The City adopted GASB Statement No. 96, Subscription-Based Information Technology Arragangements and Statement No. 101, Compensated Absences, during 2023. No matters have come to our attention that would require us, under professional standards, to inform you about (1) the methods used to account for significant unusual transactions and (2) the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus.

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

The most sensitive accounting estimates affecting the financial statements are:

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

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

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

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

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

Management’s estimate of leases receivable, deferred inflows of resources related to leases, and lease amortization is based on present value calculations using certain terms and assumptions in the lease agreements in accordance with generally accepted accounting principles. Management’s estimate of lease and subscription liabilities, right-to-use assets, and asset amortization is based on present value calculations using certain terms and assumptions in the lease/subscription agreements and estimated useful lives of assets in accordance with generally accepted accounting principles. We evaluated the key factors and assumptions used to develop the lease and subscription related estimates in determining that it is reasonable in relation to the financial statements taken as a whole.

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

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

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

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

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

The disclosure of leases receivable, deferred inflows of resources related to leases, lease/subscription amortization, leases/subscription liabilities, right-to-use assets, and asset amortization in the basic financial statements is based on certain terms and assumptions in the lease agreements which could differ from actual amounts.

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

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

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

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

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

Representations Requested from Management
We have requested certain written representations from management, which are included in the attached letter dated November 20, 2023.

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

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

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

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

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

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

Very truly yours,
San Bernardino, California

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Independent Accountant’s Report
To the Honorable City Council
City of Twentynine Palms, California
We have performed the procedures enumerated below to the accompanying Appropriations Limit Worksheet of the City of Twentynine Palms, California (the City) for the year ended June 30, 2023. The management of the City is responsible for the accompanying Appropriations Limit Worksheet.

The City has agreed to and acknowledged that the procedures performed are appropriate to meet the intended purpose meeting the requirements of Section 1.5 of Article XIII-B of the California Constitution. These procedures, which were suggested by the League of California Cities and presented in the publication entitled Agreedupon Procedures Applied to the Appropriations Limitation Prescribed by Article XIII-B of the California Constitution, were performed solely to assist you in meeting the requirements. This report may not be suitable for any other purpose. The procedures performed may not address all the items of interest to a user of this report and may not meet the needs of all users of this report and, as such, users are responsible for determining whether the procedures performed are appropriate for their purposes.

The procedures and the associated findings are as follows:

1. We obtained the completed worksheets and compared the limit and annual adjustment factors included in those worksheets to the limit and annual adjustment factors that were adopted by resolution of the City Council. We also compared the
population and inflation options included in the aforementioned documents to those that were selected by a recorded vote of the City Council.

Finding: No exceptions were noted as a result of our
procedures.

2. For the accompanying Appropriations Limit worksheet, we added last year’s limit to total adjustments and agreed the resulting amount to this year’s limit.

Finding: No exceptions were noted as a result of our
procedures.

3. We agreed the current year information presented in the accompanying Appropriations Limit Worksheet to the other documents referenced in number one above.

Finding: No exceptions were noted as a result of our
procedures.

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4. We agreed the prior year appropriations limit presented in the accompanying Appropriations Limit Worksheet to the prior year appropriations limit adopted by the City Council during the prior year.

Finding: No exceptions were noted as a result of our procedures.

We were engaged by the City to perform this agreed-upon procedures engagement and conducted our engagement in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an examination or review, the objective of which would be the expression of an opinion or conclusion, respectively, on accompanying Appropriations Limit Worksheet for the year ended June 30, 2023.

Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.

We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements related to our agreed-upon procedures engagement.

This report is intended solely for the information and use of the City Council and management of the City of Twentynine Palms, California, and is not intended to be and should not be used by anyone other than these specified parties. However, this report is a matter of public record and its distribution is not limited.

San Bernardino, California
November 20, 2023

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CITY OF TWENTYNINE PALMS

APPROPRIATIONS LIMIT WORSHEET
2022 - 2023
Per capita personal income change 7.55%
Population change:

City population growth -0.77%
PCPI change converted to a ratio 1.0755
Population change converted to a ratio 0.9923
Calculation of growth factor 1.0672
2021-2022 Limit 64,487,244 $
2022-2023 Limit
($64,487,244 x 1.0672) 68,821,989 $

TWENTYNINE PALMS CITY COUNCIL
City Council - Regular Meeting MINUTES
City Hall, 6136 Adobe Road, Twentynine Palms, CA 92277
www.29palms.org
November 14, 2023
CALL TO ORDER - Mayor Wright called the meeting to order at 6:01 p.m.

Pledge of Allegiance - Boy Scout Thomas Elkins led the Pledge of Allegiance.

Invocation - Ms. Karalee Hargrove, gave the Invocation.

Roll Call - The following Councilmembers were present: Bilderain, Mintz, Scott, Wright. Klink had an excused absence.

Closed Session Announcements - None.

Changes to the Agenda - None.

ANNOUNCEMENTS
Mayor Wright announced that these proceedings may be viewed on demand on the City of Twentynine Palms website at www.29palms.org. You may also Live Stream this meeting by going on our website and clicking on the "Meeting Agendas" link.

AWARDS, PRESENTATIONS, APPOINTMENTS AND PROCLAMATIONS

1. Introduction of Park and Recreation's Newest Employees.

Ms. Kary Minatrea, Recreation Division Manager, introduced Curtis McCoy and Jorge Guzman, the newest City employees.

COUNCIL COMMENTS AND REPORTS OF MEETINGS ATTENDED
Councilmember Scott mentioned that he attended the Marine Corps Birthday Pageant and the Veterans' Day event at Freedom Plaza.

Councilmember Mintz commented that he attended the Marine Corps Birthday Pageant, the Birthday Lunch, the Veterans' Day event and he thanked Ms. Minatrea and Mr. Clinkscales for organizing a great event. He mentioned that he parked cars at the Sky's the Limit event they held on Saturday.

Mayor Pro Tem Bilderain welcomed the new employees, he attended the Marine Corps Birthday Pageant, the Birthday lunch, the Veterans' event, and he celebrated the Marine Corps Birthday at the various locations that had celebrations going on.

Mayor Wright welcomed the new employees, he attended the Marine Corps Birthday Pageant, the Birthday lunch, the Veterans' Day event and attended a Mayor's Roundtable in Fontana.

CONSENT CALENDAR

2. Waive the Reading of Ordinance and Approve the Reading by Title Only.

3. Approval of Minutes of the City Council Meeting Held on October 24, 2023.

City Council - Regular Meeting
November 14, 2023

4. Approval of Warrant Register Totaling $1,114,623.91

5. Split Rock Ave Bridge Design Contract Amendments
RECOMMENDATION: The City Council approve Amendment Nos. 2 and 3 with Dokken Engineering, not to exceed a combined total of $86,000, and authorize the Interim City Manager to execute all documents.

6. Public Utilities -Wastewater Services - Second Reading RECOMMENDATION: The City Council find the project exempt from CEQA and adopt the Ordinance, adding Chapter 15.10 Wastewater Services to the Municipal Code.

7. Award a Construction Services Contract to Courtmaster Sports, Inc.

RECOMMENDATION: The City Council approve and award a construction services contract to Courtmaster Sports, Inc. for repair and resurfacing of the basketball courts within Luckie Park utilizing 2023/2024 CDBG program funds.

8. Fire Department Emergency Response Report - October 2023.

Councilmember Scott asked that item #7 be removed for discussion.

ACTION: A motion was made by Councilmember Mintz, seconded by Mayor Pro Tem Bilderain, to approve the Consent Calendar as submitted.

The above motion was carried by the following:

ROLL CALL VOTE:

AYES: BILDERAIN, MINTZ, SCOTT, WRIGHT
NOES: NONE
ABSTAIN: NONE
ABSENT: KLINK

ITEMS REMOVED FROM CONSENT CALENDAR FOR DISCUSSION

7. Award a Construction Services Contract to Courtmaster Sports, Inc.

RECOMMENDATION: The City Council approve and award a construction services contract to Courtmaster Sports, Inc. for repair and resurfacing of the basketball courts within Luckie Park utilizing 2023/2024 CDBG program funds.

Recreation Division Manager Minatrea presented the Staff Report.

ACTION: A motion was made by Councilmember Scott, seconded by Councilmember Mintz, to approve and award a construction services contract to Courtmaster Sports, Inc. for repair and resurfacing of the basketball courts within Luckie Park utilizing 2023/2024 CDBG program funds.

The above motion was carried by the following:

ROLL CALL VOTE:

AYES: BILDERAIN, MINTZ, SCOTT, WRIGHT
NOES: NONE
ABSTAIN: NONE
ABSENT: KLINK

City Council - Regular Meeting
November 14, 2023

PUBLIC HEARINGS

9. DCA23-000002 - Nonconforming Buildings and Uses.

RECOMMENDATION: The City Council find the project exempt from CEQA and adopt the Ordinance, approving the Development Code Amendment for Chapter 19.142 Nonconforming Buildings and Uses.

Mayor Wright opened the Public Hearing.

Having no requests to speak, Mayor Wright closed the Public Hearing.

ACTION: A motion was made by Councilmember Mintz, seconded by Mayor Wright, to find the project exempt from CEQA and adopt Ordinance No. 313, approving the Development Code Amendment for Chapter 19.142 Nonconforming Buildings and Uses.

The above motion was carried by the following:

ROLL CALL VOTE:

AYES: BILDERAIN, MINTZ, SCOTT, WRIGHT
NOES: NONE
ABSTAIN: NONE
ABSENT: KLINK

10. DCA23-000007 - Vacation Home Rentals.

RECOMMENDATION: The City Council find the project exempt from CEQA and adopt the Ordinance, approving the Development Code Amendment for Chapter 19.41 Vacation Home Rentals.

Director Gardner presented the Staff Report.

Mayor Wright opened the Public Hearing.

Mayor Wright read emails into the record from the following: George Mulopulos, Heather Vescent, Cindy Bernard, and Debra Shea.

Jim Krushat, Twentynine Palms, spoke about the benefits of VHRs for the City's economy.

Kat Talley-Jones, Twentynine Palms, expressed her frustration with the Planning Committee. She asked the City Council not to approve the current suggested changed to the Code.

Heidi Heard, Twentynine Palms, spoke against VHRs.

John Talley-Jones, Twentynine Palms, spoke against the proposed changes to the STR rules and made suggestions to these changes.

Susan Peplow, Joshua Tree, gave her suggestions on each of the proposed changes to the VHR rules.

Jonathan Hume, Desert Heights, mentioned that the County recently completed a study on the impact of VHRS on housing in the unincorporated area and they found no impact on housing. He expressed that if a study were done in the community, we will find the same result. He made suggestions to the other proposed changes to the code.

Eric Menendez, Twentynine Palms, echoed the support of the purpose built STRs and what was said by Ms.

Peplow and Mr. Hume on the paved driveways.

City Council - Regular Meeting
November 14, 2023
After a lengthy discussion of each proposed change, the consensus of the City Council was to send the item back to the Planning Commission for discussion on some of the proposed changes. The item cannot be approved until all changes are discussed with the Planning Commission.

11. DCA23-000012 - Western Joshua Trees.

RECOMMENDATION: The City Council find the project exempt from CEQA and adopt the Ordinance, approving the Development Code Amendment for Western Joshua Trees.

Mayor Wright opened the Public Hearing.

Having no requests to speak, Mayor Wright closed the Public Hearing.

ACTION: A motion was made by Councilmember Mintz, seconded by Mayor Pro Tem Bilderain, to find the project exempt from CEQA and adopt Ordinance No. 314, approving the Development Code Amendment for Western Joshua Trees.

The above motion was carried by the following:

ROLL CALL VOTE:

AYES: BILDERAIN, KLINK, MINTZ, SCOTT, WRIGHT
NOES: NONE
ABSTAIN: NONE
ABSENT: KLINK

12. DCA23-000015 - DTSP Land Use Tables.

RECOMMENDATION: The City Council find the project exempt from CEQA and adopt the Ordinance approving the Development Code Amendment for the Downtown Specific Plan land use tables.

Mayor Wright opened the Public Hearing.

Having no requests to speak, Mayor Wright closed the Public Hearing.

ACTION: A motion was made by Councilmember Mintz, seconded by Mayor Pro Tem Bilderain, to find the project exempt from CEQA and adopt Ordinance No. 315, approving the Development Code Amendment for the Downtown Specific Plan land use tables.

The above motion was carried by the following:

ROLL CALL VOTE:

AYES: BILDERAIN, MINTZ, SCOTT, WRIGHT
NOES: NONE
ABSTAIN: NONE
ABSENT: KLINK

DISCUSSION AND POTENTIAL ACTION ITEMS

13. City Clerk Compensation.

RECOMMENDATION: The City Council approve increases to the City Clerk’s Compensation.

Interim City Manager presented the Staff Report.

ACTION: A motion was made by Mayor Pro Tem Bilderain, seconded by Mayor Wright, to approve increases to the City Clerk's Compensation.

City Council - Regular Meeting
November 14, 2023
The above motion was carried by the following:

ROLL CALL VOTE:

AYES: BILDERAIN, MINTZ, SCOTT, WRIGHT
NOES: NONE
ABSTAIN: NONE
ABSENT: KLINK

14. Public Arts Advisory Appointment.

RECOMMENDATION: The City Council appoint Paul Razo as a standing member of the Public Arts Advisory Committee.

PAAC Members Anna Stump and Kate Short presented the Staff Report and recommendation. Mr. Paul Razo introduced himself to the City Council.

ACTION: A motion was made by Councilmember Scott, seconded by Mayor Pro Tem Bilderain, to appoint Paul Razo as a standing member of the Public Arts Advisory Committee.

The above motion was carried by the following:

ROLL CALL VOTE:

AYES: BILDERAIN, MINTZ, SCOTT, WRIGHT
NOES: NONE
ABSTAIN: NONE
ABSENT: KLINK

FUTURE COUNCIL INITIATED ITEMS

1. Seasonal Banners throughout the City.

2. Identify ten lots to start a self-help construction program.

3. Discussion of forming a Youth Advisory Commission.

4. Discussion with the Homeless Committee on the possibility of hotels housing the homeless for short periods of time.

5. Assess and examine pedestrian and street safety around the schools.

6. Discussion on the peacock issue and creating an Ordinance to consider them wild animals and prohibiting them from being fed.

Mayor Wright asked Staff to find a way to give Food for Life $20,000 for their program. Councilmember Scott seconded the item. The City Council asked that this be brought to the next meeting on December 12th.

Mayor Pro Tem Bilderain asked that number three on the list be brought back and that the Interim City Manager schedule a meeting with students at the Junior High and High School to begin this process. All Councilmembers were in favor.

PUBLIC COMMENTS
Thomas Elkins, Twentynine Palms, spoke about the Future Initiated Item of forming a Youth Advisory Commission.

Izzy Hargrove, Twentynine Palms, spoke about the Future Initiated Item of forming a Youth Advisory Commission.

Suzy Dick, Yucca Valley, gave information about an event happening in Yucca Valley at the Church of Jesus Christ of Latter-day Saints.

Jim Krushat, Twentynine Palms, spoke about the National Park buffer zone relating to VHRs and single-family homes.