Watsonville City Council
February 27, 2024

Landscape Architecture & Environmental Engineering – Ramsay Park Phase IV Design CITY OF WATSONVILLE Appendix

RESUMES

WALLACE GROUP 20
Landscape Architecture & Environmental Engineering – Ramsay Park Phase IV Design CITY OF WATSONVILLE

MATT WILKINS, PLA
Director of Landscape Architecture
Matt Wilkins is the Director of Landscape Architecture at Wallace Group. Matt has worked in inter-disciplinary groups throughout his career and brings valuable knowledge of sustainability, transportation design, park design, landscape architecture, construction, and digital technology to the team. His dedication to the profession and interest in 3D and digital technology has allowed him to lead the discussion about technology use in practice. He is currently the Webmaster of the American Planning Academy Central Coast Section and a frequent presenter at national conferences, including ASLA (American Society of Landscape Architecture) in which he’s presented on transportation, mobility, and public infrastructure projects. He has prepared and led landscape design projects from concept to completion, and has created various 3D models, animations and photo simulations for site and city-wide design solutions. With his passion for building a better tomorrow, Matt is dedicated to building better
infrastructure for our communities.

REPRESENTATIVE PROJECTS
Riverview Park, San Benito County, CA
Director overseeing the development of Riverview Park which is a 74-acre new regional park that will be an amazing asset for the County of San Benito. Amenities include a 5K cross country course for the adjacent high school, ADA access paths, various multipurpose trails, and various other amenities.

Sea Haven Park, Marina, CA
Sea Haven Park is a new park in the planned community of Sea Haven in the City of Marina. It will be a large regional park with the following amenities: a large all-access playground, ADA accessible pathways, picnic and BBQ areas, dog park, disc golf course, plaza for farmer's market, sports courts, and a parking lot. Matt manages the landscape architecture team who is leading the development of the conceptual design, construction documents, and final implementation.

Dr. Martin Luther King, Jr. Sculpture Garden, Marina, CA The City of Marina recently installed an impressive bronze structure of Dr. Martin Luther King, Jr. The City hired Wallace Group to develop a new plaza and gathering lawn that highlights and features sculpture. Matt assisted the team during coordination of the bidding and construction processes.

Bob Jones Bike Path, County of San Luis Obispo, CA
Director overseeing the landscape architectural improvements for the Bob Jones Bike Path which is a 4.5-mile extension of the existing trail that connects from Avila Beach at Ontario Road to the Octagon Barn. Understanding how to refine the Bob Jones Trail alignment to maximize user experience while harmonizing the trail with active ag operations, a floodplain, and other natural constraints are major aspects of completing this project.

EDUCATION
Bachelor of Landscape Architecture, Cal
Poly San Luis Obispo

REGISTRATION
Professional Landscape Architect
6398

AFFILIATION
American Society of Landscape Architects
American Planning Association
Digital Technology Practicing Professional
Network, Co-Chair
AWARDS
2022 APWA San Diego Honor Award,
Parks, North Park Mini-Park
2022 APA Los Angeles Award of Merit,
Comprehensive Plan - Small Jurisdiction,
City of Montebello Parks Master Plan
2022 APWA San Diego Project of the Year,
Transportation, Mid-Coast LRT
Extension of the UCSD Blue Line
2020 APWA Ocean Beach Street Access
Honor Award, Parks ($2-$5M)
2020 CMAA San Diego, Public Works Less
than $15 M, Ocean Street Beach Access
Improvements
2017 APWA, Armorlite Drive Complete
Street Plan
2014 ASLA Junipero Serra Museum
Historic Landscape Assessment and
Documentation
2014 ASLA, City of Lemon Grove Main
Street Promenade

WALLACE GROUP 21
Landscape Architecture & Environmental Engineering – Ramsay Park Phase IV Design CITY OF WATSONVILLE KARI E. WAGNER, PE
Principal
Kari is one of six managing Principals and the Director of Water Resources. She has 20 years of experience working as Project Engineer and Project Manager for a variety of projects, primarily focused on utilities, water, wastewater, and storm drainage for both public and private clients. Kari specializes in assessment district engineering services, water, wastewater, and storm water planning studies, design, and treatment processes. As a Project Manager, she oversees and coordinates the technical design, maintains the budget and schedule, prepares status updates and maintains communication with the Client. She also coordinates with other project team members to ensure that they are apprised to the latest conditions of the project.

Kari has engineered water mains, storage reservoirs, booster stations, gravity sewers, wastewater treatment plants, lift stations, and pond systems, as well as water and wastewater master planning, hydraulic modeling, assessment district formation, vulnerability assessment, undergrounding of overhead utilities, utility and Client coordination, and funding procurement. Kari has been highly involved in the American Society of Civil Engineers, having served nearly every officer position including president. She also served as practitioner advisor, liaison to the student ASCE chapter for many years.

Kari is the former District Engineer for Heritage Ranch Community Services District. During her eight years, she provided services for a multitude of projects, including preparation of the water master plan and conservation plan, drought contingency plan, and development plan design and review for water and wastewater facilities.

Kari has participated in Toastmasters, honing her public speaking skills for use in public presentations. Her professional leadership at Wallace Group is highly valued.

REPRESENTATIVE PROJECTS
Wastewater Service Area Study, Monterey Regional Water Pollution Control Agency, Monterey, CA
Project Manager for the preparation of a Feasibility Study for the Toro Park customers. The Feasibility Study evaluated the options to construct a new sewer main that would connect the Toro Park sewer collection system to the Salinas Lift Station that ultimately is transported to the MRWPCA Regional WWTP. The Feasibility Study also evaluated the costs to construct the pipeline, buy out the private company who currently owns and operates the Toro Park collection system and WWTP, and create a public agency that would own, operate and maintain the collection system once the buy-out occurs.

Water Main Improvements (Design-Build), Watsonville, CA – 15,500 LF of water main replacement.

Storm Drainage Master Plan, Hollister, CA
Project Manager for the preparation of the Storm Drain Master Plan for the City of Hollister. Evaluated the study area, including the watershed, topography, climate, soils, and land use. Evaluated the existing storm drain system and drainage problems and provided the

EDUCATION
BS, Civil Engineering, California
Polytechnic State University,
San Luis Obispo, CA

REGISTRATION
California Registered Civil
Engineer, Number 66026

AFFILIATION
American Society of Civil
Engineers (ASCE)
AWARDS
2009 ASCE Region 9 Award
Winner: Outstanding
Practitioner Advisor
2010 ASCE San Luis Obispo
Branch Award Winner:

Outstanding Younger Civil
Engineer

WALLACE GROUP 22
Landscape Architecture & Environmental Engineering – Ramsay Park Phase IV Design CITY OF WATSONVILLE KARI E. WAGNER, PE
Principal
City with a list of recommended capital improvement projects to address the CIPs. Provided storm water management and long-term watershed protection recommendations and storm drain design standard recommendations based on the RWQCB’s hydromodification and LID requirements. Also evaluated the City’s Industrial WWTP and its ability to accept, treat, and dispose of storm water.

Lake Street Emergency Sewer Replacement, Salinas, CA
Wallace Group was retained by the City of Salinas to provide design and construction inspection services for a new 30-inch sewer main to replace existing 21-inch and 12-inch sewer mains. The 21-inch sewer main had an epoxy lining that was delaminating from the asbestos cement pipe (ACP) and causing blockages. The design was modified to incorporate the aging 12-in sewer collector that ran down Lake Street parallel to the 21-inch line. Due to the critical nature of this project, construction documents were turned around in 7 weeks and the City of Salinas retained an on-call Construction Contractor to construct the new sewer main. Kari worked closely with the Contractor to provide the City with the most cost-effective and constructable solution.

Various Projects, City of Salinas, CA
As Project Manager and overall client manager, Kari has been overseeing the development of the Sewer Master Plan, Storm Drain Master Plan, and Emergency Sewer Main Design for Lake Street. She has also been involved in the utility design for the Boronda Road Project and other projects over the past 5 years.

Del Monte Sewer Upgrade, Seaside, CA
Project Manager for the design of a sewer replacement project for Seaside County Sanitation District. This project included re-routing sewer flows from an existing sewer line that was exceeding its capacity to a newly designed sewer main. The project will construct 5,300-LF of new and replaced sewer lines. In addition, an aging and underutilized lift station was able to be abandoned and replaced with a gravity sewer line, and several parallel sewer lines were consolidated into one line. A portion of the project has been designed, and the specifications have been written, with the option for the contractor to select pipe bursting or open trench construction. The final design for the project was completed in Winter 2019, bid in Spring 2020, and is currently in construction.

Salinas Valley Basin Groundwater Sustainability Plan, Salinas Valley Basin Groundwater Sustainability Agency (SVBGSA)
Subconsultant and serving as the project engineer for the development of the Groundwater Sustainability Plan for the Salinas Valley Basin in compliance with the Sustainability Groundwater Management Act (SGMA). Primary responsibilities include development of the projects to bring the basin into sustainability.

Plan Checking, Hollister, CA
Serves as the Project Manager for the development review for the City of Hollister. Oversee staff to complete the review of mapping, public improvement plans, stormwater compliance, water and sewer reports.

WALLACE GROUP 23
Landscape Architecture & Environmental Engineering – Ramsay Park Phase IV Design CITY OF WATSONVILLE

ANN SEVER, PLA, LEED AP
Senior Landscape Architect
Ann is an accomplished Landscape Architect who since 1990 has created, enhanced, and improved landscapes from Washington State to Southern California. She excels in project management, project coordination, Client relations, and directing design teams on both public and private development projects.

In addition to her leadership skills, Ann’s talents include all phases of design, from preliminary concepts to master planning to construction documents. Her work includes site planning, public outreach, stakeholder meetings, wayfinding, hardscape design, interpretive sign design, planting and irrigation design, preparation of construction documents, construction observation and coordination, and Irrigation Auditing.

Ann’s expertise includes parks and recreation designs, bike trails, streetscape design, LEED-sensitive design and
documentation, Low Impact Development (LID) techniques, Cal Green requirements, MWELO documentation requirements,
recycled water irrigation design, and mitigation plans. She has worked on public projects such as community parks,
streetscapes, and educational facilities, as well as private residential and business developments. This varied experience makes Ann a valuable resource on any landscape design project.

REPRESENTATIVE PROJECTS
LeRoy Park, Guadalupe, CA
LeRoy Park is a well-loved park in the City of Guadalupe. It has suffered from neglect and age for several years. The City teamed with Wallace Group and a local architectural firm to develop extensive renovations for the on-site community center and grounds. The new site amenities include a large playground, ADA accessible pathways, picnic and BBQ areas, amphitheater, open lawn area, and parking lot. Ann worked with the team to develop the conceptual design of the park and then the construction documents.

Ramona Park, Grover Beach, CA
Ramona Park is a community park that is a key amenity for the community and needs a facelift. Working with the City of Grover Beach, Ann assisted in the design of the park upgrades which include ADA access path of travel, ADA Restroom facilities, all access playground, amphitheater, sports courts, picnic and BBQ areas, game tables, plazas, art instillations, and new landscaping.

Ann coordinated with the City and stakeholders to develop a fourphase approach for the design and then participated with the team to develop construction documents.

Hart Park, Kern County, CA
Hart Park is a large regional park that is a key amenity for the County of Kern. Nestled in the center of the park the County desired to add an all-access playground, splash pad, new restroom, and small ADA parking lot.cal Ann coordinated with the County and

EDUCATION
Bachelor of Landscape Architecture,
California Polytechnic State University,
San Luis Obispo

REGISTRATION
California Licensed Landscape
Architect, Number 4038

CERTIFICATION
LEED Accredited Professional
(Leadership in Energy and
Environmental Design)

PUBLICATION
“Laguna Lake Park Fitness Course,”
Landscape Architect and Specifier
News, March 2014

WALLACE GROUP 24
Landscape Architecture & Environmental Engineering – Ramsay Park Phase IV Design CITY OF WATSONVILLE

ANN SEVER, PLA, LEED AP
Senior Landscape Architect
stakeholders to develop a conceptual design and then led the team during the production of construction documents.

Dr. Martin Luther King, Jr. Sculpture Garden, Marina, CA The City of Marina has an impressive bronze bust of Dr. Martin Luther King, Jr. It has been in storage for a few years because its original location was too far from public access. The City hired Wallace Group to develop a new plaza and gathering lawn that highlights and centers on the sculpture. Ann led the team during the production of the construction documents and is currently helping coordinate the bidding process.

Riverview Park, San Benito County, CA
Riverview Park is a large new community park that will be a wonderful asset for the community once it is built. Working with the County of San Benito, Ann developed the conceptual design of the park. Amenities include a 5K cross country course for the adjacent high school, ADA access path of travel, ADA Restroom facilities, all access playground, amphitheater, sports courts, softball diamonds, picnic and BBQ areas, bike pump track, RC car track, outdoor classroom facilities, botanical garden, community garden, disc golf course, plazas, interpretive signs, new landscaping, and parking lot. Ann coordinated with the City and stakeholders to develop the conceptual design and then led the team during the production of construction documents.

Sea Haven Park, Marina, CA
Sea Haven Park is a new park in the planned community of Sea Haven in the City of Marina. It will be a large regional park with the following amenities a large all-access playground, ADA accessible pathways, picnic and BBQ areas, dog park, disc golf course, plaza for farmer's market, sports courts, and parking lot. Ann worked with the team to develop the conceptual design of the park and then the construction documents.

Islay Hill Park, San Luis Obispo, CA
Islay Hill Park is a 7-acre community park that provides recreational opportunities for the community. The park amenities include a children’s playground split into two areas (one for ages 2- 5 and one for ages 5-12), large open turf, baseball diamond, tennis court, basketball court, sand volleyball court, picnic areas, and restroom facilities. Working with the City of San Luis Obispo, Ann assisted in the design of the park playground equipment replacement project, upgrading the ADA access path of travel and Restroom ADA facilities to meet new State requirements. Ann coordinated with the City and their three preferred playground equipment manufacturers.

WALLACE GROUP 25
Landscape Architecture & Environmental Engineering – Ramsay Park Phase IV Design CITY OF WATSONVILLE Brett Hadley, PE, QSD/P
Civil Engineer
Brett joined Wallace Group in 2013 as a Licensed Professional Civil Engineer. He has over twelve years of engineering experience with an emphasis on Land Development engineering including residential, commercial, institutional and municipal.

His project background covers site grading, and utility design.

He is experienced in hydraulic and hydrologic modeling, water systems modeling, floodplain mapping, erosion control design, drainage reports, cost estimates and the production of
development plans. Brett graduated with a Bachelor of Science in Civil Engineering from Brigham Young University and is a licensed civil engineer in the state of California.

REPRESENTATIVE PROJECTS

Cal Poly Beach Volleyball Facility, San Luis Obispo, CA Project Manager for the new Beach Volleyball Facility on the Cal Poly San Luis Obispo campus. The project included a 5-court sand area, a landscaped spectator zone, and renovations to the surrounding areas to better accommodate the additional traffic the facility will generate along with perimeter seating. The courts are contained by a combination of seat walls and retaining walls, creating a natural barrier between the play surface and walkways while permitting viewing from any angle around the courts. The site design had to consider several existing large utilities, both wet and dry. Some of the utilities were rerouted where possible and others were ultimately incorporated into the site design. The transition from asphalt basketball courts to sand volleyball courts provided Wallace Group an opportunity to improve the drainage and stormwater runoff collection as well as update the site with new landscaping to better match the coastal aesthetic created by the new sand courts.

LeRoy Park & Community Center Rehab, Guadalupe CA
Project Manager for LeRoy Park, a 4-acre park in Guadalupe that serves an underprivileged community but is currently in a state of disrepair. The City of Guadalupe has acquired a CDBG (Community Development Block Group) grant to fund a facility rehabilitation of the park and Community Center. The project includes
rehabilitating LeRoy Park along with the community center located on the park's property. The design includes new parking, existing parking lot surfacing, ADA ramps, new concrete and decomposed granite trails, wood railing and chain link fencing, rain gardens, new landscaping throughout the site, an entry monument sign, group picnic areas of various sizes with BBQ setups, two age appropriate playgrounds, graded turf amphitheater, group outdoor exercise stations, and utility upgrades for the community center and separate restroom building.

Outdoor Learning Centers - Lucia Mar Unified School District, Arroyo Grande, CA
Wallace Group was contracted to provide site grading design for two outdoor learning centers – one at Oceanview Elementary in Arroyo Grande and the other at Fairgrove Elementary in Grover Beach. The outdoor learning centers were designed to allow teachers and students to have educational experiences outside the formal classroom setting. The outdoor learning centers included permeable pavers, concrete walkways, seating areas, shade

EDUCATION
BS Civil Engineering, Brigham
Young University, UT

REGISTRATION
California Registered Civil Engineer,
Number 80124
Utah Registered Civil Engineer
Number 8321263-2202
Qualified SWPPP
Developer/Practitioner (QSD/P)

AFFILIATION
American Society of Civil Engineers
(ASCE) -Los Angeles Section, San Luis
Obispo Branch, Secretary

SOFTWARE
AutoDesk Civil 3D

HEC-RAS

HEC-HMS
Storm and Sanitary Analysis
StormCAD
WaterCAD
ESRI ArcMap

WALLACE GROUP 26
Landscape Architecture & Environmental Engineering – Ramsay Park Phase IV Design CITY OF WATSONVILLE Brett Hadley, PE, QSD/P
Civil Engineer
structures, and provisions for ADA accessibility. The Fairgrove project included detailed grading of tiered seating in an amphitheater approach to match the slope of the site. Both projects are planned for construction Summer of 2018.

San Miguel Community Park Expansion
County of San Luis Obispo, CA
Wallace Group was contracted by the County of San Luis Obispo to expand and enhance the San Miguel Community Park.

Improvements included realignment of roadways to expand park area, new parking surfaces, paved pedestrian pathways, and new landscape and signage features. Brett lead the civil grading and drainage design for the project and the preparation of construction documents for bidding. The San Miguel Park project was
completed in 2017 and is actively used for soccer and other community events.

Cal Poly Drumm Reservoir Study, San Luis Obispo, CA
Wallace Group was contracted by Cal Poly to prepare a preliminary study for an on-campus irrigation reservoir (Drumm Reservoir). As project engineer for this study, Brett prepared watershed delineations, hydrologic calculations, a review of existing underground pipelines, an analysis of the reservoir’s capacity and day to day operations, and recommendations for future
improvements. This work was requested to support the planning of a new student housing area proposed adjacent to the existing reservoir. Wallace Group collaborated with Cal Poly Staff to review the existing facilities and to gather information to prepare the technical report. Brett also provided a review of the existing FEMA floodplain associated with Brizziolari Creek which is also adjacent to the proposed student housing area. The existing floodplain mapping was compared to existing topographic data and evaluated in the field to provide recommendations for planning the proposed student housing area.

Pismo Beach Resort – Pismo Beach, CA
Project Engineer responsible for civil site design and project management to obtain a Coastal Development Permit through the City of Pismo Beach and the California Coastal Commission. The proposed resort is planned for a new 128 room hotel along the beachfront in Pismo Beach. Brett was tasked with site grading, underground utility design, storm drain management, post construction stormwater compliance, and coordination with the client and design team. Preliminary water demand estimates for the proposed project were provided and water saving measures within the City were analyzed in effort to offset the project’s estimated water usage.

WALLACE GROUP 27
Landscape Architecture & Environmental Engineering – Ramsay Park Phase IV Design CITY OF WATSONVILLE Teri Wissler Adam

SENIOR PRINCIPAL

PROFESSIONAL EXPERIENCE
Ms. Wissler Adam joined the EMC Planning Group in 1991. Her area of expertise is in California Environmental Quality Act (CEQA) and National Environmental Policy Act (NEPA) compliance.

Ms. Wissler Adam directs the CEQA and NEPA compliance projects for the firm. She has been responsible for a large variety of private projects, including residential, commercial, industrial, mixed-use, and large specific plan and general plan projects. She has also managed several projects for public facilities, such as recycled water projects, roadway projects, bikeway projects, bridge projects, elementary schools, high schools, and college campuses, and other public facilities, such as health clinics, landfills, child development centers, and federal research facilities. She has represented public clients throughout Monterey County, San Benito County, Santa Clara County, Merced County, San Luis Obispo County, San Mateo County, Santa Cruz County, and as far south as Los Angeles County.

EDUCATION
B.S. California Polytechnic State University
at San Luis Obispo, Business
Administration, Concentration in
Environmental Management, 1991

PROFESSIONAL ACHIEVEMENTS
 Presenter, CEQA Seminar, Lorman
Education Services
 Presenter, CEQA Workshop, Association
of Environmental Professionals
 Member, Association of Environmental
Professionals
 Contributor, Environmental Mitigation
Handbook, California’s Coalition for
Adequate School Housing, February 2009
 Past Director/President/Newsletter Editor,
Monterey Bay Area Chapter, Association
of Environmental Professionals

PROFESSIONAL ASSOCIATION
 Member, Association of Environmental
Professionals

Ramsay Park Green Infrastructure Project - Project Schedule 2/8/2024
Draft
Task
Duration
(working days)* Due Date
2/52/122/192/263/43/113/183/254/14/84/154/224/295/65/135/205/276/36/106/176/247/17/87/157/227/29AUGUSTSEPTEMBEROCTOBERNOVEMBERDECEMBERJANUARYFEBRUARYMARCHAPRILMAYJUNEJULYAUGUSTSEPTEMBEROCTOBERNOVEMBERDECEMBER

1.1 - Project Initiation & Kick-off 10 3/1/2024 x x

1.2 - Kick-Off Meeting 5 3/8/2024 x

1.3 - Site Analysis Memo 20 3/15/2024 x x x x

2.1 - Project Planning 15 3/8/2024 x x x

2.2 - CEQA Review 20 4/19/2024 x x x x

2.3 - PM, Admin & Meetings Ongoing Ongoing x x x x x x x x x x x x x x x x x x x x x x x x

2.4 - Project Team Meetings Ongoing Ongoing x x x x x

2.5 - QAQC Ongoing Ongoing

3.1 - 30% Schematic Design 10 3/1/2024 x x

3.1 - Schematic Design City Review 5 3/8/2024 x

3.2 - 60% Design Development 20 4/5/2024 x x x x

3.2 - 60% DD City Review 10 4/19/2024 x x

3.3 - 95% PSE 20 5/17/2024 x x x x

3.3 - 95% PSE City Review 10 5/31/2024 x x

3.4 - 100% PS&E 15 6/21/2024 x x x

3.4 - 100% PS&E City Review 5 6/28/2024 x

4.1 - Pre-Bid Assistance N/A N/A x x x x x x

4.2 - Construction Admin Support N/A N/A x x x x x x x x x x x x x

4.3 - Site Observations & Reports N/A N/A x x x x x x x

4.4 - Record Drawings N/A N/A x x x x x x x
*Note: Doesn't include holidays.

Legend
Task Duration
Milestone / Key Date
2025
Q1 Q2 Q3 Q4
2024
FEB - Q1 MARCH - Q1 APRIL - Q2 MAY - Q2 JUNE - Q2 JULY - Q3 Q3 Q4

2/22/2024 4:32:15 PM
C:\Program Files\eSCRIBE\TEMP\16321242833\16321242833,,,Report - Lease for Wats Veterans Hall.docx Agenda Report
MEETING DATE: Monday, February 12, 2024
TO: City Council
FROM: PARKS & COMMUNITY SERVICES DIRECTOR CALUBAQUIB

RECREATION SUPERINTENDENT NEGRETE
THROUGH: CITY MANAGER MENDEZ
SUBJECT: RESOLUTION APPROVING A TWO-YEAR LEASE WITH

COUNTY OF SANTA CRUZ FOR COUNTY PROPERTY,
WATSONVILLE VETERANS HALL, LOCATED AT 215 EAST

BEACH STREET
RECOMMENDED ACTION:

Adopt a resolution approving a two-year lease with one (1) five-year option term between the City of Watsonville and the County of Santa Cruz, a political subdivision of the Ste of California, for County property at 215 East Beach Street (Watsonville Veterans Memorial Building), Watsonville, California, commencing March 1, 2024 and ending February 28, 2026, and authorizing and directing the City Manager to execute the same and any amendments thereto of a non-substantive nature subject to legal approval.

BACKGROUND:

The City of Watsonville Parks and Community Services Department had previously leased the property at 215 East Beach Street, known as the Watsonville Veterans Memorial Building or Watsonville Vets Hall, from the County of Santa Cruz, Department of Parks, Open Space and Cultural Services. The previous lease agreement expired on June 30, 2011 and the City continued to operate the facility on a month to month basis until March 2020.

DISCUSSION:

The County of Santa Cruz assumed operation of the Watsonville Veterans Memorial Building in March 2020 to provide and locate services for unhoused individuals through the COVID-19 pandemic. Prior to this, the City of Watsonville Parks and Community Services Department managed programming held at this location for several decades. This facility housed facility rentals, youth and adult sports programming and provided a space for various organizations thus being able to generate revenue for the facility rental program

2/22/2024 4:32:15 PM
C:\Program Files\eSCRIBE\TEMP\16321242833\16321242833,,,Report - Lease for Wats Veterans Hall.docx and the sports program. During occupancy, the utilities and minor repairs were paid by the City. The revenue generated from facility rentals helped offset these expenditures.

The proposed lease agreement will allow the Parks and Community Services Department to once again have a venue for youth and adult sports programming and facility rentals. With the renovation of Ramsay Park, the Watsonville Veterans Hall will serve as a much needed venue to be able to continue to offer a space for private rentals, youth and adult sports programming and a meeting space for organizations. Facility expenditures include utilities, miscellaneous minor repairs (as needed) and janitorial services, averaging about $2500, which will be absorbed through current budget savings in facilities (681) for this Fiscal Year. It is expected that rental and recreation programming revenue will offset these expenses moving forward.

STRATEGIC PLAN:

This lease agreement supports the Strategic plan of 4 – Fiscal Health as revenue will be generated from facility rentals and 6 – Community Engagement & Well-Being as the facility will serve as a venue where the community can engage in either sports or other recreational programming being offered at this location.

FINANCIAL IMPACT:

Per the lease agreement, the City of Watsonville Parks and Community Services will pay the County of Santa Cruz $1 per year for each year throughout the term of the agreement, payable on the first lease day of each lease year.

ALTERNATIVE ACTION:

The Council may choose not to approve this lease agreement.

ATTACHMENTS AND/OR REFERENCES (If any):

None.

1 Reso No. ______ (CM)
Meeting Date: 022724 SWZ ______ RM ______ PCS ______
RESOLUTION NO.__________ (CM)

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
WATSONVILLE APPROVING A TWO-YEAR LEASE WITH ONE (1) FIVEYEAR OPTION TERM BETWEEN THE CITY OF WATSONVILLE AND

THE COUNTY OF SANTA CRUZ, A POLITICAL SUBDIVISION OF THE STATE OF CALIFORNIA, FOR COUNTY PROPERTY AT 215 EAST

BEACH STREET, (WATSONVILLE VETERANS MEMORIAL BUILDING), WATSONVILLE, CALIFORNIA, COMMENCING ON MARCH 1, 2024 AND ENDING FEBRUARY 28, 2026, AND AUTHORIZING AND DIRECTING

THE CITY MANAGER TO EXECUTE THE SAME AND ANY

AMENDMENTS THERETO OF A NON-SUBSTANTIVE NATURE

SUBJECT TO LEGAL APPROVAL

BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF WATSONVILLE, CALIFORNIA, AS FOLLOWS:

1. Adopting a Resolution approving a two-year property lease with County of Santa Cruz does not meet CEQA’s definition of a “project,” because the action does not have the potential for resulting in either a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment.

2. That the two-year Lease between the City of Watsonville and the County of Santa Cruz, a political subdivision of the State of California, for 215 East Beach Street, Watsonville, California, commencing on March 1, 2024, and ending on February 28, 2026, a copy of which Lease is attached hereto and incorporated herein by this reference, is hereby approved.

3. That the City Manager be and is hereby authorized and directed to execute said Lease for the original term, and if properly exercised, the one (1) five-year option term, and any amendments thereto of a non-substantive nature subject to approval by the City Manager and City Attorney.
******************************************

1 Ord No. ______ (CM)
Meeting Date: 02/27/24
ORDINANCE NO. FINAL ADOPTION (CM)

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
WATSONVILLE REPEALING UNCODIFIED ORDINANCE NO.
1456-23 (CM) AND REPLACING IT WITH A NEW CODIFIED
ORDINANCE; BY ADDING SECTION 2-1.123 (COMPENSATION)
TO ARTICLE 1 (COUNCIL PROCEDURE) OF CHAPTER 1
(COUNCIL) OF TITLE 2 (ADMINISTRATION) OF THE

WATSONVILLE MUNCIPAL CODE WHICH SETS THE

COMPENSATION FOR EACH MEMBER OF THE CITY COUNCIL

AND THE MAYOR
WHEREAS, the Charter of the City of Watsonville (“Charter”) Section 405 states that the Council shall receive a salary, not to exceed the amount provided in the schedule set forth in Section 36516(a) of the Government Code, and as may be amended. “Such amount shall constitute total compensation which may include fringe benefits.”; and
WHEREAS, Charter Section 502 states that the Mayor shall receive $100 per month in addition to the amount set forth in Section 405; and WHEREAS, on July 18, 2023, the City Council enacted Ordinance No. 1456-23 (CM), in which it increased City Council and Mayor compensation. The increase comprised an increase in salary from $638.17 to $670.04 per month, and a $10 per month contribution by the City for a term life insurance policy for all Council Members and the Mayor; and
WHEREAS, Senate Bill 329, effective January 1, 2024, amended Government Code Section 36516 to increase the maximum salary for City Councilmembers. The increases are based on population, so the maximum salary permitted for Watsonville Councilmembers is $1,600 per month; and
WHEREAS, Government Code Section 36516(d) provides that any amounts

2 Ord No. ______ (CM)
Meeting Date: 02/27/24
paid by a city for retirement, health and welfare, and federal social security benefits shall not be included for purposes of determining salary, provided that the same benefits are available and paid by the City for its employees; and WHEREAS, Charter Section 405 indicates that any benefit paid to Councilmembers must be deducted from Councilmembers’ salaries, regardless of whether the City provides that same benefit to City staff. In this way, the City’s Charter allows Watsonville Councilmembers to receive less total compensation than is permitted by the Government Code and Councilmembers in other general law cities; and
WHEREAS, as noted by the State legislature in AB 329, the Councilmember compensation schedule for general law cities has not been adjusted since 1984, meaning that City Council compensation has not kept pace with inflation; and WHEREAS, allowing adjustments for inflation may help city councils become more diverse because increased compensation can help individuals from across different income levels receive sufficient income from their service to help ensure that they can continue to serve the public and support their families; and WHEREAS, increasing compensation for Councilmembers reflects the significant time commitment required to serve as a Councilmember; and WHEREAS, allowing Councilmembers to receive benefits similar to those received by City staff is consistent with Section 36516 and furthers the goal of increasing access to service on the City Council; and
WHEREAS, Section 36516 permits the City Council to increase its salary to $1,600 by Ordinance. To receive healthcare or other benefits, in addition to the

3 Ord No. ______ (CM)
Meeting Date: 02/27/24
maximum salary permitted under 36516, the City must amend Section 405 of its Charter.

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF WATSONVILLE, CALIFORNIA, DOES HEREBY ORDAIN AS FOLLOWS:

SECTION 1. REPEAL.

Uncodified Ordinance No. 1456-23 is hereby repealed and replaced with this Ordinance.

SECTION 2. ADDING NEW SECTION 2-1.123 TO ARTICLE 1 (COUNCIL PROCEDURE) OF CHAPTER 1 (COUNCIL) OF TITLE 2 (ADMINISTRATION) OF THE WATSONVILLE MUNICIPAL CODE.

Section 2-1.123, Council Member and Mayor Compensation, is hereby added to Article 1 of Chapter 1 of Title 2 of the Watsonville Municipal Code, to read in words and figures as follows:

Section 2-1.123 Council Member and Mayor Compensation.
(a) Consistent with the City Charter and Cal. Government Code Section 36516, all Council Members shall receive a salary of $1,600.00 per month, effective December 2024, when a new term of office for any Council Member commences. The Mayor shall also receive supplemental compensation as permitted by Section 502 of the City Charter. These amounts shall include a $10 per month contribution by the City for a life insurance benefit.
(b) Any changes to the City Charter enacted by the voters that impact compensation of Council Members or the Mayor, including but not limited to changes to Charter Sections 405 and 502, shall take effect as soon as permitted by law and shall

4 Ord No. ______ (CM)
Meeting Date: 02/27/24
not require any amendment of this Ordinance.

SECTION 3. RECITALS.

The City Council finds and determines the foregoing recitals to be true and correct and hereby adopts them as findings demonstrating the need for increased compensation and incorporates them into this Ordinance.

SECTION 4. CALIFORNIA ENVIRONMENTAL QUALITY ACT.

The City Council finds that this Ordinance, which sets Councilmember compensation, will not result in a direct or reasonably foreseeable indirect physical change in the environment and is not a “project,” as defined in Section 15378 of the CEQA Guidelines.

SECTION 5. SEVERABILITY.

If any section, subsection, sentence, clause or phrase or word of this Ordinance is for any reason held to be unconstitutional, unlawful or otherwise invalid by a court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this ordinance.

SECTION 6. PUBLICATION.

This ordinance shall be published in the Watsonville Register-Pajaronian and/or Santa Cruz Sentinel in compliance with the provisions of the Charter of the City of Watsonville.

SECTION 7. EFFECTIVE DATE.

This ordinance shall take effect thirty (30) days after passage by the City Council. Increases in compensation shall take effect upon commencement of a new term of office by any Council Member.

5 Ord No. ______ (CM)
Meeting Date: 02/27/24
**********************************

2301 Rosecrans Ave., Suite 4140
El Segundo, CA 90245
TEL: 424-297-1070 | URL: www.kosmont.com

CITY OF WATSONVILLE

ECONOMIC DEVELOPMENT STRATEGIC PLAN SUMMARY

CITY COUNCIL PRESENTATION
FEBRUARY 27, 2024

KOSMONT COMPANIES | 2

INTRODUCTION
Kosmont Companies ("Kosmont"), a real estate & economics advisory firm serving hundreds of cities and local governments for over 37 years, has been retained by the City of Watsonville ("City" or “Watsonville") to develop an Economic Development Strategic Plan (“EDSP”). In a stride towards realizing City economic aspirations, Kosmont is facilitating development and supporting future implementation of the EDSP to guide the near term and longer term.

Kosmont’s approach to preparing the Economic Development Strategic Plan includes the following tasks:
 Review of relevant City documents (budget, planning), together with a tour of the City and its business districts  Interviews / feedback from City staff, Council members, and community stakeholders  Assessment of regional economic trends
 Assessment of local demographic and market conditions  In person stakeholder outreach to gain insights as to needs and challenges  Assessment of major commercial districts
 Identification of key opportunities and strategies
 Create a timeline and approach to strategies (e.g., support business attraction and expansion) Disclaimer: The analyses, projections, assumptions, and any examples presented herein are for illustrative purposes and are not a guarantee of actual and/or future results. Actual results are difficult to predict as a function of market conditions, natural disasters, pandemics, legislation and administrative actions. Page 207 of 509 KOSMONT COMPANIES | 3

VISION AND OBJECTIVES
Vision:

The EDSP is designed to help the City strengthen its local economic base and fiscal health, provide a wide range of employment opportunities for its residents, enable the City to leverage State and Federal grants, loans and policy tools, and achieve greater resiliency.

Core Objectives:

1. Increase fiscal revenue;

2. Enhance City’s commercial and residential market by attracting a balance of local and national business;

3. Help existing businesses grow

4. Enhance employment, educational and new business opportunities;

5. Create job opportunities for younger generations;

6. Fund critical physical infrastructure improvements.

KOSMONT COMPANIES | 4

COMMUNITY OPPORTUNITY AREAS
Downtown
The recent Specific Plan should serve to catalyze the revitalization of the Downtown. Historically, Downtown was a thriving commercial center with the City’s commercial core of ~30% of the office inventory and ~23% of the retail inventory. But evolving land use trends has introduced the need for new residential units and blended use projects. Further, City assets include ownership of several surface parking lots and two structures.

Airport Area
Watsonville is home to general aviation airport with 230 aircraft and approximately 60,000 operations annually. The Airport Area including The Hangar offers an experiential draw for the community and its role in the City’s economy and surrounding land uses should continue to be explored.

Highway 1 Gateway
This is the industrial hub of the City, and it offers a great opportunity for attracting regional commercial development (e.g., hotels, restaurants, retail, auto dealers) and will depend on annexation to maximize growth.

KOSMONT COMPANIES | 5
 Watsonville has a Population of ~52,100 (14,200 households)  Average Household Size is 3.60 persons, higher than County/State, and the Median Age is 31 years, younger than County and State median of 39 and 37 years, respectively  City Average Household Income is $100,200, approx. ~35% less than County and 24% lower than statewide levels. The residents generate $359 million in annual retail spending potential across major retail categories  Watsonville has ~23,900 Employees, with a resident workforce of ~5,300 people  Jobs in the City are primarily in Healthcare / Manufacturing / Retail Trade / Agriculture / Education. Of these five, two are part of the fastest growing industries in Santa Cruz County (shown in italics)  Residents of the City are primarily employed in Healthcare / Retail Trade / Hospitality-Food Service / Agriculture / Manufacturing

EXECUTIVE SUMMARY

DEMOGRAPHIC / EMPLOYMENT OVERVIEW
See Appendix A.2 and A.3
Sources: ESRI Business Analyst Online; Zillow.com (Accessed September 2023); U.S. Census Bureau Center for Economic Studies, California Employment Development Department, ESRI Business Analyst Online (Accessed September 2023)

KOSMONT COMPANIES | 6

EXECUTIVE SUMMARY

ECONOMIC TRENDS
 Economic forces are reshaping local economies across the State:
➢ Today’s consumers are using online websites for purchasing a broad array of goods. As e-commerce continues to take an increasing percentage of consumer spending, cities must take new approaches to land use that explore concepts for public amenities and private attractions that help cities capture trips and thus “sales”. ➢ Younger consumers, with increased use of media and digital communication, seek gathering places with restaurants, entertainment venues and experiential retail, rather than simply a collection of traditional store fronts.
➢ Telework dynamics have drastically changed work patterns over the past few years and are poised to reshape office needs. Creative class professionals are attracted to communities with clustered centers, which provide a sense of vitality, diversity, convenience and a mix of work, entertainment, services, arts and culture.  In light of these trends, Kosmont is assisting the City in achieving its economic objective by providing market analysis and recommendations with a goal to foster economic vitality in the City, improving business conditions and resident quality of life.

Sources: Kosmont Companies, CoStar, Coresight Research, Cowen & Company, Cushman & Wakefield, ICSC, St. Louis Federal Reserve, UBS, U.S. Census Bureau, St. Louis Federal Reserve Page 211 of 509 KOSMONT COMPANIES | 7

EXECUTIVE SUMMARY

MARKET DEMAND ANALYSIS
See Appendix B.2 to B.6
Sources: CoStar (Accessed September 2023 and January 2024)  The retail, office, industrial/flex, and multifamily residential markets in the City are strong, featuring low vacancies compared to the 10-mile radius and Santa Cruz County. Market trends dictate potential demand for these asset classes.
 Although increased e-commerce presence (need for smaller lastmile, flex industrial, and sorting facilities), limits demand for some retail, low vacancies indicate a strong market. Retail sales grew by almost 70% in past decade, thanks to 120%
increase in auto sales and City was minimally impacted
by Covid pandemic.
 Limited demand for office space given more people are working from home and utilizing in-home office amenities. It is important to note, however, there has been medical
office demand which indicates there can be future
demand for this office type (e.g., Kaiser and Satellite Healthcare clinics).
 Industrial/Flex space is in high demand given the greater need for warehouse, sorting facilities, and last-mile delivery to support e-commerce needs. A 175,300 SF last-mile delivery facility was proposed.
 State’s housing shortage, more people working from home, coupled with low vacancy and higher rents drive
residential demand. General Plan Update is focused on
providing development opportunities to yield more than 5,000 new units.
 Limited number of economy, midscale and upper midscale hotels in the City. Commercial sites with proximity to Highway 1 could be developed as a regional hospitality attractor to capture visitors traveling from Carmel/Monterey to Santa Cruz and produce demand from large hotel chains to open in the City.

KOSMONT COMPANIES | 8
 The COVID-19 pandemic saw a decline in
visits to the City by both visitors and
employees. The average monthly visits to
the City declined by almost 50% and
20% respectively
 Among employees, the average
monthly visits returned to prepandemic levels by November 2021 and has remained at or above pre-pandemic levels
ever since
 Visits to the City have approached prepandemic baseline levels, but have remained below the baseline

EXECUTIVE SUMMARY
PLACER.AI LOCATION ANALYSIS
See Appendix A.4
Sources: Placer.AI (Accessed January 2024)
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
1/1/20203/1/20205/1/20207/1/20209/1/2020
11/1/2020
1/1/20213/1/20215/1/20217/1/20219/1/2021
11/1/2021
1/1/20223/1/20225/1/20227/1/20229/1/2022
11/1/2022
1/1/20233/1/20235/1/20237/1/20239/1/2023
11/1/2023
Visitors Employees

KOSMONT COMPANIES | 9
 Using Placer.ai, Kosmont examined visitation trends for key locations in the City (Downtown Watsonville, Watsonville Auto Mall, Cinelux Green Valley Cinema, and Watsonville Municipal Airport) compared to a 2019 baseline (pre-COVID-19 pandemic)
➢ Visitation to the airport fluctuates greatly – some months visitation will outperform the same month in the pre-pandemic period; The auto mall was the first among the other locations examined to return to pre-pandemic levels in Oct. 2020, followed by Downtown Watsonville in Oct. 2021
➢ The movie theater suffered the biggest loss of visitors due to the pandemic and has yet to fully recover with
visitation since Sept. 2021 significantly less than pre-pandemic levels ➢ The airport and auto mall attract regional visitors.

Downtown Watsonville and the movie theater are local
draws The auto mall has the largest true trade area out of the locations examined

EXECUTIVE SUMMARY
PLACER.AI LOCATION ANALYSIS (CONT’D)
See Appendix A.4
Sources: Placer.AI (Accessed January 2024)
Watsonville Auto Mall
True Trade Area (34.30 sq. mi.)

KOSMONT COMPANIES | 10
The City has recently adopted the Downtown
Watsonville Specific Plan (“Specific Plan”) to help restore the historic district that has suffered from high
commercial vacancy for the past 3 decades following the 1989 Loma Prieta earthquake. The Specific Plan
encompasses several thousand acres broken into 8
distinct character areas including Gateway to the east , Civic Core, Historic Core, Commercial and Residential
flex and a Workplace industrial area to the south.

The Specific Plan identifies many important goals:

1. Diversify mix of land uses given vibrant center

2. Make City a regional attraction

3. Enhance unique characteristics of all areas

4. Incorporate placemaking concepts

5. Increase production of affordable and market rate
housing

6. Enhance historic character of Downtown

7. Enhance walkability in Downtown

EXECUTIVE SUMMARY

DOWNTOWN SPECIFIC PLAN
Sources: Kosmont Companies, City of Watsonville Page 215 of 509 KOSMONT COMPANIES | 11

EXECUTIVE SUMMARY

ROLE OF ECONOMIC DEVELOPMENT
The City has had to rely on sales tax increases in recent years to balance budget as growth in property tax and retail sales has not kept pace with cost inflation.

Economic development as a priority can help. What is Economic Development? It requires education… It is not just “more development” but rather it will:
• Assist City in achieving its strategic vision
• Identify development opportunities to help increase City tax base • Facilitate growth of small businesses
• Focus on business expansion, attraction and retention The table on the following page illustrates the annual tax revenues typically generated by strategic private sector development to the City’s long term fiscal stability.

Sources: Kosmont Companies, City of Watsonville Page 216 of 509 KOSMONT COMPANIES | 12

ILLUSTRATIVE FISCAL IMPACT OF NEW DEVELOPMENT
To evaluate economic development opportunities and understand their impact on City revenues, the table below provides an illustration of incremental tax revenues potentially generated from various types of development on a hypothetical 2-acre parcel:

Top
Fast-Casual
Restaurant
Auto
Dealership
15,000 SF
Restaurant
50-unit
Multifamily
Housing
Mixed Use
40-units &
5,000 SF
100-room
Upscale Hotel
Property Taxes +
VLF in-lieu $10,000 $20,000 $20,000 $65,000 $55,000 $70,000 Direct Sales & Use
Taxes* $150,000 1,000,000 $100,000 $25,000
Indirect Sales & Use
Taxes $20,000 $15,000 $50,000
Hotel
TOT $300,000
Annual General
Fund Revenues $160,000 $1,020,000 $120,000 $85,000 $95,000 $420,000 Note: *City share of taxable sales is 2% Page 217 of 509 KOSMONT COMPANIES | 13
Goals
 City needs to be more business friendly
 City needs more entertainment/experiential venues
 Evaluate incentives best practices
 Improve infrastructure
 Fiscal sustainability
Strengths
 Tight knit community comes together when needed
 Manufacturing ecosystem in place
 Major agricultural economy
 Skilled labor pool
 Entrepreneurial spirit
 Excellent location amidst coastal tourism area
 Ramsay Park
 Downtown Specific Plan
 Limited number of development sites
 Downtown performance
 Heavy reliance on sales tax for general fund
 Lack of national retail tenants
 Growth limits / boundaries
 Permitting delays / over-regulation
 Inclusionary housing requirements
Opportunities
 Annexation of Highway 1 properties
 Watsonville Municipal Airport
 Downtown infill sites
 Well situated to attract flex industrial uses
 Demand for Single Family housing
 Local business incubators
 Use of public financing tools
 Improve wayfinding from Highway 1

SWOT ANALYSIS SUMMARY
Kosmont has summarized the strengths, weaknesses, opportunities and threats (“SWOT”) as well as goals gleaned from stakeholder outreach, and community feedback during General Plan outreach.

Sources: Economic Planning Systems, City of Watsonville Page 218 of 509 KOSMONT COMPANIES | 14

CITY BOUNDARIES

AND PROJECT
SITES
# on Map Project Sites
1 The Hangar
2 Watsonville Diesel
3 Former Kmart Property
4 Repass
5 The Residence Apartments
6 Former Gottschalks
7 Fox Theater
8 Old City Hall
9 Highway 1 Gateway
Legend
Watsonville City Boundaries
Project Sites
1 and 2
5 6
7 4
Insert 1 Airport
Insert 2
Downtown
3 8
9 Source: ESRI Business Analyst Online; City of Watsonville (Accessed January 2024)

KOSMONT COMPANIES | 15
ECONOMIC DEVELOPMENT PLAYBOOK: CAPTURE

VALUE AND CREATE CURRENCY
Special
Districts -

EIFD, CRIA,
CFD
Development
Opportunity
Reserve
(D.O.R.)®
Sales Tax
Assessment
Revenue
(STAR*)®
Other Public
Money (OPM)
- ARPA,
Infrastructure
(D.O.R.)®
Capture Value from
Zoning
EIFDs
Capture Value from
Tax Increment
(STAR*)®
Create Value
from DA
Negotiation
OPM
Create Value
from New
Funding
Government
Financing
Financing
Create Value
through refinancing
Real Estate
Strategies
Source: Kosmont Companies

KOSMONT COMPANIES | 16

CAPTURE VALUE AND CREATE CURRENCY
Source: Kosmont Companies
Capture
Value from
Tax
Increment
Special Districts:

EIFD, CRIA, CFD
Capture
Value from
Zoning
Development
Opportunity
Reserve
(D.O.R.)®
Capture
Value from
Property
Real Estate &
Lease Strategies
Create
Currency via
Tax Revenue
Replacement
Sales Tax
Assessment
Revenue
(STAR*)®
Create
Currency
from Gov’t
Financing
Reduce Debt
Costs & Pursue
Projects
Create
Currency
with Other
Public Money
State / Federal
Grants

KOSMONT COMPANIES | 17
Based on the real estate and economic research and input from community and stakeholder outreach, Kosmont has prepared a list of potential Economic Development strategies with Estimated Timeframes for the City to consider to achieve the economic goals.

1. Prioritize Growth/Annexation Scenarios – 6 months

2. Public Private Partnership for 250 Main St. (Civic / Former City Hall) - 1 to 2 years

3. Work with Tut Family to achieve Hotel/Retail Development – 1 to 2 years

4. Support Downtown Specific Plan Implementation – 12 months

5. Business Development / Incentives / Permitting – Now and Ongoing

6. Downtown Business Attraction and Retention – Now and Ongoing

7. Consider a Tax Increment Financing for Infrastructure (EIFD) – 12 months Action Items for each strategy are identified on the following pages.

EDSP STRATEGIES
Source: Kosmont Companies Page 222 of 509
KOSMONT COMPANIES | 18

PERFORMANCE METRICS
Performance metrics will allow the City to identify progress made and determine what barriers to Economic Development continue to exist, what responses have proven successful or otherwise, and which projects are scheduled for development. The following metrics can be measured each calendar year and compared to the prior year’s results:

1. Commercial Building Permits in Key Areas – measure commercial developer interest

2. Assessed Value of Commercial and Industrial Property – show increased private sector investment

3. Number and Type of Business Licenses – measure new business formations

4. Employment by Industry – show success in commercial and industrial business attraction and employment growth

5. Sales Tax Revenues by Geographic District – measure success in attracting businesses and economic activity

6. Hotel Tax Revenues – measure success in attracting more visitors

7. Hotel Visitor Survey – identify types of visitors, short term vs longer term stays

8. Annual Survey of Business Owners – identify issues regarding City permitting / zoning process and other programs to inform City staff of progress/shortcomings

9. Special Event Data: number of events, attendance estimates – show success of community outreach efforts, revitalization efforts, and general marketing

KOSMONT COMPANIES | 19
Kosmont proposes the following steps to achieve sustained Economic Development in the City:

1. Hire a Development “Concierge” / Facilitator (aka Ombudsman) to help small business start-up and expansion

2. Utilize grant writing firm such as California Consulting and Kosmont to pursue federal / state grants for revitalization projects (i.e., Fox Theater and other Downtown Watsonville)

3. Evaluate business incentives for focused business attraction

4. Pursue Highway 1 annexation as critical regional commercial center

5. Utilize third party economic development resources (e.g., Kosmont) and attend ICSC and other conferences to meet with major retailers / restaurants / retail / hotel operators

6. Explore potential redevelopment of 250 Main St. (Civic / Former City Hall) as blended-use catalyst for Downtown revitalization

7. Evaluate and consider forming a TIF District via Enhanced Infrastructure Financing District (EIFD)

ACTION PLAN / NEXT STEPS
Source: Kosmont Companies Page 224 of 509
KOSMONT COMPANIES | 20

CITY OF WATSONVILLE

ECONOMIC DEVELOPMENT STRATEGIC PLAN SUMMARY

CITY COUNCIL PRESENTATION
FEBRUARY 27, 2024
2301 Rosecrans Ave., Suite 4140
El Segundo, CA 90245
TEL: 424-297-1070 | URL: www.kosmont.com

Watsonville Economic Development
City Manager's Office
Community Development Department
Public Works

Council
Update
• Kosmont
Economic Development Plan
Exploring Opportunity Sites
Evaluation of Processes and Development Standards
•Downtown Businesses
• ICSC
• Workshops
Engagement and Education
• Revolving Loan
•Other Best Practice Incentives
Building a Toolbox
Additional Investment & Marketing

Economic Development Plan &
Opportunity Sites
RFP for ED Consultant to support
the City:

Economic Development Plan
Implementation of strategies that support
business attraction and expansion
A summary of the draft plan Opportunity sites available

Evaluation of
Internal
Processes &
Standards
• Public Works and CDD Staff – evaluation of internal
processes and standards
• Streamline Communication between PW & CDD and work
on alignment
• Receiving IT support that facilitates technology
improvements or program enhancements
• The group discussed and agreed to explore Munis to see if we can find a successful outcome with our existing
technology.
• Working with Consultant to review current practices and modify standards that hinder development
• Created ‘home screens’ for CDD supervisors so they can track and see what cases, permits or inspections are due or late (real-time information)

Downtown
Business Survey
• Focused on our Downtown
Watsonville Specific Plan Area
• Captures the economic health
of our Downtown businesses
and how they feel the City can
assist them
• Currently 15% of about 392
licensed businesses have been
surveyed

Downtown
Business
Survey
Findings

Downtown Business
Survey Findings
• The top 4 categories in which
respondents felt the City could assist
them were:
• Marketing – Help with advertising
and drawing visitors to their
business
• Parking - Abuse of posted limits
• Crime – Concerned with homeless
population, safety concerns at our
parking garages, not enough police
patrols
• Funding - Expressed a hard time
acquiring funds
65%
58%
50%
42%
0%
10%
20%
30%
40%
50%
60%
70%
Marketing Parking Crime Funding
How Can the City Help?

Engagement & Education
• ICSC Conference
• 2024 Retail Expansion Outlook: Market Trends
and Growth Opportunities
• Money Matters: Funding Sources for
Community and Economic Development
• From Vacant Spaces to Vibrant Places: How to
Backfill Vacancies in Your Downtown

Toolbox to Incentivize
Development
• Revolving Loan Program
• State Grants that could support new
development
• Best Practice Incentives that could
support development and stimulate
growth of existing businesses
• Kosmont Support

Marketing and Investment
•Why Watsonville & What about Watsonville? Developing Marketing Materials:
•Support coordination for current and future development •Attract and facilitate new/expansion of businesses
Hire a FT Development
Ombudsperson position
(Pending Budget Approval)
•Additional resources for economic development, brochures, marketing, outreach. •Work needed to possibly develop an Enhanced Infrastructure Finance District. •Attend trade shows
•Incentives
Set aside $250K on time
funds to support ED
strategies (Pending Budget
Approval)

KOSMONT COMPANIES | 31
INSERT 1:

AIRPORT AREA
SITES #1-3:

THE HANGAR,

WATSONVILLE DIESEL,

AND FORMER KMART

PROPERTY
Watsonville
Municipal
Airport
2 1
Aviation Wy. 3
Source: ESRI Business Analyst Online; City of Watsonville (Accessed January 2024)

KOSMONT COMPANIES | 32
INSERT 2:

DOWNTOWN

WATSONVILLE
SITES #4-8:

REPASS,

THE RESIDENCE APTS,

FORMER GOTTSCHALKS,

FOX THEATER,

OLD CITY HALL
4 5
6 7
8 Cabrillo
College
Watsonville
Plaza
Watsonville
High School
/ Virtual
Academy
USPS
Watsonville
Civic Plaza
Source: ESRI Business Analyst Online; City of Watsonville (Accessed January 2024)

KOSMONT COMPANIES | 33
9 Source: ESRI Business Analyst Online; City of Watsonville (Accessed January 2024)
SITE #9: HIGHWAY 1

GATEWAY

TUT PROPERTIES
(2.5 ACRES WITHIN CITY
LIMITS AND 13.6 ACRES

OUTSIDE THE CITY
LIMITS – POTENTIAL

ANNEXATION)

City Council Strategic Plan
Mid-Year Update
February 2024

Strategic Plan:

A Road Map for the Future
• Articulates the Council’s priorities and
guides its policy decisions.
• Enables staff to develop feasible,
measurable, and actionable strategies to
address the Council’s priorities,
implement policies, and allocate
resources effectively.
• Focuses the City’s efforts to engage
community members and agency
partners in achieving the City’s mission.
• Enables the City to prioritize time &
resources in alignment with the Council’s
priorities.
• Ensures accountability and transparency
in furthering effective policies and City
services that meet community needs.
2023-2025 Priorities
Economic Development
Infrastructure & Environment
Housing
Fiscal Health
Public Safety
Community Engagement & Well-Being
Efficient & Well-Performing Government
1 2
3 4
5 6
7

Executive
Team

Progress Check
9% 50% 32% 9%
• Seven Goals
• 180 Initiatives, Projects, Activities in
the 2023-2025 City Council Strategic Plan

REPORT

Economic
Development
Focus on developing a strong and visible City brand to help strengthen and diversify the City's economy for all.

Support and grow existing businesses, attract new
businesses and industries, enhance workforce
development, revitalize downtown, and encourage
entrepreneurs to invest and grow locally.
29% 57% 14%

Infrastructure &
Environment
The City will work to build and
maintain our infrastructure
and preserve the natural
environment through careful
planning, preservation, and
maintenance for residents and
future generations. Special
attention will be given to road
maintenance, street lighting,
and City facilities.
2% 64% 30% 4%

Housing
Proactively remove barriers to
accessing stable, quality and
affordable housing and strive to
create new opportunities to add
housing to meet our community’s
current and future housing needs.
16% 9% 75%

Fiscal
Health
The City will continue to enhance
fiscal sustainability of the City,
through prudent financial
planning and decision-making to
ensure the organization can best
serve the residents and businesses
of Watsonville today and in the
future.
5% 53% 32% 10%

Engagement &
Well-being
Actively engage community
members on important issues
affecting the quality of life to
create a more informed,
engaged, and thriving community.

Engagement efforts will prioritize
expanding programs and activities
that create a sense of community
and belonging.

Prioritize efforts that increase our
community’s a sense of physical
and emotional safety.
12% 35% 29% 24%

Public
Safety
Strive to create healthy, safe,
and thriving Watsonville.

The definition of public safety
under this priority is expansive,
and it reaches beyond the
absence of crime or providing
emergency medical response
services in the community.

Public safety includes safe
roads, lighting, traffic,
community.
14% 59% 22% 5%

Efficient & High-Performing
Government
Deliver high-quality and
efficient services for the
community through a
commitment to local
government best practices,
employee retention and
development, effective
communications and
investment in technology.
5% 62% 22% 10%

Highlighting Our Progress

Looking Forward
• 5-year Pavement Management Plan
• Levee Reconstruction Project
• 2050 General Plan Community Outreach and Adoption
• Continue road maintenance, parks, and library services via Measure R • Public Art Master Plan
• Explore incentivizing mixed-use developments
• Contracted with Grant Consultants and Financial Advisors to support the City with new available grants and formulate future investment plans for the City
• Ramsay Park Renaissance
• New Nature Center
• Urban Forest Master Plan
• Summer in the City Internships
• 2025 Watsonville Academy
• Strawberry Festival, National Night Out, Fire in the Sky Page 252 of 509 City Council
2023-2025
watsonville.gov
Strategic Plan Mid-Year Update
February 2024

watsonville.gov

Eduardo Montesino
District 1
Vanessa Quiroz- Carter
Mayor
District 2
Maria Orozco
Mayor Pro Tempore
District 3
2024

Every two years, the City Council adopts a Strategic Plan that aligns the Council’s priorities and community needs with the budget and sets forth a forward-looking vision for the City organization and the services we offer to the community.

The 2023 - 2025 Strategic Plan includes seven long-range priorities. Under each Strategic Priority, the Council identified several strategies and actions to support meeting the measurable outcomes set forth under each priority.
• Articulates the Council’s priorities and guides
its policy decisions.
• Enables staff to develop feasible, measurable,
and actionable strategies to address the
Council’s priorities, implement policies, and
allocate resources effectively.
• Focuses the City’s efforts to engage community
members and agency partners in achieving the
City’s mission.
• Enables the City to prioritize time & resources
in alignment with the Council’s priorities.
• Ensures accountability and transparency in
furthering effective policies and City services that
meet community needs.

Strategic Plan: 2023-2025 Priorities
A Road Map for the Future
Economic Development
Efficient & Well-Performing
Government
Housing
Community Engagement & Well-being
Public Safety
Infrastructure & Environment
Fiscal Health

Establish an Economic Development Plan that is data-informed and allows the City to attract new businesses. The Economic Plan should include City branding and messaging and promote business growth and connection.

Develop a plan that attracts flagship companies and larger revenue-generating businesses. Adopt the Downtown Specific Plan and support local business growth.

Fiber optics support the digital middle mile for future growth and digital access of residents, businesses, and connected/smart City initiatives. Fiber optics are foundational to increasing data access to small cell sites throughout the city. Small cell sites improve cellular signal in populated areas, which increases data access for all.

City departments
leading the work
to support:

Strategies

1.1 - Establish an Economic Development Plan

1.2 - Work on Business Attraction

1.3 - Expand Fiber Optics
Priority 1
Focus on developing a strong and
visible City Brand to help strengthen
and diversify the City’s economy for all.

Support and grow existing businesses,
attract new businesses and industries,
enhance workforce development,
revitalize downtown, and encourage
entrepreneurs to invest and grow locally.

Economic
Development

Work Plan
Supporting the Strategic plan
2023 - 2025
The list below reflects the work that various City Departments will complete and ideas to be explored during the 2023-2025 Fiscal Years to support the advancement of the Council’s Strategic Priorities. Additional work and projects that emerge as part of continued reassessment of community needs could be added as the Council reviews progress of their Strategic Plan or as new operational needs arise.

Focus on developing a strong and visible City Brand
to help strengthen and diversify the City’s economy
for all. Support and grow existing businesses, attract
new businesses and industries, enhance workforce
development, revitalize downtown, and encourage
entrepreneurs to invest and grow locally.

How do we accomplish this goal
(What is needed or work you will need to do to get there?)

1.1 - Establish Economic Development Plan

1.2 - Work on Business Attraction
Hire Consultant to assist with economic
development *
Create and execute an economic development
campaign
Develop plan that attracts flagship companies and
larger revenue generating businesses *
Follow-on to the 2019 Airport Economic Benefit
Analysis; conduct a 2024 analysis
Develop city branding for helping market
businesses *
Engage Chamber of Commerce and partners to
strengthen workforce development *
Adopt the Downtown Specific Plan
Strategy to support local business growth
1 - Economic Development
OngoingEngagementPolicy Project ProgramPlanning Investment Communication Other Completed Ongoing
In Progress Delayed
* Voted as Council Priorities
Percentage of Completion as of February, 2024

Other
Develop and adopt a “Dig Once”Policy
Adopt a small Cell site guidelines
Work with educational partners to develop
strategies that support education and
workforce training (PVUSD, SUEÑOS, etc)
Opportunity to Work Program
Develop a Public Art Master Plan

1.3 - Expand Fiber Optics
1 - Economic Development
OngoingEngagementPolicy Project ProgramPlanning Investment Communication Other Complete Fiber Optic Loop

Address potholes, striping, road maintenance, and repairs on streets throughout the city. Implement new traffic safety projects that make Watsonville more accessible to drivers and safer for pedestrians.

Explore opportunities to update and enhance City facilities for the benefit and enjoyment of employees and City residents.

Continue the City’s longstanding and proactive efforts to serve as a regional leader in environmental stewardship.

City departments
leading the work
to support:

Strategies

2.1 - Improve Streets

2.2 - Address City’s Aging Facilities

2.3 - Support Environmental Stewardship
Priority2
The City will work to build and maintain
our infrastructure and preserve the
natural environment through careful
planning, preservation, and maintenance
for residents and future generations.

Special attention will be given to road
maintenance, street lighting and City
facilities.

Infrastructure
& Environment

2.2 - Address City’s Aging Facilities
Repair potholes throughout the City
Explore better roundabout standards
Update lighting throughout the City
Implement Way finding program
Improve Crosswalks
Improve Striping on City streets
Replace & install 1-2 miles of new water main / year
Repair City sidewalks, curbs, and gutters to reduce
trip and injury hazards
Improve and install bike lanes
Work Plan
Supporting the Strategic plan
2023 - 2025
The list below reflects the work that various City Departments will complete and ideas to be explored during the 2023-2025 Fiscal Years to support the advancement of the Council’s Strategic Priorities. Additional work and projects that emerge as part of continued reassessment of community needs could be added as the Council reviews progress of their Strategic Plan or as new operational needs arise.

The City will work to build and maintain our
infrastructure and preserve the natural environment
through careful planning, preservation, and
maintenance for residents and future generations.

Special attention will be given to road maintenance,
street lighting and City facilities.

How do we accomplish this goal
(What is needed or work you will need to do to get there?) 2 - Infrastructure & EnvironmentOngoing
EngagementPolicy Project ProgramPlanning
Investment Communication
Other

2.1 - Improve Streets *
Completed Ongoing
In Progress Delayed
* Voted as Council Priorities
Percentage of Completion as of February, 2024

Improve or when possible, build new City Hall,
Municipal Service Center, Police Department and
Fire stations *
Minimize blight by providing proactive graffiti
abatement response.

Build City Plaza Master Plan
Invest in technology for safety improvements
at City buildings
Provide landscape maintenance and weed
abatement services.

Joint Use Investment at Rolling Hills MS
Youth Center and Senior Center Building
Enhancements
Park and Trail Signage Master Implementation Plan
Expedite development, design, & construction of
wastewater related projects that will maintain,
upgrade and enhance the infrastructure of the
wastewater system in order to meet NPDES permit
requirements and protect the environment
Construction of new Nature Center Building
System-wide Park Assessment Implementation Plan
City Council Chambers Upgrades

2.2 - Address City’s Aging Facilities (Continued)
2 - Infrastructure & Environment
OngoingEngagementPolicy Project ProgramPlanning Investment Communication Other Centralize internal service requests for all
departments.

Perform daily and routine cleaning services for
approximately 220,000 square feet of facilities.

Complete Ramsay Park Renaissance *

Continue supporting the implementation and
construction of the levee project
Convey wastewater to the treatment plant in a
reliable and cost-effective manner, meet all
applicable State and Federal regulations, and
protect the environment and public health
Provide technical support and project management
for energy conservation and renewable energy
projects for all City departments.

Continue Food Scraps Program
Increase tree canopy within the City *
Reduce carbon footprint by acquiring zero emission
vehicles and eliminating leaded fuel sales.

Ensure timely homeless encampment litter removal
Improve levees in and around the City
Complement existing unleaded aviation fuel
offerings by introducing a higher-octane alternative
that services 70 % of based aircraft.

Expansion of electrification of City fleet to meet state mandates, explore alternative fuel opportunities,
purse grant funding for Evs.

Implement Urban Forest Master Plan *
Create guidelines to implement underground
utility lines

2.3 - Support Environmental Stewardship
Other
2 - Infrastructure & Environment
OngoingEngagementPolicy Project ProgramPlanning Investment Communication Other Implementation of the Local Hazard Mitigation Plan
(LHMP) and Climate Action and Adaptation Plan
(CAAP)
Provide cost-effective wastewater treatment, protect
Monterey Bay water quality and public health, and
comply with National Pollution Discharge Elimination
System (NPDES) permit requirements

Building enhancements at the Main Library;
develop the atrium on the 2nd floor to increase
reader seating and outdoor engagement for
fundraising, programming, etc.

Other (Continued)
Additional - (Future work not identified as of yet)
2 - Infrastructure & Environment
OngoingEngagementPolicy Project ProgramPlanning Investment Communication Other Water main replacement at a min of 1 mile a year
Explore options to expand park space
Expand on partnership with PVUSD to expand
parks, green spaces and public spaces for the
community to use and enjoy
Need for a new Police Activities League building
Continue to improve City’s cybersecurity program.

Explore opportunities and policies that will allow for mixed-use development to make use of the limited space available within city limits.

Encourage the development of sustainable, inclusive, and affordable homes for all residents, including moderate housing, workforce housing, and downsizing options.

Explore opportunities to enhance and market ADUs to Watsonville residents.

City departments
leading the work
to support:

Strategies

3.1 - Explore Mixed Use Development

3.2 - Increase Housing Options for All

3.3 - Explore Opportunities for ADUs
Priority3
Proactively remove barriers to accessing
stable, quality and affordable housing
and strive to create new opportunities
to add housing to meet our community’s
current and future housing needs.

Housing

3.2 Increase Housing Options for All

3.3 Explore Opportunities for ADU’s
Explore new ways to incentivize mixed-used
developments *
Incentivize “Housing for all” developments *
Market and enhance ADUs *
Explore opportunities for businesses to provide
housing to employees
Explore opportunities for housing developments
near rail and public transportation *
Adopt the Downtown Specific Plan *
Explore ADU Assistance Program
Explore ways of assisting new homeowners
through education and financing *
Work Plan
Supporting the Strategic plan
2023 - 2025
The list below reflects the work that various City Departments will complete and ideas to be explored during the 2023-2025 Fiscal Years to support the advancement of the Council’s Strategic Priorities. Additional work and projects that emerge as part of continued reassessment of community needs could be added as the Council reviews progress of their Strategic Plan or as new operational needs arise.

Proactively remove barriers to accessing stable,
quality and affordable housing and strive to
create new opportunities to add housing to meet
our community’s current and future housing needs.

How do we accomplish this goal
(What is needed or work you will need to do to get there?) 3 - Housing
OngoingEngagementPolicy Project ProgramPlanning
Investment Communication
Other

3.1 - Explore Mixed Use Development
Completed Ongoing
In Progress Delayed
* Voted as Council Priorities
Percentage of Completion as of February, 2024 75% 25%

Prepare and adopt the 6th cycle Housing Element
Community engagement and outreach to support
2050 General Plan Update
Require charging stations in new developments
Enhance Legislative Engagement including County,
LAFCO, Regional, State, and Federal *
Other
3 - Housing
OngoingEngagementPolicy Project ProgramPlanning Investment Communication Other

Explore the possibility of amending the City Charter to allow Council members to receive health benefits and a salary. This will appeal and attract other community members who wish to get involved with local government and run for office.

Maintain a balanced budget with healthy fund balances while aligning with the Strategic Plan Priorities.

Develop additional policies to help maintain and grow adequate city reserves.

Leverage local tax measure funds and explore the possibility of bonding to finance Capital Improvement Projects.

City departments
leading the work
to support:

Strategies

4.1 - Increase Community Involvement in Local Government

4.2 - Maintain a Balanced Budget

4.3 - Leverage Local Tax Measures
Priority4
The City will continue to enhance fiscal
sustainability of the City, through prudent
financial planning and decision-making
to ensure the organization can best
serve the residents and businesses
of Watsonville today and in the future.

Fiscal
Health

4.2 - Maintain a Balanced Budget

4.3 - Leverage Local Tax Measures
Evaluate tools that could increase community
members involvement with local government
and to run for office *
Prepare a comprehensive, balanced budget book
which includes long term budget plan and strategic
priorities *
Develop a spending plan for Measure R
revenues based on community priorities *
Prepare a Comprehensive Annual Financial Report
including external audit review
Implement policies to have a healthy fund balance
and fiscal reserve policies in place to help us get
through future economical uncertainties
Prepare an Annual Mid-Year Report and present to
City Council with appropriation corrections
Increase Community Involvement in Local Government
Work Plan
Supporting the Strategic plan
2023 - 2025
The list below reflects the work that various City Departments will complete and ideas to be explored during the 2023-2025 Fiscal Years to support the advancement of the Council’s Strategic Priorities. Additional work and projects that emerge as part of continued reassessment of community needs could be added as the Council reviews progress of their Strategic Plan or as new operational needs arise.

The City will continue to enhance fiscal sustainability of the City, through prudent financial planning and decision-making to ensure the
organization can best serve the residents and
businesses of Watsonville today and in the future.

How do we accomplish this goal
(What is needed or work you will need to do to get there?) 4 - Fiscal Health
OngoingEngagementPolicy Project ProgramPlanning
Investment Communication
Other

4.1 - Increase Community Involvement
in Local Government
Completed Ongoing
In Progress Delayed
* Voted as Council Priorities
Percentage of Completion as of February, 2024

Modernize Financial Services
Deploy improved online customer account access for
payments and service
Hexavalent Chromium Funding and Implementation
Lobby Government officials for additional funds
Expand electronic payment methods by installing
kiosks at payment office.

Continued funding for capital improvement of
facilities. *
Manage our Retirement Liability
Maintain fleet and replacement program to ensure
funding is available for transportation needs

4.3 Leverage Local Tax Measures
Other - Collection
Other - Community Investments
4 - Fiscal Health
EngagementPolicy Project ProgramPlanning Investment Communication Other Leverage economic development as a driver to
improve fiscal health of the City *
Ensure all service connections are metered
Federal Levee Project
Ongoing
Leverage bond financing to support major
infrastructure projects to be built in our community

Attract and retain public safety staff to have the capacity to educate our community and enforce existing laws and regulations.

Focus on traffic safety education, infrastructure, and enforcement to ensure safe streets for all.

Engage the community though a wide range of programs and initiatives to enhance the sense of safety and highlight the rich and diverse cultural, linguistic and ethnic heritage of Watsonville.

City departments
leading the work
to support:

Strategies

5.1 - Promote Public Safety

5.2 - Focus on Tra!c Education & Enforcement

5.3 - Improve Safety Through Engagement and Outreach
Priority5
Strive to create a healthy, safe, and
thriving Watsonville. The definition
of public safety under this priority is
expansive, and it reaches beyond the
absence of crime or providing
emergency medical response services
in the community. Public safety includes
safe roads, lighting, traffic, community
partnerships, fire, community-oriented
police, and community services.

Public
Safety

Work Plan
Supporting the Strategic plan
2023 - 2025
The list below reflects the work that various City Departments will complete and ideas to be explored during the 2023-2025 Fiscal Years to support the advancement of the Council’s Strategic Priorities. Additional work and projects that emerge as part of continued reassessment of community needs could be added as the Council reviews progress of their Strategic Plan or as new operational needs arise.

Strive to create a healthy, safe, and thriving
Watsonville. The definition of public safety under
this priority is expansive, and it reaches beyond the
absence of crime or providing emergency medical
response services in the community. Public safety
includes safe roads, lighting, traffic, community
partnerships, fire, community-oriented police, and
community services.

How do we accomplish this goal
(What is needed or work you will need to do to get there?)

5.1 - Promote Public Safety

5.2 - Focus on Traffic Education & Enforcement *

5.3 - Improve Safety Through Engagement and Outreach
Relocation of Runway Two-Seven threshold by 870
to mitigate Runway Visibility Zone issue
Lead a community Youth Developmental Asset
Movement
Expansion of Traffic Unit, Education and Enforcement
Be the preferred place for adults, youth, families and
caregivers to connect, learn & grow together by providing opportunities for learning & social development.

Police and Fire Youth Academy *
Street Lighting - assessment project
Police and Fire response
Crosswalk and street stripping program
5 - Public Safety
OngoingEngagementPolicy Project ProgramPlanning
Investment
Communication Other
Completed
In Progress
Ongoing
Delayed
* Voted as Council Priorities
Percentage of Completion as of February, 2024

Additional - (Future work not identified as of yet)

5.3 - Improve Safety Through Engagement
and Outreach (Continued)
5 - Public Safety
OngoingEngagementPolicy Project ProgramPlanning Investment Communication Other Police Flock Program
Police Drone Program
Police Firearms and Drugs Detection Canine
Provide resources to disenfranchised community
members through ongoing outreach activities.
(Mental health, monolingual, lack of access to services) * Partner with local organizations and agencies to
effectively communicate the library’s programs and
services to maximize community use.

Community outreach and education about the
Community Development Department
CPR for Spanish Speakers & partnerships with
local agencies
Celebrate the unique diversity and heritage of our community through programming and events that highlight the rich and diverse cultural, linguistic and ethnic heritage.

Offer a dynamic & diverse collection of both physical
and downloadable materials and resources for all
ages that focuses on self-discovery and expression.

Create a sense of community and belonging for residents by working with the community and stakeholders to continue to provide events that promote art, culture, health, and economic opportunities.

Provide inclusive opportunities to learn about the City, gain new skills, and increase resiliency for youth, adults, and seniors through programs provided by all City departments.

Work with the community to assess, promote, and maintain City parks and trails. Increase traffic calming and pedestrian safety projects throughout the City.

City departments
leading the work
to support:

Strategies

6.1 - Expand Community Events

6.2 - Increase Inclusive Engagement Programs

6.3 - Promote Parks and Pedestrian Safety
Priority6
Actively engage community members
on important issues affecting the
quality of life to create a more informed,
engaged, and thriving community.

Engagement efforts will prioritize
expanding programs and activities
that create a sense of community and
belonging. Prioritize efforts that increase
our community’s a sense of physical
and emotional safety.

Community
Engagement
& Well-being

Work Plan
Supporting the Strategic plan
2023 - 2025
The list below reflects the work that various City Departments will complete and ideas to be explored during the 2023-2025 Fiscal Years to support the advancement of the Council’s Strategic Priorities. Additional work and projects that emerge as part of continued reassessment of community needs could be added as the Council reviews progress of their Strategic Plan or as new operational needs arise.

Actively engage community members on important issues
affecting the quality of life to create a more informed, engaged, and thriving community. Engagement efforts will prioritize expanding programs and activities that create a sense of community and belonging. Prioritize efforts that increase our community’s a sense of physical and emotional safety.

How do we accomplish this goal
(What is needed or work you will need to do to get there?)

6.1 - Expand Community Events *
Expand the Bibliovan’s availability at events
throughout the City
Partnering with Agencies to Increase Services for
Residents: Ex. Increase County hours in Watsonville;
Mexican Consulate, etc.

National Night Out
Watsonville Reads; one book, one community
reading program
Explore opportunities to expand holiday events
Host community cleanup days 1 or 2 times per year
Creative Cafe at Freedom Library aims to provide
space, supplies, and inspiration for crafters in the
community
Continue and expand Summer Concert Series
Fire In the Sky Event
6 - Engagement & Well-being
OngoingEngagementPolicy Project ProgramPlanning
Investment Communication
Other
Completed Ongoing
In Progress Delayed
* Voted as Council Priorities
Percentage of Completion as of February, 2024

6.3 - Promote Parks and Pedestrian Safety

6.2 - Increase Engagement Programs *
6 - Engagement & Well-being
OngoingEngagementPolicy Project ProgramPlanning Investment Communication Other Implement a PD Advisory Board
Expand P.A.L.’s Programing
Implement the Library’s Strategic Plan
Expand Programs and services for Seniors
Work with Community Based Orgs to provide
resources for residents
Implement a Records Management System to
allow staff to respond to public in a transparent
and efficient manner
Poet Laureate and Youth Poet Laureate
Collaborate with CA State Parks to provide
transportation and education about state parks
Install traffic calming and pedestrian safety
measures *
Expand the Watsonville Academy
Expand Teen Action Council with Library
Expand Field trips to the Airport
Expand “Passport to Fun” with City Youth Programs
Prioritize deferred maintenance of existing parks
and facilities

Additional - (Future work not identified as of yet)
Other

6.3 - Promote Parks and Pedestrian Safety
(Continued)
6 - Engagement & Well-being
OngoingEngagementPolicy Project ProgramPlanning Investment Communication Other Grow ParkRx with Salud para la Gente and
County Health
Partner with County on survey for Master Plan on
Aging and develop Age Friendly Community
Strategic Plan *
Adopt the City’s first Public Arts Master Plan
Construction of new Nature Center Building
Explore Library Book Vending Machines
Create a program to allow access to computers
Police Cadet Program
Police Youth Academy
Police Pink Patch Project
Police Neighborhood Watch Program
Police Multi-Disciplinary Team
Police Post Incident Team
Begin initial evaluation and effort to create single
log-in for city web-based services
Police Media & Communications Assistant

Assess ways of increasing productivity throughout City departments, capitalizing on using technology to streamline and increase service capacity.

Increase effective communications with the community, between departments, and with elected officials.

Attract, retain, and develop a well-qualified, diverse, and professional workforce dedicated to public service. Lead departments in talent management, succession planning, employee engagement, and positive employee relations.

City departments
leading the work
to support:

Strategies

7.1 - Increase Department Capacity

7.2 - Promote E"ective Communications

7.3 - Invest in our Human Resources
Priority 7
Deliver high-quality and efficient
services for the community through
a commitment to local government
best practices, employee retention and
development, effective communications,
and investment in technology.

Efficient & High
Performing
Government

Work Plan
Supporting the Strategic plan
2023 - 2025
The list below reflects the work that various City Departments will complete and ideas to be explored during the 2023-2025 Fiscal Years to support the advancement of the Council’s Strategic Priorities. Additional work and projects that emerge as part of continued reassessment of community needs could be added as the Council reviews progress of their Strategic Plan or as new operational needs arise.

Deliver high-quality and efficient services for the
community through a commitment to local
government best practices, employee retention
and development, effective communications, and
investment in technology.

How do we accomplish this goal
(What is needed or work you will need to do to get there?)

7.1 - Increase Department Capacity
7 - Efficient & High Performing Government Ongoing Engagement Policy Project ProgramPlanning Investment Communication Other
Coordinate timely and responsive input to develop
the Capital Improvement Program, the financial plan,
and the annual budget.

Create framework with staff to facilitate data
collection and improve data visualization
Provide technical support and project management
for energy conservation and renewable energy
projects for all City departments.

Install automated materials handling system at Main
Library; a sorting solution to improve efficiency and
enhance the patron experience
Install a check-in tablet at the one-stop permit center Determine the work required to maintain and
upgrade the City’s facilities and infrastructure.

Continue migration to Microsoft 365 and migrate
shared and department files
Continue to expand fire equipment maintenance
services.

Develop an operational and sustainability analysis of
shop operations.

Completed Ongoing
In Progress Delayed
* Voted as Council Priorities
Percentage of Completion as of February, 2024

Consolidate Airport functions/resources into two
Divisions: Operations and Administration

7.3 - Invest in our Human Resources
Provide innovative technologies that will benefit the
City operations.

Develop succession planning and training for all
departments *
Process correspondence & inquiries, Council reports,
public records requests, and personnel actions and
evaluations in a timely and accurate fashion.

Maintain proactive/timely communications with the
City Council *
Attract and retain a highly talented and
diverse workforce *
Records Management System Implementation: New
system will allow staff to respond to the public in a
transparent and efficient manner.

Update Personnel Rules and Regulations.

Deploy improved online customer account access for
payments and service.

Support employee safety and well-being.

Expanding multi-factor authentication using Azure
MFA
Update regulations, policies, and procedures to
minimize operational risks.

7.1 - Increase Department Capacity (Continued)
7 - Efficient & High Performing Government
OngoingEngagementPolicy Project ProgramPlanning Investment Communication Other Needs Assessment for the Police Department

7.2 - Promote Effective Communications

Develop and coordinate all department revenues
including water, wastewater, and solid waste rate
setting.

Additional - (Future work not identified as of yet)
Expand electronic payment methods by installing
kiosks at the payment office.

Explore Charter Amendments (Election in 2024)
Coordinate and administer the department’s
budget activities, ensuring that expenses are within
the approved appropriation.

Manage our Retirement Liability
Increase transparency and community
understanding of the City’s finances
Training for Police- Looking beyond the traditional
police training. Implement training that is more in
line with 21st century policing
Complete transition to full AMI deployment for
meter reading
Maintain an apparatus and car fleet replacement plan
that meets the needs of the community and ensures
funding is allocated for future replacements.

Modernize Financial Services
Develop Cybersecurity work-plan
Develop a plan to address data at risk from Long
term employees exiting the organization
Develop a Data Governance Policy that addresses
data classification & retention
Encourage agencies to use CC chambers for hybrid
meetings to increase participation
Identify Duplicative software & create a plan to consolidate where possible. Use ERP software to reduce the cost of docusign.

Other (Continued)
7 - Efficient & High Performing Government
OngoingEngagementPolicy Project ProgramPlanning Investment Communication Other

Independent Police Auditor
Guardian Tracking Accountability, re-enforce positive
performance
Police Axon my 90 Program
Supervisory Leadership Institure Training
for all Sergeants
Other (Continued)
7 - Efficient & High Performing Government
OngoingEngagementPolicy Project ProgramPlanning Investment Communication Other

Looking Forward
2023 - 2025
Mid-Year Update
February 2024
watsonville.gov
Economic Development
Infrastructure & Environment
Housing
Fiscal Health
Public Safety
Community Engagement & Well-being
Efficient & Well-Performing Government
• 5-year Pavement Management Plan
• Levee Reconstruction Project
• 2050 General Plan Community Outreach and
Adoption
• Continue road maintenance, parks, and library
services via Measure R
• Public Art Master Plan
• Explore incentivizing mixed-use developments
• Contracted with Grant Consultants and Financial
Advisors to support the City with new available
grants and formulate future investment plans
for the City
• Ramsay Park Renaissance
• New Nature Center
• Urban Forest Master Plan
• Summer in the City Internships
• 2025 Watsonville Academy
• Strawberry Festival, National Night Out, Fire
in the Sky
Progress made on initiatives
supporting Council Goals
5% 62% 22% 10%
29% 57% 14%
2% 64% 30% 4%
16% 9% 75%
5% 53% 32% 10%
12% 35% 29% 24%
14% 59% 22% 5%
KEY
Completed
In Progress
Ongoing
Delayed

Ramsay Park Renaissance is 100%
designed and out to bid. Expected
construction summer 2024.

The Police Department established a Chief’s
Advisory Board to better understand the
community’s needs and concerns related to
Police Department services.

Finance completed a Comprehensive
Annual Financial Report, including the
annual external audit review.

Summer Youth Academy
(PD/Fire) and Summer in
the City Program served
over 110 youth this past
summer.

Our Wayfinding Program is moving
forward towards manufacturing and
installation. Expect new signage by
the end of 2024.

Economic Development Strategic
Plan has been completed.

Establishing actionable steps in
attracting new businesses and
supporting our existing ones.

Library and Parks and Community Services
Departments partnered to spearhead the
Teen Action Council. Helping teens build
leadership skills, civic engagement, and
receive hands-on-the job and college
readiness training.

The City was awarded
$17,922,270 in grants to
support public infrastructure
improvements, police, parks,
and Library programs.

The Municipal Airport held its
first drone light show during
Fire in the Sky event in 2023.

City launched a refreshed look
of our City logo and branding.

The rollout of the updated logo is
being implemented, following a
phased approach.

Watsonville Academy remains
a favorite in our community.

The program offers residents
firsthand experience and insight
into city government.

Citywide striping for improved
visibility and pedestrian safety at 160
intersections was completed, as well
as repairs to moderately damages
streets to prevent future potholes.

Public Works issued an RFP for
consultant services to develop
a city-wide 5 year Pavement
Management Plan to help the City
privatize road maintenance and
repair.

The Environmental Impact Report for the
Downtown Watsonville Specific Plan was
approved which streamlines the review
process for upcoming projects. Council
adopted the DWSP in October 2023.

Robust community engagement
and outreach to support the 2050
General Plan Update is ongoing.

Staff continues to develop a plan to attract
new companies to Watsonville. In the
past year, we’ve welcomed nearly 20 new
businesses. Another half dozen will be
coming soon.

The Opportunity to Work Program
was relaunched, providing diverse job
opportunities within our organization
to 16 young adults. The program was
recognized by County of Santa Cruz
Workforce Development Board with a
Workforce Development Achievement
Award.
2023-2024 HIGHLIGHTS 2023-2024 HIGHLIGHTS
Library established the 2023-2025
Youth Poet Laureate. Rachel Huerta &
Eva Sophia Martinez Rodriguez have
been selected as Watsonville’s Youth
Poet Laureates.

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C:\Program Files\eSCRIBE\TEMP\2021292271\2021292271,,,Report - Mid Year Budget.docx Agenda Report
MEETING DATE: Tuesday, February 27, 2024
TO: City Council
FROM: ADMINISTRATIVE SERVICES DIRECTOR DURAN
THROUGH: CITY MANAGER MENDEZ
SUBJECT: CONSIDERATION OF COMPREHENSIVE FINANCIAL REPORT FOR FY 2022-23 AND MID-YEAR REPORT FOR FY 2023-24
STATEMENT OF ISSUES:

Receive audited financial reports for Fiscal Year 2022-23 and a mid-year financial report for FY 2023-24.

RECOMMENDED ACTION:

That the City Council:

I. Accept by motion, the Annual Comprehensive Financial Report for FY 2022-23, and
II. Accept by motion, the mid-year financial report for the 2023-24 Fiscal Year:

III. Accept by motion, the Annual Measure Y Audit Report for FY 2022-23, and IV. Approve a resolution appropriating $3,735,852 including three and a quarter in new positions into various funds as described in Attachment A.

DISCUSSION:

I. Review of Fiscal Year 2022-23
The City’s Charter and the State of California law require that all general-purpose local governments publish a complete set of financial statements presented in conformity with accounting principles generally accepted in the United States of America (US GAAP). Upon its completion, the City prepared the Annual Comprehensive Financial Report (ACFR). The ACFR was audited by Maze and Associates, a certified public accountant firm, who issued an unqualified opinion of the City's audit. This opinion indicates that the financial statements represent fairly, in all material aspects, the financial position of the City in accordance with Generally Accepted Accounting Principles (GAAP) 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.

2/22/2024 8:02:15 PM
C:\Program Files\eSCRIBE\TEMP\2021292271\2021292271,,,Report - Mid Year Budget.docx The Government Finance Officers Association of the United States and Canada (GFOA) sponsors an award program for excellence in financial reporting. The City has received this Award for excellence for 20 consecutive years. City staff believes the June 30, 2023, ACFR continues to maintain the high standards set by the GFOA and has submitted this year's ACFR for evaluation under this esteemed program.

ACFR Organization
The City’s ACFR is organized into three major sections: Introductory, Financial, and Statistical.

The following is a summary of the contents of each of these sections:

1. Introductory Section: The letter of transmittal and other information of general interest are presented in this section including the organizational chart, directory of officials as well as the Government Finance Officers Association’s Certificate of Achievement for Excellence in Financial Reporting. The letter of transmittal is an opportunity for management to provide an overview of the City’s activities, prospective information as well as subjective information useful in assessing the City’s economic condition.

2. Financial Section: The financial section includes the report of the independent auditor, management’s discussion and analysis, basic financial statements (including notes), required supplementary information and related notes, combining statements (i.e., non-major funds), and individual fund financial statements and schedules.

3. Statistical Section: The statistical section offers operational, economic, and historical data that provides a context for assessing the City’s economic condition. Such data includes information on financial trends, information on revenue capacity, information on debt capacity, demographic and economic information, and operating information.

Highlights from the audited statements include: (all figures are in thousands unless otherwise indicated):
 The City of Watsonville's assets exceeded its liabilities by $128,497. See Table 1 below.  The City's total net position increased by $22,520, with a $9,421 increase in the net position for governmental activities, mainly due to the receipts of grant funds received and higher interest earnings, sale of the Porter Building and a $13,099 increase in the net position for business type activities, mostly due to Water ending with positive operating income.
 As of the end of the fiscal year, the City's governmental funds reported a combined ending fund balance of $48,707, a $3,362 increase from the prior fiscal year. The fund balance was comprised of $27,081 restricted, and $21,626 unassigned, with much of the unassigned balance created by increases the general fund and in impact fees and Measure D during the fiscal year 2022-23, as well as budgetary expenditure savings.

General Fund Balance
The General Fund balance for the fiscal year 2022-23 was $21,626k, an increase of $3,355k from the prior fiscal year. The General Fund, which encompasses 18 subaccounts,

2/22/2024 8:02:15 PM
C:\Program Files\eSCRIBE\TEMP\2021292271\2021292271,,,Report - Mid Year Budget.docx received grant reimbursements it was awaiting from the prior year in the amount of $1MM, with the current high interest rates the general fund lastly earned $600k from investment earnings and lastly we sold the Porter building in the amount of $1.1 MM and are planning to use most of these funds for the general plan update, which is currently under way.

Additionally, we had the Ramsay project budgeted in our Capital Improvement Budget that we will be carrying forward to next fiscal year’s budget. Despite this, the General Fund balance stands at approximately 37% of operating expenses, exceeding the Council's approved policy goal of 20%. It is expected that most of the fund balance above the reserve requirement will be spent in future years.

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C:\Program Files\eSCRIBE\TEMP\2021292271\2021292271,,,Report - Mid Year Budget.docx Table 1:

City of Watsonville’s Net Position
June 30, 2023(in thousands)

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C:\Program Files\eSCRIBE\TEMP\2021292271\2021292271,,,Report - Mid Year Budget.docx Chart 1:

History of General Fund Balance
I. Review of Fiscal Year 2022-23
Revenues:

The Fiscal Year 2024 Mid-Year Budget Monitoring Report (Mid-Year Report) provides the City Council and the public with a comprehensive forecast of year-end projections for both revenues and expenditures, in funds with budgeted personnel expenditures, and compares those projections to the current fiscal year’s budget.

Property Taxes
The budget assumed a 3.1% growth in property taxes, considering the lower increase in the Consumer Price Index (CPI) for existing assessments would be offset by increases in assessed values of properties changing hands, as well as increases in supplemental and transfer taxes for properties changing hands. The current projections indicate that the city will slightly exceed the budget by around $66k in property taxes, mainly in property tax in-lieu revenues.

Sales tax
Sales tax has seen a Statewide decline in the last year in total property tax receipts. Our consultants HDL Companies tell us that Watsonville car sales surged far outpacing statewide sales in our projection. We do not expect this peak to continue but we’d expect it to stay elevated in their receipts. We are doing better than the State average in the category of car

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C:\Program Files\eSCRIBE\TEMP\2021292271\2021292271,,,Report - Mid Year Budget.docx sales. Measure R is expected to see a full year of remittance in this fiscal year. The sales tax measure is expected to bring in about $5.2MM by the end of the fiscal year.

Hotel tax
Hotel tax is performing close to budget projections. There are currently six hotels that are collecting and remitting this tax revenue to the City. Despite two hotels being taken offline for county-related housing, the opening of the Hampton Inn compensates for the loss of revenue from those two hotels.

Other General Revenues
The city's other general revenues, including utility taxes, franchise fees, and business licenses, are performing as expected and with little variation from the budget.

Departmental Revenues
The story of departmental revenues reflects the impacts of difficulty with hiring in some of our departments. In our Parks and Recreation Department, we have struggled to hire part-time staff that help us run our programs. Also, the Veteran’s Hall has been used as a shelter for our unhoused population since Covid times by the County and we are working on an agreement to lease that building from the County. The addition of the Veteran’s Hall will help us offer more programming for our youth in our community. The Community Development Department is currently on track to come in on budget, which is an improvement on last fiscal year, when we experienced a drop-in activity. The police department will have slightly less revenue than budgeted due to budgeting for two School Resource Officer contracts but only being able to provide one officer due to staffing shortages. The fire department’s revenue will be coming lower due to less than budgeted reimbursements from mutual aid and less inspector revenues coming in under budget. The public works department is showing lower than budgeted revenue in reimbursable activities, but this will be offset by expenditure savings.

Expenditures:

Most departments are staying within budget with minor savings expected. However, there are some areas where departments are facing challenges and require additional funds. 1- Fire Department
The Fire Department has experienced high overtime costs overages in this fiscal year.

Despite hiring efforts, they have several vacancies which have resulted in overtime. This time around there is not as much overtime that will be offset with mutual aid reimbursement. The department will need an additional appropriation of $603K. They have three recruits currently in training for the medical support program which aims to help recruit local EMTs to become accredited firefighters with the city. The purpose of this program is to help recruit and retain local fire fighters.

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C:\Program Files\eSCRIBE\TEMP\2021292271\2021292271,,,Report - Mid Year Budget.docx 2- Police
The Police Department is requesting an additional appropriation of $170.2k to cover overtime costs. The department has had several vacancies and injuries in the department that have contributed to the increase in overtime. They are suggesting replacing one police officer position with a police service specialist to help with patrol enforcement efforts. The additional one-year, limited term police service specialist position they are requesting will focus on increasing enforcement of recreational vehicles, help with the homeless pilot program, and address other departmental enforcement needs. Both positions are expected to help manage and reduce overall departmental overtime costs.
3- Community Development Department
The Community Development Department is coming in on budget. Statewide building/construction permits have dropped 0.8 percent in comparison to last year. The department is currently busy working on the general plan. They are not requesting any additional funds.
4- City Clerk
The City Clerk Department is coming in on budget. They have added hosting services and DocuSign services in recent years which has helped modernize the department and assist City departments become more efficient with staff reports to Council and contract management.
5- City Manager
The City Manager’s office is requesting an additional staff member. The position requested is for a Development Coordinator (Development Ombudsperson position). This staff member will be the contact point and coordinator for all development projects and will also assist in implementing the Economic Development plan currently being identified by our consultant Kosmont Financial Services through collaborations with our City Manager’s Office. To support the Economic Development plan, an additional $250,000 will be set aside to support this very important effort.

The City Manager’s Office is also seeking additional appropriations to cover our portion for the Warming Center’s cost in the amount of $66K. Our jurisdiction’s share of the expenses related to the Annual Homelessness Action Partnership in the amount of $81.6k and an additional $200k is to support homelessness efforts. These funds would be utilized to fund a pilot program to more proactively address the homelessness challenge in our community by allowing more resources to be utilized for daily contact, transition services, clean up services, and as needed enforcement. Based on the results of the pilot program which will be tracked, will help inform a more permanent allocation in future budgets.

Additionally, the City Manager’s Office entered into a reimbursable agreement with Second Harvest Food Bank in the amount of $248k. This office is requesting appropriating some of the funds to hire a limited term Senior Administrative Analyst for a one-year term to support the efforts identified in the agreement. The remaining funds would be used for this purpose as well in the form of equipment or other identified uses.

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C:\Program Files\eSCRIBE\TEMP\2021292271\2021292271,,,Report - Mid Year Budget.docx 6- Public Works
The General Fund divisions of public works cover building, street, and sidewalk maintenance and are expecting to come in below budget. Reimbursable property repairs are coming in slower this fiscal year. This is also reflected on the revenue side as we are not anticipating either cost or the revenue.
7- Parks and Community Services
The Parks and Community Services department is projected to have some savings due to programs that could potentially be offered at the Veteran’s Hall have not been offered due to slow negotiations with the County of Santa Cruz. The savings are realized in the temporary salary savings. They are also seeing increased costs in the special events area. The costs to run the Strawberry Festival for example are projected to be higher than in recent years.

They are asking for an appropriation of $7.5k for their Science Program with an offset of revenue in the same amount.
8- Measure R
Measure R spending plan was adopted in August of 2023, just a few months into the fiscal year. This new funding source significantly boosts the capacity of the Parks, Library and Streets departments enabling them to enhance and have additional funding for new programming, infrastructure, and street projects within the City. The Streets division has the biggest allocation of these funds in the current fiscal year at $3.2MM. They are currently in the design phase for the Green Valley Road and Bridge Streets projects. They are expected to bid on both these projects later this calendar year. The remaining allocated funds of $1.8MM are for the Ohlone project that will be worked on later this year. The Parks Division has been able to add programming for Older Adults, and Special Events. The Library Department is in the design phase for their outdoor café on the second floor of the library.

We are currently working with a financial advisor to issue bonds that will cover the funding gap to be able to completely pay for the Ramsay Project, City Plaza, and the Rolling Hills agreement. We anticipate having this funding secured within the next six months. 9- Other Departments
We will also be asking for more appropriations for legal services. In this fiscal year, we have had increased costs due to labor negotiations, investigations, personnel matters, and updates to the general plan. We will be requesting an additional $370k in the general fund for this increase. We will also be asking for $900k for a legal settlement for the Willowcreek case.1
Overall, all other departments are expected to end the year within their budgets, although some General Fund capital projects may not be completed as budgeted this fiscal year and will be rolled into the 2024-25 fiscal year. Tables 2 and 3 summarize all general fund appropriation requests and the overall projection for the general fund for FY 2023-24. Table 2 below shows a summary of all general fund appropriations requests. Table 3 summaries the overall projection for the general fund for FY 2023-24.

1 Based on the expected fund balance and current fiscal position of the budget, the capacity exists to cover this legal settlement without having to utilize General Fund Reserves.

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C:\Program Files\eSCRIBE\TEMP\2021292271\2021292271,,,Report - Mid Year Budget.docx Table 2: Summary of General Fund Appropriation Requests General Fund
Revenue Expense
OTHER Legal Costs 370,000
Settlement 900,000
Warming Centers 62,000
County Homelesness Share 81,614
Homeless Efforts 200,000
Cloud Upgrade 80,290
Economic Development 250,000
City Manager Redevelopment Manager 153,494
FIRE Fire 603,000
Parks Science Workshop 7,500
980
4,420
2,100
Police Support Services 85,000
Police - Operations 85,200
Eliminate 1 Police Officer Position (62,279)
Police Service Specialist 40,058
Police Service Specialist - 1 year 40,058
TOTALS 7,500 2,895,935

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C:\Program Files\eSCRIBE\TEMP\2021292271\2021292271,,,Report - Mid Year Budget.docx Table 3: General Fund Summary for Fiscal Year 2023-24

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C:\Program Files\eSCRIBE\TEMP\2021292271\2021292271,,,Report - Mid Year Budget.docx Other Funds
The Airport Fund ended the FY 2022-23 with $817,181 in cash, despite facing challenges such as fuel costs. The department's conservative approach to revenue projections helped them to end the year on a strong note. They are expected to increase their cash balance by $732,000 at the end of FY 2023-24.

On the other hand, the Utility Enterprise Funds for Water, Sewer, and Solid Waste are witnessing normal revenues and were able to secure state grants to pay aging account balances for customers during the pandemic. These funds expect to fully expend their operating budgets, but not their capital budgets, which will result in an increase in their cash balances by the end of the fiscal year. Additionally, the utilities are requesting to increase a 75% Nature Center Coordinator to a full-time position, however they will be reducing other contract services in the same amount needed to make this change. They are also proposing an increase to other contract costs for their environmental & sustainability division in the amount of $30,000.

Revenues from sales tax are the primary source for the Library, Measure D, and Measure Y funds, and as a result, these funds are projected to have better revenues in FY 2023-24 than originally projected. Each of these funds also plans to fully expend their operating budgets and have some savings in capital, leading to an increase in their cash balances and the availability of one-time funds for future projects.

Gas Tax and SB1 revenues are driven more by the number of miles driven than by the cost of gasoline. They are not projected to have major fluctuations in their revenue projections though likely will have savings from capital projects that will not be completed this year. They will likely roll those projects forward and complete them in future years.

In Information and Technology internal service fund accumulated a balance of approximately $1.9 million in the prior year. The budget anticipated spending much of that down on citywide infrastructure projects such as the upgrade of the council chamber and replacing servers, switches, and other major hardware. The department is going through some growth and transition to provide the needed level of service to other departments. The department is currently working on modernizing City IT by replacing a failing 18-year-old phone system throughout all departments. IT is also working to continually increase cybersecurity awareness and enhancements through all upgrades and new systems purchased. IT introduced new, updated service desk software that follows current Information Technology Service Management (ITSM) and incorporates a service desk for Facilities. The IT Department will initiate a new project to modernize the City’s ERP System, transitioning from on-premises to cloud-based infrastructure. This migration will ensure that we always have the latest applications and technology, guaranteed service levels, and faster support for our issues. This initiative also covers expenses for upgrading to the newest software version of Munis. The extra expenses for this migration amount to $137k and will be distributed among all our funds.

We will also be requesting an appropriation for our Library Department (0250) to be able to bring up minimum wages to $20 per hour in response to the fast-food state increase in hourly wages.

2/22/2024 8:02:15 PM
C:\Program Files\eSCRIBE\TEMP\2021292271\2021292271,,,Report - Mid Year Budget.docx We want to be able to maintain our employees and stay competitive in our wages for our temporary staff. The request is for an additional appropriation of $13,500. Additionally, our Housing Division (0221) will be requesting appropriation of $81,614 to pay for an outstanding County of Santa Cruz Housing Invoice. We are also requesting a $75,000 new appropriation in our Public Arts Fee Fund (0274) to be able to pay for contract services for this program. The Carbon Fund (0311) will be requesting $10,000 for EV electrical stations work. Lastly, we will be requesting an additional appropriation in the Worker’s Compensation Fund (0780) for a $325,000 claim, we will also receive an additional $284,327 from our Insurance Provider as we have met our stop loss point of attachment for this claim.

The Municipal Service Center Vehicle Shop, a new internal service fund in its third year, manages the maintenance of all city vehicles. The fleet manager is making changes to the operation to yield a more efficient and data-driven fleet management. This division is facing increased costs for fuel and vehicle parts but was able to build these into their budget and is expected to absorb the increases.

For a summary of all non-General fund appropriation requests and major other funds, see tables 4 and 5.

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C:\Program Files\eSCRIBE\TEMP\2021292271\2021292271,,,Report - Mid Year Budget.docx Table 4: Summary of Non-General Fund Appropriation Requests Next Steps
The mid-year report officially marks the beginning of the budget season for Fiscal Year 2024-

25. Based on the report's findings and projections, an updated five-year projection and budget outlook will be developed. In early March, budget instructions will be provided to departments to use in preparing their budget proposals to the City Manager by March 31st. Throughout the rest of the fiscal year, both revenues and expenditures will be closely monitored and any necessary updates to the projections will be made at the end of the third quarter in April or May. On June 11th, a proposed FY 2024-25 budget will be submitted to the Council for review and approval.

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C:\Program Files\eSCRIBE\TEMP\2021292271\2021292271,,,Report - Mid Year Budget.docx Table 5: Summary of Other Funds for FY 2023-24

2/22/2024 8:02:15 PM
C:\Program Files\eSCRIBE\TEMP\2021292271\2021292271,,,Report - Mid Year Budget.docx STRATEGIC PLAN:
04-Fiscal Health: the report above specifically meets strategic plan goal number 4 by keeping the Council and the public informed as to the status of the City’s finances. In addition, it is critical to supporting all the other goals.

FINANCIAL IMPACT:

The proposed appropriations listed in Attachment 1 amount to $3,735,852 and are funded by $539,920 in revenue, with the remainder of the requests being covered using fund balance and budget savings from various funds that have the capacity to absorb these additional expenditures within their operating budgets.

ALTERNATIVE ACTION:

The Council has the discretion to accept some, all, or none of the recommendations presented to them.

ATTACHMENTS AND/OR REFERENCES (If any):

A: Recommended Appropriation Detail
B: Annual Comprehensive Financial Report for FY 2022-23 C: Annual Measure Y Audit Report for FY 2022-23

Attachment A
Mid Year 23/24 Review Appropriation Request
General Fund
Revenue Expense
OTHER Legal Costs 130-7303 370,000
Settlement 280-7302 900,000
Warming Centers 280-7361 62,000
County Homelesness Share 280-7361 81,614
Homeless Efforts 280-7361 200,000
Cloud Upgrade 280-7361 80,290
Economic Development 280-7361 250,000
City Manager Redevelopment Manager 120-7011-7067 Salary & Benefits 153,494 FIRE Fire 450-7012 Overtime 603,000
Parks Science Workshop 694-5895 Other Revenue 7,500
694-7011 Wages 980
694-7021-09048 Temporary Wages 4,420
694-7559-09048 Other Supplies 2,100
Police Support Services 409-7012 Overtime 85,000
Police - Operations 410-7012 Overtime 85,200
Eliminate 1 Police Officer Position 410-7011 to 7067 Salaries & Benefits (62,279) Police Service Specialist 410-7011 to 7067 Salaries & Benefits 40,058 Police Service Specialist - 1 year 410-7011 to 7067 Salaries & Benefits 40,058 TOTALS 7,500 2,895,935
Other Funds
Revenue Expense
Airport Cloud Upgrade 560-7361 Contract Services 3,381
Library Increase Minimum Wage 620-7021 Temporary Wages 13,500 Cloud Upgrade 620-7361 Contract Services 7,522
Carbon Fund EV charging stations 325-7361 Contract Services 10,000 CDD-RAH County Homelesness Share 221-347 Contract Services 81,614 Grants Fund Senior Administrative Analyst 339-7011 Salary & Benefits 128,000 (City Manager's Office) Second Harvest Agreement - costs 339-7361 other costs as identified 120,093 Second Harvest Agreement 339-5890 reimbursement agreement 248,093 PW Increase of .75 position to full time 540-7011 to 7067 Salary & Benefits 36,000 540-7361 Other Contract Services (36,000)
Environmental & Sustainability 543-7361 Contract Services 30,000 PW- Wastewater Cloud Upgrade 530-7361 Contract Services 18,002 PW- Water Cloud Upgrade 596-7361 Contract Services 12,508 PW- Solid Waste Cloud Upgrade 570-7361 Contract Services 15,297 PCS Public Arts 0274-928-7361 Contract Services 75,000
Workers Compensation Reimbursement of Claim 291-5819 WC Stop Loss 284,327 Claim Payment 291-7712 Compensation Claim 325,000
TOTALS 532,420 839,917
TOTALS APPROPRIATION REQUEST 539,920 3,735,852

watsonville.gov
Annual Comprehensive
Financial Report

FISCAL YEAR ENDING
JUNE 30, 2023
Attachment B

Attachment B

City of Watsonville, California
ANNUAL

COMPREHENSIVE

FINANCIAL
REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
Prepared by the Finance Department
Marissa Duran, Administrative Services Director
Attachment B

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Attachment B

CITY OF WATSONVILLE, CALIFORNIA
Annual Comprehensive Financial Report
Fiscal Year Ending June 30, 2023

TABLE OF CONTENTS
I. INTRODUCTORY SECTION:

Transmittal Letter .................................................................................................................... 1 GFOA Certificate of Achievement ......................................................................................... 7 Officers and Officials .............................................................................................................. 8 Organizational Structure .......................................................................................................... 9 II. FINANCIAL SECTION:

Independent Auditor’s Report ............................................................................................... 11 Management’s Discussion and Analysis ............................................................................... 15 Basic Financial Statements:

Government-wide Financial Statements:

Statement of Net Position. ........................................................................................ 28 Statement of Activities .............................................................................................. 30 Fund Financial Statements:

Balance Sheet – Governmental Funds ...................................................................... 32 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position ............................................................................ 34 Statement of Revenues, Expenditures, and Changes in
Fund Balances – Governmental Funds. ................................................................. 36 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities ............ 38 Statement of Revenues, Expenditures, and Changes in
Fund Balance – Budget and Actual – General Fund ............................................. 39 Statement of Revenues, Expenditures, and Changes in
Fund Balance – Budget and Actual – Housing Fund ............................................ 40 Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – Redevelopment and Housing Grants Fund .......................... 41 Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – American Rescue Plan Act Fund ......................................... 42 Statement of Net Position – Proprietary Funds ........................................................ 44 Statement of Revenues, Expenses, and Changes in
Net Position – Proprietary Funds ........................................................................... 46 Statement of Cash Flows – Proprietary Funds ......................................................... 48 Statement of Fiduciary Net Position – Successor Agency
Private Purpose Trust Fund .................................................................................... 50 Statement of Changes in Fiduciary Net Position – Successor Agency Private Purpose Trust Fund .................................................................................... 51 Notes to Financial Statements ............................................................................................... 53

Attachment B

CITY OF WATSONVILLE, CALIFORNIA
Annual Comprehensive Financial Report
Fiscal Year Ending June 30, 2023
TABLE OF CONTENTS (Continued)
Required Supplementary Information (Unaudited)
Schedule of Changes in the Net Pension Liability and Related Ratios – Miscellaneous Pension Plan ................................................................................. 100 Schedule of Contributions – Miscellaneous Pension Plan ..................................... 102 Schedule of Proportionate Share of Net Pension Liability – Safety Pension Plan .............................................................................................. 103 Schedule of Contributions – Safety Pension Plan .................................................. 104 Supplementary Information:

Combining and Individual Fund Statements and Schedules:

Combining Balance Sheet – Nonmajor Governmental Funds ..................................... 108 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Governmental Funds .................................................. 110 Schedule of Revenues, Expenditures, and Changes
in Fund Balances – Budget to Actual:

Gas Tax and Narcotics Assets Seizure Funds ..................................................... 112 Business Development and Economic Development Funds ............................... 113 Library and Parks Development Funds ............................................................... 114 Retirement Tax and Parking Garage Funds. ........................................................ 115 Measure G/Y and Abandoned Vehicle Funds. .................................................... 116 Inclusionary Housing and SB 1 – Gas Tax Fund ................................................ 117 Measure D Fund ................................................................................................... 118 Schedule of Revenues, Expenditures, and Changes
in Fund Balances – Budget and Actual:

Debt Service Fund ................................................................................................ 119 III STATISTICAL SECTION (Unaudited):

Net Position By Component – Last Ten Fiscal Years ............................................ 123 Changes In Net Position – Last Ten Fiscal Years .................................................. 124 Fund Balances of Governmental Funds – Last Ten Fiscal Years .......................... 126 Net Change In Fund Balances of Governmental Funds – Last Ten Fiscal Years ............................................................................................... 127 General Governmental Tax Revenues By Source – Last Ten Fiscal Years ........... 128 Assessed Value and Estimated Actual Value of Taxable Property. ....................... 129 Property Tax Rates – Direct and Overlapping – Last Ten Years ........................... 130 Principal Property Taxpayers – Current Year and Nine Years Ago ..................... 131 Property Tax Collection – Last Ten Fiscal Years ................................................... 132 Ratio of Outstanding Debt By Type – Last Ten Fiscal Years ................................ 133 Ratio of Net General Obligation Debt Outstanding – Last Ten Fiscal Years ........ 134 Attachment B

CITY OF WATSONVILLE, CALIFORNIA
Annual Comprehensive Financial Report
Fiscal Year Ending June 30, 2023
TABLE OF CONTENTS (Continued)
III STATISTICAL SECTION (Unaudited) (Continued):

Legal Debt Margin Information – Last Ten Fiscal Years ...................................... 135 Computation of Direct and Overlapping Bonded Debt .......................................... 136 Demographic and Economic Statistics – Last Ten Fiscal Years ............................ 137 Principal Employers – Current Fiscal Year and Ten Years Ago ........................... 138 Full-time Equivalent City Government Employees by Function – Last Ten Fiscal Years ....................................................................................... 139 Operating Indicators by Function – Last Ten Fiscal Years .................................... 140 Capital Assets Statistics by Function – Last Ten Fiscal Years .............................. 141 Attachment B

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Attachment B

INTRODUCTORY

SECTION
Attachment B

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Attachment B

Department of Finance
“Working with our community to create positive impact through service with heart.” 831-768-3100
[email protected]
www.watsonville.gov
Administration
275 Main Street, Suite 400
Watsonville, CA 95076
December 26, 2023
Honorable Mayor, City Council and Citizens of the City of Watsonville:

REPORT PURPOSE AND ORGANIZATION
We are pleased to present the City of Watsonville’s Annual Comprehensive Financial Report (ACFR) for the fiscal year ended June 30, 2023. The ACFR is intended to present information above, what is required by generally accepted accounting principles and State law.

The Charter of the City of Watsonville and the State of California law require that all general-purpose local governments publish within six months of the close of the fiscal year a complete set of financial statements presented in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP). The report should also be audited by an independent firm of certified public accountants (CPA) in accordance with generally accepted government auditing standards (GAGAS). Pursuant to the requirements, we hereby issue the comprehensive annual financial report of the City of Watsonville for the fiscal year ended June 30, 2023.

The ACFR consists of management’s representation concerning the finances of the City of Watsonville (City). Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management of the City has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City of Watsonville’s financial statements in conformity to U.S. GAAP. Because the cost of internal controls should not outweigh their benefits, the City of Watsonville’s comprehensive framework of internal controls has 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.
1 Attachment B

Department of Finance
“Working with our community to create positive impact through service with heart.” 831-768-3100
[email protected]
www.watsonville.gov
Administration
275 Main Street, Suite 400
Watsonville, CA 95076
Audited Financial Statements
Certified Public Accountants have issued an unmodified (“clean”) opinion on the City of Watsonville’s financial statements for the fiscal year ending June 30, 2023. A copy of this report is included in page 11 in the Financial Section of this report.

The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a 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 U.S. GAAP. The independent auditors’ report is presented as the first component of the financial section of this report.

The independent audit of the financial statements of the City of Watsonville also incorporates a broader, federally mandated Single Audit Uniform Guidance designed to meet the special needs of federal grantor agencies. The standards governing the Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government’s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in the City of Watsonville’s separately issued Single Audit Report.

GAPP 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 MD&A and should be read in conjunction with it. The City of Watsonville’s MD&A can be found immediately following the report of the independent auditors.

CITY OF WATSONVILLE PROFILE
The City of Watsonville was incorporated in 1868 and is located six miles inland from the Monterey Bay in the State of California. The government has a land area of 6.19 square miles and a population of 52,590 people based on the US Census 2020 Census.
2 Attachment B

Department of Finance
“Working with our community to create positive impact through service with heart.” 831-768-3100
[email protected]
www.watsonville.gov
Administration
275 Main Street, Suite 400
Watsonville, CA 95076
Watsonville became a charter City government in 1908. Policymaking and legislative authority are vested in the governing City Council, which consists of seven Council Members, one of whom serves as mayor. The mayor is appointed on a sequential basis from each of the numbered City Council districts and serves for a term of one year. The council is elected on a non-partisan basis from seven electoral districts.

Council members are elected to four-year terms. Elections are staggered with four Council Members elected during one election and three Council Members elected in the following election two years later. The governing City Council is responsible, among other things, for passing ordinances, adopting the budget, appointing committees, and hiring the government's City Manager, City Clerk, and Attorney. The City Manager is responsible for carrying out the policies and ordinances of the governing council, for overseeing the day-to-day operations of the government, and for appointing the department heads.

City Services
The City of Watsonville provides a full range of services including police and fire protection; water treatment and distribution; solid waste collection and disposal; sanitary sewer collection and treatment; airport facilities; building inspection, planning, economic development, housing rehabilitation, and general government services; library; recreation; parks; street construction and maintenance; and general administration.

The financial reporting entity of the City includes all the funds of the City of Watsonville, as well as all of its component units. Component units are legally separate entities for which the primary government is financially accountable. The Successor Agency of the City of Watsonville Redevelopment Agency’s information in this year’s financial report is presented separately as part of the fiduciary statements.

Additional information can be found on this entity starting on page 95 within the notes to the financial statements.

Budgetary Process and Controls
The annual budget serves as the foundation for the City of Watsonville’s financial planning and control. All departments of the City of Watsonville are required to submit requests for appropriations to the government’s management on or before March 31 of each fiscal year. The Finance Department uses these requests as a starting point for developing a proposed budget. The Finance Department then presents this proposed budget to the Council for review prior to May 31. The Council is required to hold public hearings on the proposed budget and to adopt a final budget by no later than June 30, the close of the City of Watsonville’s fiscal year. The appropriated budget is prepared by fund (i.e. General Fund, Water), department (i.e., police), and division (i.e., investigation).
3 Attachment B

Department of Finance
“Working with our community to create positive impact through service with heart.” 831-768-3100
[email protected]
www.watsonville.gov
Administration
275 Main Street, Suite 400
Watsonville, CA 95076
Department directors may make transfers of appropriations within a department.

Transfers of appropriations between departments, however, require the special approval of the City Manager. Budget to actual comparisons is provided in this report for each individual governmental fund for which an appropriated annual budget has been adopted. The general fund, housing fund, and redevelopment and housing grants fund comparisons are presented on pages 39 to 42 as part of the basic financial statements for the governmental funds. For governmental funds, other than major funds, with appropriated annual budgets, these comparisons can be found in the governmental fund subsection of this report, which starts on page 112.

FACTORS AFFECTING FINANCIAL CONDITON
The budget for Fiscal Year 2022-23 assumed a return to normalcy with a normal level of revenue growth after the unpredictability of the pandemic. As the economy remains uncertain in the fourth year after the COVID-19 pandemic, we are optimistic about the future but remain optimistic about the future. While the inflation rate peaked and declined, it remains at about 3.7% nationally. The General Fund budget assumed a normal level of growth. We have budgeted to spend some of our fund balance to fund Ramsay Park. We ended the year with an increase to the fund balance in the General Fund of $3MM. Controlled spending and moderate increases in our revenues have contributed to this increase.

The CPI (Consumer Price Index) is used by the U.S. Bureau of Labor Statistics to measure inflation. The September 2023 CPI-U (Consumer Price index for all Urban Consumers) increased 3.7 percent over the last 12 months. Core CPI (CPI less food and energy) is 4.1 percent compared to 6.6 percent in September 2022. Core CPI represents a more accurate picture of underlying inflation trends since volatile food and energy products are excluded. While the global economic activity remains uncertain, the U.S.

Bureau of Labor Statistics’ Employment Projections for 2022-2023 shows a projected growth from 164.5 million to 169.1 million over the 2022-32 decade.

Local Economy
Despite the confusion brought by the pandemic, Watsonville was able to end the fiscal year on a positive note, driven by year-over-year tax increases and responsible spending and savings on the part of our departments.

Property taxes saw an increase of $824k from FY 2021-2022. Property tax collections in FY 2022-23 were driven by assessments and increases in supplemental taxes that were set the prior year. We saw less transfer taxes than in the prior years, which are a direct result of higher interest rates. The doubling of the 30-year mortgage interest rates to over 6.5% during the latter of calendar year 2022 and still to this day appears to be reducing the demand to purchase homes.
4 Attachment B

Department of Finance
“Working with our community to create positive impact through service with heart.” 831-768-3100
[email protected]
www.watsonville.gov
Administration
275 Main Street, Suite 400
Watsonville, CA 95076
In November 2022, voters approved Measure R, a half-cent sales tax on most goods sold within Watsonville. This tax became effective April 1, 2023. While this is a general-purpose tax, it will solely be used to primary support investment in street maintenance, pothole repairs, parks and recreation, library services, employment opportunities and services for seniors. There is an estimated $5 million that will be generated annually from this tax.

The biggest increase continues to be Sales tax revenues, we saw an increase of $930k from FY 2021-2022. We have recovered very well and are seeing the impact of inflation on our increased revenue. Auto sales were strong in this fiscal year and contributed to the increase in this revenue. The largest decreases came from fuel service stations as falling fuel prices at the pump reduced receipts from gas stations and petroleum providers. Consumption of goods is generally lower as general retail is softening in our state. Sales tax for the remainder of 23 appears likely to follow the recent trend of moderate declines before leveling off in 2024. Cooling consumer confidence and greater pressure on household budgets may lead to a lackluster upcoming holiday shopping period. Below is a graph that shows the percentage or receipts by category for the Sales tax receipts in FY 2023 (provided by HDL):

Watsonville is a strong and resilient community with a history of doing more with less.

We are on a good path and with slow and steady steps we will stay there. 5 Attachment B

Department of Finance
“Working with our community to create positive impact through service with heart.” 831-768-3100
[email protected]
www.watsonville.gov
Administration
275 Main Street, Suite 400
Watsonville, CA 95076
Independent Audit
Each year the City requires an independent annual audit of the City's financial records, the results of its operations, and cash flows. This report includes the opinion of the City's independent auditors, Maze & Associates, for the basic financial statements of the City. In addition, the document also contains the auditors' 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.

Awards and Acknowledgements
The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Watsonville, California for its annual comprehensive financial report (ACFR) for the fiscal year ending June 30, 2022. This was the twentieth consecutive year that the government has received this prestigious award. To be awarded a Certificate of Achievement, the government must publish an easy, readable, and efficiently organized ACFR. The report satisfies both U.S. GAAP and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. We believe that our current ACFR meets the Certificate of Achievement Program’s requirements, and we are submitting it to GFOA to determine its eligibility for another certificate. In addition, the City has received the GFOA’s Award for Distinguished Budget Presentation for its biennial budget dated June 30, 2022. To qualify for the Distinguished Budget Presentation Award, the government’s budget document was judged to be proficient in several categories, including policy documentation, a financial plan, and a communication device.

The preparation of this report could not have been accomplished without the efficient and dedicated service of the Finance Department staff. We would like to express our appreciation to all members of the department who assisted and contributed to the preparation of this report. Brenda Castillo, Ilda Estrada, Jorge Ortiz, and Patricia Rodriguez deserve special recognition for their contribution to the report. The following remaining Finance Staff made this report possible through their dedicated service throughout the fiscal year: Elizabeth Quiroz, Christine McGrath, Diana Rivas, and Mary Stepovich. The mayor and the governing council should also be given due credit for their interest and support in managing the City of Watsonville in a responsible and progressive manner.

Respectfully submitted,
Administrative Services Director
6 Attachment B

Government Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Watsonville
California
For its Annual Comprehensive
Financial Report
For the Fiscal Year Ended
June 30, 2022
Executive Director/CEO
7 Attachment B

City of Watsonville, California
Officers and Officials
For the Fiscal Year End June 30, 2023
City Council:

Mayor – Eduardo Montesino
Mayor Pro Tempore –Vanessa Quiroz-Carter
Council Member – Maria Orosco
Council Member – Casey Clark
Council Member – Krystal Salcido
Council Member – Jimmy Dutra
Council Member – Ari Parker
City Officials:

City Manager – Rene Mendez
City Clerk – Irwin Ortiz
Fire Chief – Rudy Lopez
Administrative Services Director – Marissa Duran
Police Chief – Jorge Zamora
Public Works Director – Courtney Lindberg
Library Director – Alicia Martinez
Community Development Director – Suzi Merriam
Parks and Community Services Director – Nick Calubaquib Airport Director – Rayvon Williams
8 Attachment B

COUNCIL MEMBER -MARIA OROZCO

SAMANTHA ZUTLER

WATSONVILLE

GOVERNING BODY

ORGANIZATIONAL STRUCTURE
FISCAL YEAR 2022 - 2023

CITIZENS

CITY COUNCIL

MAYOR - EDUARDO MONTESINO

MAYOR PRO TEMPORE -VANESSA QUIROZ-CARTER

COUNCIL MEMBER - CASEY CLARK

COUNCIL MEMBER - KRYSTAL SALCIDO

FINANCE

MARISSA DURAN

LIBRARY

ALICIA MARTINEZ

COUNCIL MEMBER - JIMMY DUTRA

COUNCIL MEMBER - ARI PARKER

CITY ATTORNEY CITY MANAGER CITY CLERK
RENE MENDEZ IRWIN I. ORTIZ
POLICE

JORGE ZAMORA
FIRE
RUDY LOPEZ SR.

PUBLIC WORKS/UTILITIES

COURTNEY LINDBERG

AIRPORT

RAYVON WILLIAMS

PARKS & COMMUNITY

NICK CALUBAQUIB

SERVICES

COMMUNITY DEVELOPMENT

SUZI MERRIAM

REDEVELOPMENT & HOUSING

SUZI MERRIAM

INFORMATION SERVICES

BRANDON GIL
9 Attachment B

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Attachment B

INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor and Members of the City Council
City of Watsonville, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Watsonville, California (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 financial statements referred to above 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 and the respective budgetary comparisons listed in the Table of Contents as part of the basic financial statements 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 and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirement 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.

Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of these 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 the 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. 11 Attachment B

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

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

Change in Accounting Principles
Management adopted the provisions of the Governmental Accounting Standards Board Statement No. 96 – Subscription-Based Information Technology Arrangements (SBITA’s), which became effective during the year ended June 30, 2023 and required the restatement of net position and required the City to record certain subscription related balances and activity as discussed in Note III-F in the financial statements.

The emphasis of this matter does not constitute a modification to our opinions. 12 Attachment B

Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis and other required supplementary information 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 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 accompanying Supplementary Information, as listed in the Table of Contents, is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Supplementary Information 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 Section and Statistical Section listed in the Table of Contents, but does not include the basic financial statements and our auditor’s report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon.

In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.
13 Attachment B

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 26, 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 the City’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.

Pleasant Hill, California
December 26, 2023
14 Attachment B

CITY OF WATSONVILLE, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS
As management of the City of Watsonville, we offer readers of the City of Watsonville’s financial statements this narrative overview and analysis of the financial activities of the City of Watsonville 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 1 - 6 of this report. All amounts, unless otherwise indicated, are expressed in thousands of dollars.

Fiscal Year 2023 Financial Highlights
• The assets and deferred outflows of the City of Watsonville exceeded its liabilities and deferred inflows at the close of the most recent fiscal year by $287,546. • The City’s deferred outflow of resources-Pension totaled $43,598 and its deferred inflow of resources-Pensions totaled $8,675.
• The City’s liabilities totaled $163,419.
• The City’s total net position increased by $22,519. Governmental activities net position increased by $9,420 most of this increase is due to the passage of Measure R by our voters in November 2022. The city was able to collect one quarter of this new sales tax in the 2023 fiscal year. Absent this new tax, the City’s sales tax revenues would have been relatively flat.

As well as we saw increase in Property taxes due increases in supplemental tax receipts.

Business type activities net position increased by $13,098. Most of this increase was from Water, Sewer and Solid Waste funds ending with positive operating income. • As of the close of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $48,708, an increase of $3,361 in comparison with the prior fiscal year’s balances. The restricted portion was $27,419 and the unassigned amount was $21,288 which is an increase of $3,442 from the prior fiscal year.

Overview of the Financial Statements
This discussion and analysis is intended to serve as an introduction to the City of Watsonville’s basic financial statements. The City of Watsonville’s basic financial statements comprise 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 of Watsonville’s finances, in a manner similar to a private-sector business.

The Statement of Net Position presents information on all of the City of Watsonville’s assets and liabilities, with the difference between the two reported as net position. Increases or decreases in net position may serve as a useful indicator of whether the financial position of the City of Watsonville is improving or deteriorating overtime.
15 Attachment B

The Statement of Activities presents information showing how the City of Watsonville’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 or related cash flows. Thus, revenues and expenses are reported in this statement for some items that will result in cash flows in future periods (e.g. uncollected taxes).

Both of the government-wide financial statements distinguish functions of the City of Watsonville 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 of Watsonville include general government, public safety, housing, streets, and culture and recreation. The business-type activities of the City of Watsonville include water, sewer, solid waste, airport, and fiber optic activities.

The government-wide financial statements can be found on pages 28 to 30 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 Watsonville, 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 of Watsonville can be divided into three categories: governmental funds, proprietary 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 nearterm 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 evaluation of a government’s near-term financing requirements.

Because the focus of governmental funds is narrower than that of 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 funds balance sheet and the governmental fund statements of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

The City of Watsonville maintains eighteen individual governmental funds. Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances for the general fund, impact fees fund, housing fund, redevelopment and housing grants fund, American rescue plan act fund and general debt service fund which are all major funds. Data for the other thirteen governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report.

The City of Watsonville adopts a biennial budget (one year adopted and one year proposed) for all its governmental funds.
16 Attachment B

The basic governmental fund financial statements can be found on pages 32 to 38 of this report.

Proprietary funds. The City of Watsonville maintains two types of proprietary funds; Enterprise and Internal Service funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City of Watsonville uses enterprise funds to account for Water, Sewer, Solid Waste, Airport and Fiber Optic operations.

Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary funds financial statements provide separate information for the water, sewer, solid waste, airport and fiber optic operations, all of which are considered to be major funds of the City of Watsonville.

Internal service funds are an accounting device used to accumulate and allocate costs internally among the City of Watsonville’s various functions. The City of Watsonville uses an internal service fund to account for insurance activities of the City. The fund predominantly benefits governmental funds rather than business-type functions, and it has been included within governmental activities in the government-wide financial statements. Conversely, the internal service fund is presented in the proprietary funds’ financial statements.

The basic proprietary funds financial statements can be found on pages 44 to 49 of this report.

Fiduciary fund. Fiduciary funds are used to account for resources held for the benefit of parties’ outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City of Watsonville’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds.

The basic fiduciary fund financial statements can be found on pages 50 to 51.

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 53 to 97 of this report.

Other information. In addition to the basic financial statements and accompanying notes, required supplementary information, combining statements and schedules referred to earlier in connection with non-major governmental funds are presented immediately following the notes to the financial statements. Combining and individual fund statements and schedules can be found on pages 108 to 111 of this report.

Government-wide Financial Analysis
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 Watsonville, assets and deferred outflows exceeded liabilities and deferred inflows by $287,546 at the close of the most recent fiscal year.
17 Attachment B

By far the largest portion of the City of Watsonville’s net position $213,386 reflects its investment in capital assets (e.g., land, buildings and improvements, machinery, work in progress, and infrastructure) less any related outstanding debt used to acquire those assets. The City of Watsonville uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City of Watsonville’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.

An additional portion of the City of Watsonville’s net position $27,082 represent resources that are subject to external restrictions on how they may be used by creditors (such as through debt covenants), grantors, contributions or laws or regulations of other governments. The remaining balance of unrestricted net position $47,079 is unrestricted and available for next year’s operations at the direction of the City Council.

City of Watsonville’s Net Position
June 30, 2023
(in thousands)
At the end of the current fiscal year, the City of Watsonville is able to report positive balances in net investment in capital assets and restricted net position for the government as a whole.

Governmental Business-type
Activities Activities
2023 2022 2023 2022 2023 2022
$$ $ $
Current and other assets 113,308 106,080 113,479 219,388 66,399 179,878 Capital assets 115,364 113,358 101,659 81,291 196,655 215,017 Total Assets 228,672 187,371 226,837 168,058 416,043 394,895 Deferred outflows of resources 34,527 15,666 3,546 9,072 43,599 19,212 Total Defered Outlfows of Resources 34,527 15,666 3,546 9,072 43,599 19,212 Long-term liabilities outstanding 85,911 44,144 49,209 26,228 130,055 75,437 Other Liabilities 29,473 32,620 4,175 3,892 33,365 36,795 Total Liabilities 115,384 48,036 81,829 30,403 163,420 112,232 Deferred inflows of resources 4,279 26,558 10,288 4,397 36,846 8,676 Total Defered Outlfows of Resources 4,279 26,558 10,288 4,397 36,846 8,676 Net Position:

Net Investment in capital assets 113,121 100,264 111,205 213,385 96,016 207,221 Restricted 27,082 27,012 27,012 27,082
Unrestricted 3,333 43,746 (4,102) 34,895 47,079 30,793
Total Net Position 143,536 144,010 134,115 130,911 287,546 265,026 Total
18 Attachment B

City of Watsonville
Summary of Changes in Net Position
For the Fiscal Year Ending June 30, 2023
(in thousands)
Governmental Activities. Governmental activities increased the City of Watsonville’s Net Position by $9,420. Key elements of this increase are as follows:
• Governmental revenues saw an increase in charges for service at about $3,244 and a combined increase in Sales Tax and Property Taxes at about $1,744. Investment Interest Revenue saw an increase of $1,592, this is a result of a higher earnings rate than in the last year. There were other minimal increases in other tax categories and charges for services were relatively flat offset by increases in grants and contributions.
• Governmental spending increased by $5,229 primarily in general government and streets and public safety. The increase in spending is primarily due to the city being able to complete street projects and increases in Public Safety costs.
19 Attachment B

For the fiscal year ending June 30, 2023
Expenses and Program Revenues
Governmental Activities
Revenues by Source
Governmental Activities

20 Attachment B

Business-type activities. Business-type activities increased the City of Watsonville’s net position by $13,099. Key elements of this increase are as follows:

For the fiscal year ending June 30, 2023
Expenses and Program Revenues
Business-type Activities
• Charges for services increased in comparison to last fiscal year by $3,872, this was mainly due to a 7% rate increases for Sewer and Solid Waste Funds other revenues increased by $2,047, this was mainly due to higher interest rates bringing in increases in investment interest. • The Funds had an increase in spending, mostly due to more capital spending and an increase in pension obligation costs.
21 Attachment B

For the fiscal year ending June 30, 2023
Revenues by Source
Business-type Activities
Financial Analysis of the City of Watsonville’s Funds
As noted earlier, the City of Watsonville uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

Governmental funds. The focus of the City of Watsonville’s 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 Watsonville’s financing requirements. In particular, restricted fund balances for specific proposes may serve as a useful measure of a government’s net resources available for spending on various activities at the end of the fiscal year.

As of the end of the current fiscal year, the City of Watsonville’s governmental funds reported combined ending fund balances of $48,708, an increase of $3,361 in comparison with the prior year. The largest portion of fund balances is restricted for specific purposes and the largest restricted portion is for impact fees in the amount of $6,990 and the housing fund at $3,420. This balance is for projects that have been budgeted, planned or will be completed within the next five years. The remainders of fund balances are either non-spendable or unassigned at year end. The non-spendable portion of fund balances represents the amounts of funds that cannot be spent because they are either not in spendable form or legally required to remain intact. Unassigned fund balances represent amounts which are unconstrained in that they may be spent for any purpose.
22 Attachment B

The General Fund is the chief operating fund of the City of Watsonville. At the end of the current fiscal year, the charter reserve of the General Fund was $2,450. As a measure of the General Fund’s liquidity, it may be useful to compare both the charter reserve and total fund balance to total fund expenditures. The City’s General Fund Reserve met the Charter Reserve this fiscal year end. The required Charter Reserve fund balance would be 4.2 percent of total general fund expenditures; the total fund balance represented 37.1 percent of the same amount.

The fund balance of the City of Watsonville’s General Fund increased by $3,398 during the current year largely due to the City having passed Measure R sales tax measure and modest increases in property taxes.

The changes in Governmental Fund balance can be attributed to:

The General Fund increase in fund balance was from increases in various revenue types, such as, sales tax and property tax in lieu of vehicle license fees, decrease in operating costs from a controlled spending initiative.

The Impact Fees Fund had a fund balance of $6,990, a decrease of $1,266 over the prior year’s fund balance. This decrease was due to spending on repairs and reconstruction of the Highway 1/Harkins Slough project remaining revenues are reserved for future projects in fund balance.

The Housing Fund had a fund balance of $3,419, a decrease of $56 over the prior year’s fund balance. This decrease is due to a new loan issued during the fiscal year.

The Redevelopment and Housing Grants Fund has a fund balance of $373, an increase of $19 from the prior year’s fund balance. This increase is the result of loan payments.

The government’s Debt Service Fund had a fund balance of $324, an increase decrease of $78 during the fiscal year.

Proprietary funds. The City of Watsonville’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail.

Net position and changes of net position for the five major enterprise funds are as follows:

Other factors concerning the finances of these funds have already been addressed in the discussion of the City of Watsonville’s business-type activities.

Proprietary Funds Change of Net Position
Fund FY 2023 FY 2022 FY 2021 Change % Change
Water 73,881 66,873 61,793 7,008 11.34%
Sewer 51,546 47,378 44,420 4,168 9.38%
Solid Waste 8,794 7,085 5,326 1,709 32.09%
Airport 9,139 9,013 9,449 126 1.33%
Fiber Optic 650 562 558 88 15.77%
Totals 144,010 130,911 121,546 13,099 10.78%
23 Attachment B

General Fund Budgetary Highlights
Watsonville’s finances remain on a steady path. For the most part, our revenue increases are able to match our expenditure increases. The high levels of inflation seen in the economy at large are impacting limited areas of our budget, both revenue and expenses. We do continue to see large year-over-year increases in CalPERS retirement costs, although those expected to begin decreasing in coming years. We also continue to have a backlog of unfunded capital needs and the inability to expand service levels in some areas requested by the public and our departments. The steady approach we have taken to budgeting in recent years has paid off in that our funds have the reserves needed to manage future economic shocks should they occur. There is also room for optimism in future years as the peak in CalPERS’ costs seems to be approaching.

Tax revenues were $1,997 over budget. The majority was due to Sales Tax revenues coming in $1,392 over budget. This increase was mainly due to impacts on inflation and some because of the passage of Measure R sales tax revenue measure. Other revenues were over budget by $9,277.

Most of this increase was due to reimbursements from the County of Santa Cruz payment of a short-term $5,000 loan for the purchase of the Hospital.

Capital Asset and Debt Administration
Capital assets. The City of Watsonville’s capital assets, for its governmental and business type activities as of June 30, 2023, was $221,444 (net of depreciation). This represents a $5,230 increase from the prior year or 2.42%.

Governmental Type Activities increased by 2.63% due to the additional projects in progress and the addition of the right to use subscription assets category. 24 Attachment B

While Business Type Activities increased by 4.33% due to Infrastructure additions.

Additional information on the City of Watsonville’s capital assets can be found in Note III-B on pages 66 to 67 of this report.

Long-Term Debt. At the end of the current fiscal year, the City of Watsonville had total net debt outstanding of $131,824. The debt for governmental activities is made up of notes payable of $1,372, net OPEB liability of $1,178, compensated absences of $2,381, subscription liabilities of $870 and net pension liability of $80,940. Business type activities have $5,234 in notes payable, $7,399 in a loan, net OPEB liability of $1,405, compensated absences of $1,006, net pension liability of $26,358 and landfill closure/post closure liability of $3,680.

State statutes limit the amount of general obligation debt a governmental entity may issue to 10 percent of its total assessed valuation. The current debt limit for the City of Watsonville is $199,073 which is significantly more than the City of Watsonville’s outstanding debt subject to this limit.

Additional information on the City of Watsonville’s long-term debt can be found on page 71 of this report.

Economic Factors and Next Year’s Budget
• Budget will include using of the American Rescue Plan Act allocation. • Full year of Measure R sales tax revenue and expenditures • In non-General Fund departments, you will see the same cautious growth assumptions, consistent with the revenue activity we have experienced and assumed for the General Fund. • Taking advantage of healthy fund balances to move much needed capital and infrastructure projects.
• Continued and accelerated increases in PERS contributions.

Business Type Activities Capital Assets FY 2022-23
Capital Asset FY 2023 FY 2022 Change % Change
Land 14,821 14,771 0.34% 50
Building and Improvements 49,174 51,271 (2,097) -4.05%
Machinery & Equipment 8,237 8,663 (426) -4.87%
Infrastructure 26,799 21,268 25.12% 5,531
Construction in progress 7,049 1,363 5,686 28.76%
Totals 106,080 101,659 4,421 4.33%
25 Attachment B

After several years of improving position Watsonville appears poised to weather the immediate impacts. Watsonville was fortunate to receive $18.2 million in direct funding as part of the American Rescue Plan Act (ARPA). We will budget to use the remaining American Rescue Plan Act (ARPA) funds to support improvements in streets, investment in economic development to continue to grow and diversify our revenues, Ramsay Park, Nature Center, and opportunities for our citizens to obtain valuable work experience, just to name a few. The 2021-23 Biennial Budget utilized a limited amount of ARPA funding for restoring those departments hardest hit by the pandemic. The ARPA funding plan will include opportunities for community input and will prioritize areas of greatest community need. We still face ever increasing PERS contributions and have a large pent up demand for capital investments. Watsonville will have to act cautiously to balance increasing expenditure pressure with what is likely to be several years of flatter revenue growth than we have recently experienced.

The City was successful in passing a new transaction and use tax. This new tax measure will be used to meet community goals. The tax enables the City to invest in repair and expansion of aging parks, playgrounds and trails; creating safe place for kids, maintaining after-school and gang prevention programs, fixing potholes and maintaining streets; expanding library access and services or seniors; and creating employment opportunities. Watsonville has an opportunity to reset, restructure, and rebuild the budget in ways that we meet community goals, without recreating structural deficits.

All these factors will be taken into consideration during the preparation of the City of Watsonville’s annual budget for the fiscal year 2023-24.

Request for Information
This financial report is designed to provide a general overview of the City of Watsonville’s 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 Marissa Duran, Administrative Services Director, City of Watsonville, and 250 Main Street, Watsonville, CA 95076.
26 Attachment B

BASIC FINANCIAL STATEMENTS
Attachment B

CITY OF WATSONVILLE, CALIFORNIA

STATEMENT OF NET POSITION
JUNE 30, 2023
Governmental Business-type
Activities Activities Total
$$$
ASSETS
Cash and investments 75,316,508 59,166,933 134,483,441
Restricted cash - 776,340 776,340
Cash & investments with fiscal agent - 6,041,426 6,041,426 Receivables:

Interest 2,926,616 - 2,926,616
Taxes 5,648,195 - 5,648,195
Accounts 2,150,811 8,210,078 10,360,889
Intergovernmental 2,959,586 499,697 3,459,283
Internal balances (1,188,075) 1,188,075 -
Loans receivable 24,981,201 291,926 25,273,127
Inventories 302,819 557,201 860,020
Deposits 60,000 - 60,000
Land held for resale 150,000 - 150,000
Leases receivable - 4,560,341 4,560,341
Capital assets (net of depreciation and
amortization, where applicable):

Land 17,043,868 14,820,562 31,864,430
Construction in progress 13,113,415 7,049,342 20,162,757 Buildings and Improvements 67,079,997 49,173,521 116,253,518 Machinery and equipment 4,405,498 8,236,689 12,642,187
Infrastructure 12,740,976 26,799,460 39,540,436
Right to use subscription assets 980,222 - 980,222
Total Assets 228,671,637 187,371,591 416,043,228

DEFERRED OUTFLOWS OF RESOURCES
Deferred outflow of resources - Pensions 34,526,812 9,071,942 43,598,754 Total Deferred Outflow of Resources 34,526,812 9,071,942 43,598,754 Continued
Primary Government
See accompanying notes to financial statements
28 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

STATEMENT OF NET POSITION
JUNE 30, 2023
Governmental Business-type
Activities Activities Total
$$$

LIABILITIES
Accounts payable 3,952,556 2,341,065 6,293,621
Accrued personnel costs 986,931 428,140 1,415,071
Insurance claims payable 3,991,901 - 3,991,901
Interest payable 9,637 82,530 92,167
Retentions payable 187,812 - 187,812
Unearned revenue 17,616,153 67,430 17,683,583
Deposits payable 1,897,091 34,385 1,931,476
Noncurrent liabilities
Due within one year 830,480 938,829 1,769,309
Due in more than one year 85,911,212 44,143,661 130,054,873 Total Liabilities 115,383,773 48,036,040 163,419,813

DEFERRED INFLOWS OF RESOURCES
Leases related - 4,397,311 4,397,311
Deferred inflows of resources - pensions 4,278,575 - 4,278,575 Total Deferred Inflows of Resources 4,278,575 4,397,311 8,675,886

NET POSITION
Net investment in capital assets 113,121,379 100,264,142 213,385,521 Restricted for:

Debt service 324,294 - 324,294
Impact fee 6,990,439 - 6,990,439
Housing 3,419,674 - 3,419,674
Grants, contributions & fees for
specific purpose 16,347,223 - 16,347,223
Unrestricted 3,333,092 43,746,040 47,079,132
Total Net Position 143,536,101 144,010,182 287,546,283
Concluded
Primary Government
See accompanying notes to financial statements
29 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

STATEMENT OF ACTIVITIES
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
Operating Capital
Charges for Grants and Grants and Governmental Business-type Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Primary Government: $ $ $$ $ $ $
Governmental activities:

General government 17,339,225 13,641,841 1,902,754 - (1,794,630) - (1,794,630) Public safety 35,379,428 914,219 353,943 - (34,111,266) - (34,111,266) Housing 1,190,957 134,198 807,744 - (249,015) - (249,015) Streets 244,356 (29,848) 3,894,564 - (3,680,056) - (3,680,056) Culture and recreation 12,397,560 479,062 586,071 - (11,332,427) - (11,332,427) Interest on long term debt 34,693 - - - (34,693) 207,328 (242,021) Total governmental activities 70,236,427 15,413,676 3,620,664 (51,202,087) - 207,328 (51,409,415) Business-type activities:

Water 16,473,051 22,041,411 245,169 5,929 - 5,819,458 5,819,458 Sewer 14,509,445 18,226,301 150,123 43,147 - 3,910,126 3,910,126 Solid Waste 15,639,948 16,945,549 41,999 - - 1,347,600 1,347,600 Airport 3,973,807 2,798,950 27,218 - - (1,147,639) (1,147,639) Fiber Optic 61,552 140,315 - - - 78,763 78,763
Total business-type activities 50,657,803 60,152,526 464,509 49,076 - 10,008,308 10,008,308 Total primary government 120,894,230 75,566,202 4,085,173 49,076 (51,202,087) 9,800,980 (41,401,107) General revenues:

Property taxes 17,801,659 - 17,801,659
Sales taxes 25,337,276 - 25,337,276
Utility users taxes 4,358,302 - 4,358,302
Franchise taxes 571,674 - 571,674
Other taxes 3,693,757 - 3,693,757
Intergovernmental revenues not restricted to specific program 3,963,288 - 3,963,288 Unrestricted investment earnings 4,448,848 2,431,265 6,880,113 Other revenue 31,465 1,151,341 1,182,806
Transfers 285,056 (285,056) -
Total general revenues and transfers 60,491,325 3,297,550 63,788,875 Change in net position 9,289,238 13,098,530 22,387,768
Net position - beginning, as restated (Note III. F.) 134,246,863 130,911,652 265,158,515 Net position - ending 143,536,101 144,010,182 287,546,283 Program Revenues Primary Government
See accompanying notes to financial statements
30 Attachment B

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Attachment B

CITY OF WATSONVILLE, CALIFORNIA

GOVERNMENTAL FUNDS

BALANCE SHEET
JUNE 30, 2023

REDEVELOPMENT AMERICAN

AND HOUSING RESCUE

GENERAL IMPACT FEES HOUSING GRANTS PLAN ACT
$$$ $ $
ASSETS:

Cash and investments 23,905,029 7,262,655 3,280,443 2,721,553 16,162,714 Receivables:

Interest 409,636 - 978,396 1,301,320 -
Taxes 4,268,865 - - - -
Accounts 1,594,197 - 2,000 - -
Intergovernmental 2,506,116 - 2,205 101,949 -
Due from other funds 462,405 - - - -
Advances receivable - 46,864 - - -
Loans receivable 421,302 - 10,674,250 12,230,287 -
Land held for resale - - 150,000 - -
Total Assets 33,567,550 7,309,519 15,087,294 16,355,109 16,162,714 LIABILITIES:

Accounts payable 1,418,928 298,164 99 1,112 845,758
Accrued personnel costs 791,796 - 12,506 9,306 20,047
Retentions payable 111,293 - - 10,526 -
Due to other funds - 20,916 - 114,209 -
Advances payable 1,253,516 - - - -
Unearned revenue - - - 2,315,400 15,296,909
Deposits payable 1,896,620 - 471 - -
Total Liabilities 5,472,153 319,080 13,076 2,450,553 16,162,714

DEFERRED INFLOWS OF RESOURCES
Unavailable revenue 6,469,438 - 11,654,544 13,531,607 - Total Deferred Inflows of Resources 6,469,438 - 11,654,544 13,531,607 - FUND BALANCES:

Restricted for:

Debt service - - - - -
Streets - Impact fees - 6,990,439 - - -
Housing - - 3,419,674 372,949 -
Public safety - Narcotics assets seizure - - - - -
Housing - Business development - - - - -
Housing - Economic development - - - - -
Cultural and recreation - Library - - - - -
Cultural and recreation - Parks development - - - - -
General government - Retirement tax - - - - -
Public safety - Measure G/Y - - - - -
Public safety - Abandoned vehicle - - - - -
Housing - Inclusionary housing - - - - -
Streets - SB1 Gas tax - - - - -
Streets - Measure D - - - - -
Unassigned 21,625,959 - - - -
Total Fund Balances 21,625,959 6,990,439 3,419,674 372,949 - Total Liabilities, Deferred Inflows of
Resources, and Fund Balances 33,567,550 7,309,519 15,087,294 16,355,109 16,162,714 Continued

SPECIAL REVENUE FUNDS
See accompanying notes to financial statements
32 Attachment B

OTHER TOTAL

DEBT GOVERNMENTAL GOVERNMENTAL

SERVICE FUNDS FUNDS
$$ $
324,294 15,664,934 69,321,622
- 237,264 2,926,616
- 1,379,330 5,648,195
- 369,645 1,965,842
- 320,984 2,931,254
- - 462,405
- 18,577 65,441
- 1,655,362 24,981,201
- - 150,000
324,294 19,646,096 108,452,576
- 993,324 3,557,385
- 67,730 901,385
- 59,158 180,977
- 327,280 462,405
- - 1,253,516
- 3,844 17,616,153
- - 1,897,091
- 1,451,336 25,868,912
- 2,220,486 33,876,075
- 2,220,486 33,876,075
324,294 - 324,294
- - 6,990,439
- - 3,792,623
- 201,108 201,108
- 286,453 286,453
- 30,801 30,801
- 2,341,800 2,341,800
- 1,331,349 1,331,349
- 692,272 692,272
- 3,277,733 3,277,733
- 49,892 49,892
- - -
- 3,762,494 3,762,494
- 4,338,191 4,338,191
- (337,819) 21,288,140
324,294 15,974,274 48,707,589
324,294 19,646,096 108,452,576
Concluded
See accompanying notes to financial statements
33 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

GOVERNMENTAL FUNDS

RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS

TO THE STATEMENT OF NET POSITION
JUNE 30, 2023
Amounts reported for governmental activities in the Statement of Net Position are different from those reported in the governmental funds because: $ Fund balances of governmental funds 48,707,589
Capital assets (gross) used in Governmental Activities are not financial resources and, therefore, are not reported in the governmental funds. 228,412,753 Accumulated depreciation has not been included in the governmental funds financial statements. (113,476,354)
The internal service fund is used by management to charge the costs of insurance to individual governmental funds. The net current assets and liabilities of the internal service fund are included in Governmental Activities on the Statement of Net Position. (1,002,822)
Loans and intergovernmental receivables recorded as unavailable revenue in the governmental funds are recorded as revenue on the Statement of Activities. 33,876,075 Interest payable is not due and payable in the current period and therefore, not reported in governmental funds. (9,637)
Long-term liabilities are not due and payable in the current period and therefore, not reported in governmental funds. (81,466,409)
Deferred outflows and inflows of resources relating to pensions: in governmental funds, deferred outflows and inflows of resources relating to pensions are not reported because they are applicable to future periods. In the Statement of Net Position, deferred outflows and inflows of resources relating to pensions are reported.

Deferred outflows of resources relating to pensions 32,773,481 Deferred inflows of resources relating to pensions (4,278,575) Total Net Position - Governmental Activities 143,536,101 See accompanying notes to financial statements
34 Attachment B

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Attachment B

CITY OF WATSONVILLE, CALIFORNIA

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

GOVERNMENTAL FUNDS
FOR THE FISCAL YEAR ENDED JUNE 30, 2023

REDEVELOPMENT AMERICAN

AND HOUSING RESCUE

GENERAL IMPACT FEES HOUSING GRANTS PLAN ACT
$$$ $ $
REVENUES:

Taxes 36,408,419 - - - -
Licenses, permits, and fees 2,436,035 161,616 - - -
Intergovernmental 3,485,959 44,000 - 605,902 2,394,311
Charges for services 3,910,505 - - - -
Fines 530,360 - - - -
Interest 3,365,394 261,504 24,000 36,967 -
Miscellaneous 7,732,476 - 124,654 272,331 -
Total revenues 57,869,148 467,120 148,654 915,200 2,394,311 EXPENDITURES:

Current:

General government 16,430,151 - - - 2,394,311
Public safety 29,585,373 - - - -
Housing - - 406,397 607,491 -
Streets 5,395,431 1,653,167 - - -
Culture and recreation 6,619,164 74,143 - - -
Debt service:

Principal 194,812 - - - -
Interest and fiscal charges 4,259 - - - -
Total expenditures 58,229,190 1,727,310 406,397 607,491 2,394,311 Excess (deficiency) of revenues over
(under) expenditures (360,042) (1,260,190) (257,743) 307,709 -

OTHER FINANCING SOURCES (USES)
Transfers in 4,122,071 201,985 - - -
Transfers out (364,179) (5,000) - (288,376) -
Total other financing sources (uses) 3,757,892 (5,000) 201,985 (288,376) - Net change in fund balances 3,397,850 (1,265,190) (55,758) 19,333 - Fund balances, July 1 18,228,109 8,255,629 3,475,432 353,616 - Fund balances, June 30 21,625,959 6,990,439 3,419,674 372,949 - Continued

SPECIAL REVENUE FUNDS
See accompanying notes to financial statements
36 Attachment B

OTHER TOTAL

DEBT GOVERNMENTAL GOVERNMENTAL

SERVICE FUNDS FUNDS
$$ $
- 15,354,250 51,762,669
- 606,685 3,204,336
- 1,360,667 7,890,839
- 4,650 3,915,155
- - 530,360
- 594,345 4,282,210
- 47,420 8,176,881
- 17,968,017 79,762,450
- 175,787 19,000,249
- 5,324,384 34,909,757
- 177,069 1,190,957
- 1,922,944 8,971,542
- 4,907,602 11,600,909
781,123 - 975,935
33,070 - 37,329
814,193 12,507,786 76,686,678
(814,193) 5,460,231 3,075,772
892,498 93,195 5,309,749
- (4,367,138) (5,024,693)
892,498 (4,273,943) 285,056
78,305 1,186,288 3,360,828
245,989 14,787,986 45,346,761
324,294 15,974,274 48,707,589
Concluded
See accompanying notes to financial statements
37 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

GOVERNMENTAL FUNDS

RECONCILIATION OF STATEMENT OF REVENUES, EXPENDITURES,

AND CHANGES IN FUND BALANCES OF GOVERNMENTAL

FUNDS TO THE STATEMENT OF ACTIVITIES
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
$
Amounts reported for governmental activities in the statement of activities are different because of the following:

Net Change In Fund Balance - Total Governmental Funds 3,360,828 Capital Assets Transactions
Governmental Funds report capital outlay as expenditures However, the cost of those assets is capitalized in the Statement of Activities and allocated over their estimated useful lives and reported as depreciation expense.

The capital outlay expenditures are therefore added back to fund balance 6,372,295 Depreciation expense is deducted from the fund balance (5,959,483) Long-Term Debt Proceeds and Payments
Debt and lease proceeds provide current financial resources to Governmental Funds but increases long-term liabilities in the Statement of Net Position.

The repayment of the principal is an expenditure in the governmental funds, but in the Statement of Net Position the repayment reduces long-term liabilities.

Repayment of debt and subscription principal is added back to fund balance 975,935 Interest accrued to principal is deducted from fund balance 2,636 Accrual of Non-Current Items
The amounts below included in the Statement of Activities do not provide or (require) the use of current financial resources and therefore are not reported as revenue or expenditures in governmental funds (net change):

Compensated Absences (179,336)
Net pension liabilities and pension-related deferred outflows/inflows of resources 2,784,464 Net OPEB liability 2,453,740
Unavailable revenue (129,561)
Internal Service Funds Are Used By Management To Charge The Costs Of Insurance To Individual Funds. (392,280)
Change In Net Position Of Governmental Funds 9,289,238
See accompanying notes to financial statements
38 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

GENERAL FUND

STATEMENT OF REVENUES, EXPENDITURES,

AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
Variance With
Final Budget -
Positive
Original Final Actual (Negative)
$$$$
REVENUES:

Taxes 36,408,419 34,411,245 36,408,419 -
Licenses, permits, and fees 2,941,957 2,436,035 2,436,035 - Intergovernmental 2,915,633 3,485,959 3,485,959 -
Charges for services 3,792,770 3,910,505 3,910,505 -
Fines 647,560 530,360 530,360 -
Interest 2,742,507 3,365,394 3,365,394 -
Miscellaneous 1,144,112 7,732,476 7,732,476 -
Total revenues 48,595,784 57,869,148 57,869,148 -
EXPENDITURES:

Current:

General government 22,510,787 16,430,151 16,430,151 -
Public safety 29,255,956 29,961,379 29,585,373 376,006
Streets 5,578,996 5,395,431 5,395,431 -
Culture and recreation 6,816,480 6,619,164 6,619,164 -
Debt service:

Principal - 190,713 194,812 (4,099)
Interest - 8,358 4,259 4,099
Total expenditures 64,162,219 58,605,196 58,229,190 376,006 Excess (deficiency) of revenues over
(under) expenditures (15,566,435) (736,048) (360,042) 376,006

OTHER FINANCING SOURCES (USES)
Transfers in 5,871,244 4,211,803 4,122,071 (89,732)
Transfers out (180,956) (453,911) (364,179) 89,732
Total other financing sources (uses) 5,690,288 3,757,892 3,757,892 - Net change in fund balance (9,876,147) 3,021,844 3,397,850 376,006 Fund balance, July 1 18,228,109 18,228,109 18,228,109 - Fund balance, June 30 8,351,962 21,249,953 21,625,959 376,006 Budgeted Amounts
See accompanying notes to financial statements
39 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

STATEMENT OF REVENUES, EXPENDITURES,

AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
Variance With
Final Budget -
Positive
Original Final Actual (Negative)
$$$ $
REVENUES:

Interest 15,000 24,000 24,000 -
Miscellaneous 250,000 124,654 124,654 -
Total revenues 265,000 148,654 148,654 -
EXPENDITURES:

Current:

Housing 638,273 406,397 406,397 -
Total expenditures 638,273 406,397 406,397 -
Excess (deficiency) of revenues over
(under) expenditures (373,273) (257,743) (257,743) -

OTHER FINANCING SOURCES (USES)
Transfers In 47,183 201,985 201,985 -
Total other financing sources (uses) 47,183 201,985 201,985 - Net change in fund balance (326,090) (55,758) (55,758) - Fund balance, July 1 3,475,432 3,475,432 3,475,432 -
Fund balance, June 30 3,149,342 3,419,674 3,419,674 -
Budgeted Amounts

HOUSING FUND
See accompanying notes to financial statements
40 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

STATEMENT OF REVENUES, EXPENDITURES,

AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
Variance With
Final Budget -
Positive
Original Final Actual (Negative)
$$$ $
REVENUES:

Intergovernmental 250,000 878,233 878,233 -
Interest 15,000 36,967 36,967 -
Total revenues 265,000 915,200 915,200 -
EXPENDITURES:

Housing 638,273 607,491 607,491 -
Total expenditures 638,273 607,491 607,491 -
Excess (deficiency) of revenues over
(under) expenditures (373,273) 307,709 307,709 -
OTHER FINANCING SOURCES (USES):

Transfers in 47,183 - - -
Transfers (out) - (288,376) (288,376) -
Total other financing sources (uses) 47,183 (288,376) (288,376) - Net change in fund balance (326,090) 19,333 19,333 -
Fund balance, July 1 353,616 353,616 353,616 -
Fund balance, June 30 27,526 372,949 372,949 -
Budgeted Amounts

REDEVELOPMENT AND HOUSING GRANTS FUND
See accompanying notes to financial statements
41 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

STATEMENT OF REVENUES, EXPENDITURES,

AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
Variance With
Final Budget -
Positive
Original Final Actual (Negative)
$$$ $
REVENUES:

Intergovernmental - - 2,394,311 2,394,311
Total revenues - - 2,394,311 2,394,311
EXPENDITURES:

General Government 2,186,137 4,521,137 2,394,311 2,126,826 Total expenditures 2,186,137 4,521,137 2,394,311 2,126,826 Excess (deficiency) of revenues over
(under) expenditures (2,186,137) (4,521,137) - 267,485
Net change in fund balance (2,186,137) (4,521,137) - 267,485 Fund balance, July 1 - - - -
Fund balance, June 30 (2,186,137) (4,521,137) - 267,485

AMERICAN RESCUE PLAN ACT FUND
Budgeted Amounts
See accompanying notes to financial statements
42 Attachment B

This Page Left Intentionally Blank
Attachment B

CITY OF WATSONVILLE, CALIFORNIA

PROPRIETARY FUNDS

STATEMENT OF NET POSITION
JUNE 30, 2023

WATER SEWER SOLID WASTE AIRPORT FIBER OPTIC
$ $ $ $$
ASSETS
Current Assets:

Cash and investments 31,730,377 15,553,339 10,873,827 817,481 191,909 Restricted cash - 775,197 1,143 - -
Cash and investments with fiscal agent - - 6,041,426 - - Receivables:

Accounts 3,628,179 2,607,302 1,972,754 1,843 -
Intergovernmental 245,169 150,123 25,746 78,659 -
Loans receivable - 291,926 - - -
Deposits - - - - -
Inventories 481,373 - 9,041 66,787 -
Total Current Assets 36,085,098 19,377,887 18,923,937 964,770 191,909 Noncurrent Assets:

Advances receivable 1,022,141 97,665 68,269 - -
Leases receivable - - - 4,449,103 111,238
Capital assets:

Land and improvements 289,333 8,375,598 1,769,401 4,386,230 - Construction in progress 4,295,990 2,303,776 449,576 - - Buildings 49,626,108 30,918,503 2,289,649 9,160,742 -
Machinery and equipment 7,354,405 7,433,442 12,550,169 441,365 - Vehicles - - - - -
Infrastructure 16,845,116 51,843,079 76,916 7,966,694 706,929 Accumulated depreciation (35,540,968) (53,911,139) (10,847,293) (12,453,676) (250,371) Net Capital Assets 42,869,984 46,963,259 6,288,418 9,501,355 456,558 Total Noncurrent Assets 43,892,125 47,060,924 6,356,687 13,950,458 567,796 Total Assets 79,977,223 66,438,811 25,280,624 14,915,228 759,705

DEFERRED OUTFLOWS OF RESOURCES
Deferred outflows of resources - pension 2,280,027 3,874,340 2,367,450 550,125 - Total Deferred Outflows of Resources 2,280,027 3,874,340 2,367,450 550,125 -

LIABILITIES
Current Liabilities:

Accounts payable 974,506 786,041 458,946 121,572 -
Accrued personnel costs 102,093 201,906 95,699 28,442 - Insurance claims payable - - - - -
Retentions payable - - - - -
Customer deposits 17,679 - 16,706 - -
Unearned revenue - - 7,535 59,895 -
Interest payable - 46,094 36,436 - -
Current maturities of long term debt:

Compensated absences 15,915 25,861 15,564 3,012 -
Liability for landfill closure - - - - -
Notes payable 10,333 110,629 469,978 23,037 -
Loans payable - 264,500 - - -
Total Current Liabilities 1,120,526 1,435,031 1,100,864 235,958 - Noncurrent Liabilities:

Compensated absences 249,339 405,162 243,840 47,186 -
Net OPEB liability 372,792 506,615 420,586 105,147 -
Liability for landfill closure - - 3,680,437 - -
Net pension liability 6,624,443 11,256,602 6,878,444 1,598,347 - Notes payable 9,610 193,518 6,530,063 51,833 -
Loans payable - 4,969,697 - - -
Total Noncurrent Liabilities 7,256,184 17,331,594 17,753,370 1,802,513 - Total Liabilities 8,376,710 18,766,625 18,854,234 2,038,471 -

DEFERRED INFLOWS OF RESOURCES
Leases related - - - 4,287,685 109,626
Deferred inflows of resources - pension - - - - -
Total Deferred Inflows of Resources - - - 4,287,685 109,626

NET POSITION
Net investment in capital assets 42,850,041 42,200,112 5,330,946 9,426,485 456,558 Unrestricted 31,030,499 9,346,414 3,462,894 (287,288) 193,521 Total Net Position 73,880,540 51,546,526 8,793,840 9,139,197 650,079 Continued
Enterprise Funds
Business-type Activities -
See accompanying notes to financial statements
44 Attachment B

Business-type Activities - Governmental
Enterprise Funds Activities -
Internal Service
TOTALS Fund
$$
59,166,933 5,994,886
776,340 -
6,041,426 -
8,210,078 184,969
499,697 28,332
291,926 -
- 60,000
557,201 302,819
75,543,601 6,571,006
1,188,075 -
4,560,341 -
14,820,562 -
7,049,342 314,170
91,995,002 -
27,779,381 87,503
- 33,910
77,438,734 -
(113,003,447) (8,006)
106,079,574 427,577
111,827,990 427,577
187,371,591 6,998,583
9,071,942 1,753,331
9,071,942 1,753,331
2,341,065 395,171
428,140 85,546
- 3,991,901
- 6,835
34,385 -
67,430 -
82,530 -
60,352 10,867
- -
613,977 -
264,500 -
3,892,379 4,490,320
945,527 170,246
1,405,140 -
3,680,437 -
26,357,836 5,094,170
6,785,024 -
4,969,697 -
44,143,661 5,264,416
48,036,040 9,754,736
4,397,311 -
- -
4,397,311 -
100,264,142 427,577
43,746,040 (1,430,399)
144,010,182 (1,002,822)
Concluded
See accompanying notes to financial statements
45 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

PROPRIETARY FUNDS

STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION FOR THE FISCAL YEAR ENDED JUNE 30, 2023
Business-type Activities -
Enterprise Funds

WATER SEWER SOLID WASTE AIRPORT FIBER OPTIC
$$$$$
OPERATING REVENUES:

Charges for services 22,041,411 18,226,301 16,945,549 $2,798,950 140,315 Total operating revenues 22,041,411 18,226,301 16,945,549 2,798,950 140,315 OPERATING EXPENSES:

Costs of sales and services 14,883,030 12,961,127 14,886,626 3,577,482 26,206 Depreciation 1,590,021 1,548,318 753,322 396,325 35,346 Total operating expenses 16,473,051 14,509,445 15,639,948 3,973,807 61,552 Operating income (loss) 5,568,360 3,716,856 1,305,601 (1,174,857) 78,763

NONOPERATING REVENUES (EXPENSES)
Lease revenues - - - 1,151,341 -
Grant revenues 245,169 150,123 41,999 27,218 -
Interest revenues 1,236,534 602,787 455,799 127,114 9,031 Interest expenses (17,300) (141,598) (48,430) - -
Total nonoperating revenues (expenses) 1,464,403 611,312 449,368 1,305,673 9,031 Income (loss) before contributions and transfers 7,032,763 4,328,168 1,754,969 130,816 87,794 Capital contributions - connection fees 5,929 43,147 - - - Transfers (out) (31,651) (202,513) (45,836) (5,056) -
Changes in net position 7,007,041 4,168,802 1,709,133 125,760 87,794 Total Net Position - Beginning 66,873,499 47,377,724 7,084,707 9,013,437 562,285 Total Net Position - Ending 73,880,540 51,546,526 8,793,840 9,139,197 650,079 Continued
See accompanying notes to financial statements
46 Attachment B

Business-type Activities - Governmental
Enterprise Funds Activities -
Internal Service
TOTALS Fund
$$
60,152,526 19,063,312
60,152,526 19,063,312
46,334,471 19,644,910
4,323,332 5,652
50,657,803 19,650,562
9,494,723 (587,250)
1,151,341 -
464,509 28,332
2,431,265 166,638
(207,328) -
3,839,787 194,970
13,334,510 (392,280)
49,076 -
(285,056) -
13,098,530 (392,280)
130,911,652 (610,542)
144,010,182 (1,002,822)
Concluded
See accompanying notes to financial statements
47 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

PROPRIETARY FUNDS

STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JUNE 30, 2023

WATER SEWER SOLID WASTE AIRPORT FIBER OPTIC
$ $ $ $$
CASH FLOWS FROM OPERATING ACTIVITIES:

Receipts from customers and users 19,939,177 18,610,133 15,921,226 2,778,731 116,920 Receipts from interfund services provided - - - - -
Payments to suppliers (15,183,077) (12,821,035) (14,760,357) (3,524,033) (26,306) Payments to employees 99,884 (269,398) 88,019 (54,056) - Receipt for interfund services provided 934,041 87,279 12,006 - - Net cash provided (used) by operating activities 5,790,025 5,606,979 1,260,894 (799,358) 90,614

CASH FLOW FROM NONCAPITAL FINANCING ACTIVITIES
Grant revenue 245,169 150,123 41,999 27,218 -
Transfers (to) other funds (31,651) (202,513) (45,836) (5,056) - Net cash provided (used) by noncapital financing activities 213,518 (52,390) (3,837) 22,162 -

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition of capital assets (3,608,691) (4,555,832) (560,092) (19,347) - Connection fees 5,929 43,147 - - -
Proceeds from issuance of notes and loans payable - - 6,000,000 - - Principal paid on long term debt (10,773) (376,935) (327,156) (23,037) - Interest paid on long term debt (17,300) (141,598) (48,430) - - Net cash provided (used) by capital and related financing activities (3,630,835) (5,031,218) 5,064,322 (42,384) - CASH FLOWS FROM INVESTING ACTIVITIES:

Lease revenue - - - 1,151,341 -
Interest received 1,236,534 602,787 455,799 127,114 9,031 Net cash provided (used) by investment activities 1,236,534 602,787 455,799 1,278,455 9,031 Net cash flows 3,609,242 1,126,158 6,777,178 458,875 99,645 Cash and cash equivalents at beginning of period 28,121,135 15,202,378 10,139,218 358,606 92,264 Cash and cash equivalents at ending of period 31,730,377 16,328,536 16,916,396 817,481 191,909 Reconciliation of Statement of Net Position:

Cash and investments 31,730,377 15,553,339 10,873,827 817,481 191,909 Restricted cash - 775,197 1,143 - -
Cash and investments with fiscal agents - - 6,041,426 - - 31,730,377 16,328,536 16,916,396 817,481 191,909
Reconciliation of operating income (loss) to cash flows from operating activities Operating Income (loss) 5,568,360 3,716,856 1,305,601 (1,174,857) 78,763 Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities:

Depreciation 1,590,021 1,548,318 753,322 396,325 35,346 (Increase) decrease in receivables (1,857,065) 432,562 (1,020,001) 66,322 4,421 (Increase) decrease in inventories (265,499) - 16,420 34,383 - (Increase) decrease in loans receivable - 101,393 - - - (Increase) decrease in due from other governments (245,169) (150,123) (23,165) 31,462 - (Increase) decrease in advances receivable 934,041 87,279 12,006 - - (Increase) decrease in leases receivable - - - (97,974) (27,816) (Increase) decrease in deferred outflows (1,405,503) (2,330,020) (1,478,527) (312,178) - Increase (decrease) in accounts payable 20,799 151,071 109,849 19,066 (100) Increase (decrease) in claims payable - - - - -
Increase (decrease) in accrued personnel costs (94,393) (322,937) (204,503) (18,651) - Increase (decrease) in retentions payable (7,950) (10,979) - - - Increase (decrease) in liability for landfill closure - - - - - Increase (decrease) in unearned revenue - - 2,137 (20,029) - Increase (decrease) in customer deposits (47,397) - 16,706 - - Increase (decrease) in net pension liability 3,275,033 5,341,885 3,473,885 687,014 - Increase (decrease) in net OPEB liabilities - - - - -
Increase (decrease) in deferred inflows (1,675,253) (2,958,326) (1,702,836) (410,241) - Total adjustments 221,665 1,890,123 (44,707) 375,499 11,851 Net cash provided (used) by operating activities 5,790,025 5,606,979 1,260,894 (799,358) 90,614

NON CASH TRANSACTIONS
Retirement of capital assets (13,823) (137,151) - -
Landfill post closure liability amortization - - - - -
Landfill usage amortization - - - - -
Continued
See accompanying notes to financial statements
Business-type Activities -
Enterprise Funds
48 Attachment B

Business-type Activities - Governmental
Enterprise Funds Activities -
Internal Service
TOTALS Fund
$$
57,366,187 -
- 19,323,677
(46,314,808) (19,743,076)
(135,551) 524,819
1,033,326 -
11,949,154 105,420
464,509 28,332
(285,056) -
179,453 28,332
(8,743,962) (401,674)
49,076 -
6,000,000 -
(737,901) -
(207,328) -
(3,640,115) (401,674)
1,151,341 -
2,431,265 166,639
3,582,606 166,639
12,071,098 (101,283)
53,913,601 6,096,169
65,984,699 5,994,886
59,166,933 5,994,886
776,340 -
6,041,426 -
65,984,699 5,994,886
9,494,723 (587,250)
4,323,332 5,652
(2,373,761) 288,697
(214,696) (35,969)
101,393 -
(386,995) (28,332)
1,033,326 -
(125,790) -
(5,526,228) (1,141,784)
300,685 (62,197)
- 199,372
(640,484) (123,464)
(18,929) -
- -
(17,892) -
(30,691) -
12,777,817 2,751,960
- 10,223
(6,746,656) (1,171,488)
2,454,431 692,670
11,949,154 105,420
(150,974) -
- -
- -
Concluded
See accompanying notes to financial statements
49 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

SUCCESSOR AGENCY PRIVATE PURPOSE TRUST FUND

STATEMENT OF FIDUCIARY NET POSITION
JUNE 30, 2023
ASSETS $
Cash and investments 2,019,527
Cash and investments with fiscal agent 1,692,472
Notes receivable 122,100
Total Assets 3,834,099

DEFERRED OUTFLOW OF RESOURCES
Deferred Loss on Refunding 150,118
Total Deferred Outflow of Resources 150,118

LIABILITIES
Current Liabilities:

Accounts Payable -
Salaries Payable -
Interest Payable 94,096
Notes Payable 461,275
Refunding Bonds Payable 1,465,000
Total Current Liabilities 2,020,371
Noncurrent liabilities:

Refunding Bonds Payable 4,980,297
Total Non Current liabilities 4,980,297
Total Liabilities 7,000,668
Net Position
Held in trust for other purposes (3,016,451)
Total Net Position (3,016,451)
See accompanying notes to financial statements
50 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

SUCCESSOR AGENCY PRIVATE PURPOSE TRUST FUND

STATEMENT OF CHANGES IN NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
ADDITIONS: $
Taxes 3,227,982
Interest 4,168
Amortization 72,747
Total additions 3,304,897
DEDUCTIONS:

Administration 727,974
Interest 240,887
Total deductions 968,861
Change in Net Position 2,336,036
Net Position (Deficit), July 1 (5,352,487)
Net Position (Deficit), June 30 (3,016,451)
See accompanying notes to financial statements
51 Attachment B

This Page Left Intentionally Blank
Attachment B

CITY OF WATSONVILLE, CALIFORNIA

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

A. Reporting entity
The City of Watsonville, California was incorporated in 1868 as a charter city and operates under the Council-Manager form of government. The City provides the following services: public safety (police, fire and building inspections), highway and streets, water, sewer and solid waste services, airport, public improvements, planning and zoning, housing and general administration.

B. Government-wide and fund 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 activities of the primary government except for the Fiduciary fund type – Private Purpose Trust Fund. For the most part, the effect of interfund 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 statement of activities demonstrates the degree to which the direct expenses of a given function or segments are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues 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 not properly included among programs revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements.

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

Governmental funds 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.
53 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to claims and judgments, are recorded only when payment is due.

Property taxes, franchise fees, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been 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 government.

The City reports the following major governmental funds:

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

The Impact Fees Special Revenue Fund is assessed at the time of development and is used to mitigate certain increased costs incurred by the government as development occurs. These funds are then used to increase the capacity of roads, build fire stations, public safety equipment, or other governmental facilities. The receipt and disbursement of these fees are recorded in this fund.

The Housing Special Revenue Fund is used for low and moderate-income housing projects. The fund is funded by old 20% Redevelopment Agency’s housing loans monthly payments and with loan payoffs.

The Redevelopment and Housing Grants Special Revenue Fund provides assistance to low and moderate-income individuals via grants. These grants offer a number of housing programs to help low to moderate income Watsonville residents improve their housing condition.

The American Rescue Plan Act Special Revenue Fund accounts for funds received and spent for the American Rescue Plan Act.

The General Debt Service Fund receives funds for the payment of governmental debt of the government.

The City reports all its enterprise funds as:

The Water Fund records the receipts of revenues for water services and records the associated expenses or capital investment. The water service provides water to Watsonville and the surrounding communities, which has a service population of approximately 50,000.
54 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
The Sewer Fund records the activity of the City’s wastewater treatment plant and collection system. The fund also provides waste treatment services to other local sanitary districts, namely Freedom, Salsipuedes, and Pajaro Utility Districts. Thus, the wastewater plant services some 55,000 residents.

The Solid Waste Fund records the activities of refuse collection, recycling, and landfill operations. The landfill is located near the County landfill and is used only by the citizens of the City of Watsonville.

The Airport Fund represents the activities at the airport and the receipts of Federal Aviation Agency (FAA) grants. The fund is to be supported by the fees the airport collects from fuel sales and facility use fees. The FAA provides substantial grant income for general airport improvements.

The Fiber Optic Fund records the activities of the City’s fiber optic system. The fund receives payments for use of the system.

Additionally, the government reports the following fund types:

The Internal Service Fund is used to account for financing of insurance services (workers’ compensation, general liability and health benefits) provided to other government funds and departments on a cost reimbursement basis. It also accounts for capital assets and pension related balances.

The Private Purpose Trust Fund is used to account for the transactions of the Successor Agency of the City of Watsonville Redevelopment Agency.

As a general rule, the effect of interfund activity has been eliminated from government-wide financial statements. Exceptions to this general rule are payments-in-lieu of taxes and other charges between the City’s water, sewer, and solid waste functions and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various foundations concerned.

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.

Proprietary funds distinguish operating revenues and expenses from nonoperating items.

Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with proprietary funds principal ongoing operations. The principal operating revenues of the government’s enterprise funds and of the City’s internal service fund are charges to customers for sales and services. The City also recognizes as operating revenue the portion of connection fees intended to recover the cost of connecting new customers to the system. Operating expenses for enterprise funds and the internal service fund include the cost of sales and services, administrative expenses, and depreciation on capital assets.

All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.

55 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, then unrestricted resources, as they are needed.

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America, as prescribed by the GASB and the American Institute of Certified Public Accountants, which require management to make 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 for revenues and expenses or expenditures.

D. Assets, liabilities, and net position or fund balance

1. Deposits and investments
The City’s cash and cash equivalents are considered to be cash on hand, demand deposits, and short term investments with original maturities of three months or less from the date of acquisition.

State statutes authorize the City to invest in the following types of investments:
- Securities of the US Government, or its agencies
- Certificates of Deposit (or Time Deposits) placed with commercial banks and/or savings and loan institutions like institutions such as credit unions - Local Agency Investment Fund (State Pool)
- Repurchase agreements (repos) for a term of one year or less - Passbook Savings Account Demand Deposits
- Debt of the City of Watsonville
- Negotiable Certificates of Deposits
- Bankers' Acceptances
Investments for the City are reported at fair value. The State Treasurers Investment Pool operates in accordance with appropriate state laws and regulations. The reported value of the pool is the same as the fair value of the pool shares. The City has funds held by trustees or fiscal agents pledged to the payment or security of certain bonds and certificates of participation. The California Government Code provides that these funds, in absence of specific statutory provisions governing the issuance of bonds or certificates, may be invested in accordance with the ordinance, resolutions, or indentures specifying the types of investments the trustees or fiscal agent may make.

Cash and cash equivalents
The cash flow statements require presentation of “cash and cash equivalents”. For the purposes of the statement of cash flows, the City considers all proprietary funds pooled cash and investments and cash and investments with fiscal agent as “cash and cash equivalents”. 56 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023

2. Receivables and payables
Activities between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as “due to/from other funds”. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.” Property taxes are levied and collected by the County of Santa Cruz and paid upon collection to the various taxing entities including the City. Property taxes are attached as an enforceable lien on property as of January 1. Taxes are levied on July 1 and are payable in two installments on December 10 and April 10. Unsecured taxes are due on July 1 and become delinquent on August

31. The City recognizes property tax revenues when they become measurable and available for the payment of claims in the current period.

3. Inventories
All inventories are valued at cost using the first-in/first-out (FIFO) method. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased.

4. Land held for resale
Land held for resale is carried at the lower of cost or estimated realizable value.

5. Capital assets
Capital assets, which include property, plant and equipment, and infrastructure, (e.g., bridges, curbs and gutters, streets and sidewalks, drainage systems, and lighting systems), and construction in progress are recorded in the applicable governmental or business-type activities columns in the government-wide financial statements. The City defines capital assets as assets with an initial, individual cost of more than $5,000 (amount not rounded) and an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets, donated works of art and similar items, and capital assets received in a service concession agreement are valued at their estimated acquisition value on the date donated.

The costs for normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized.

Major outlays for capital assets and improvements are capitalized as projects are constructed.

Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. 57 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
Property, plant, and equipment of the primary government, are depreciated using the straight-line method over the following estimated useful lives:

Assets Years
Infrastructure 20 to 50 years
Buildings 20 to 50 years
Improvements 20 to 50 years
Machinery, Equipment,
and Vehicles 3 to 10 years

6. Compensated absences
It is the City’s policy to allow most employee groups to accumulate sick leave to a maximum of 1,000 hours. Sick leave accumulated above this maximum is paid to employees at 50% of such excess in December. The balance of such unused sick leave is lost and the sick leave accrual is reduced to 1,000 hours at January 1 of each year. Earned vacation time is accumulated up to two times the employee's annual accrual rate and unused vacation is paid at the employee's hourly rate upon termination.

The maximum accumulation, for fire-fighters on shift duty, of unused sick leave is 62.5 days (1,500 hours). Sick leave accumulation in any calendar year in excess of 1,500 hours shall be paid at the rate of 50% of such excess. The balance of such unused sick leave is lost and the sick leave accrual is reduced to 1,500 hours at January 1 of each year.

The City accrues for compensated absences in the government-wide and proprietary fund financial statements for which they are liable to make payment directly. The General fund, Inclusionary Housing fund, and all four of the five Enterprise funds incurred costs associated with compensated absences during the last fiscal year.

7. Interfund transactions
A description of the basic two types of the City's interfund transactions during the fiscal year and the related accounting policies are set forth as follows:

1. Transactions related directly to services rendered, or facilities provided, are recorded as revenues in the fund providing the service or facility and expenditures (or expenses) in the fund receiving them.

2. Transactions to allocate resources from one fund to another, not contingent on the occurrence of specific expenditures in the receiving fund, are recorded appropriately as transfers in and transfers out in the respective funds.

58 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023

8. Long-term obligations
In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bond using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount.

In the financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

9. Deferred Outflows and Inflows of Resources
Pursuant to GASB Statement No. 63, “Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position,” and GASB Statement No. 65, “Items Previously Reported as Assets and Liabilities,” the City recognizes deferred outflows and inflows of resources.

In addition to assets, the Statement of Net Position will sometimes report a separate section for deferred outflows of resources. A deferred outflow of resources is defined as a consumption of net assets by the government that is applicable to a future reporting period. The City has one item which qualifies for reporting; see Note IV. E. for a detailed listing of the deferred outflows. In addition to liabilities, the Statement of Net Position will sometimes report a separate section for deferred inflows of resources. A deferred inflow of resources is defined as an acquisition of net assets by the City that is applicable to a future reporting period. The City has three items which qualify for reporting in this category – unavailable revenue, lease related and pension related deferred inflows of resources. Refer to Note III. D and Note IV. E. for a detailed listing of the lease related and pension related deferred inflows of resources the City has recognized.

10. Fund balances
Fund balances of the governmental funds are classified as follows:

Nonspendable Fund Balance – represents amounts that cannot be spent because they are either not in spendable form (such as inventory) or legally required to remain intact (such as notes receivable or principal of a permanent fund).

Restricted Fund Balance – represents amounts that are constrained by external parties, constitutional provisions or enabling legislation.
59 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
Committed Fund Balance – represents amounts that can only be used for a specific purpose because of a formal action by the City’s governing board (ordinance). Committed amounts cannot be used for any purpose unless the governing board removes those constraints by taking the same type of formal action. Committed fund balance amounts may be used for other purpose with appropriate due process by the governing board. Commitments are typically done through adoption and amendment of the budget. Committed fund balance amounts differ from restricted balances in that the constraints on their use do not come from outside parties, constitutional provisions, or enabling legislation.

Assigned Fund Balance – represents amounts which the City intends to use for a specific purpose, but that do not meet the criteria to be classified as restricted or committed. Intent maybe stipulated by the government board or by an official or body to which the governing board delegates the authority. Specific amounts that are not restricted or committed in a special revenue, capital projects, debt service or permanent fund are assigned for purpose in accordance with the nature of their type or the fund’s primary purpose. An assignment within the general fund conveys that the intended use of those amounts is for a specific purpose that is narrower than the general purpose of the City.

Unassigned Fund Balance – represents amounts which are unconstrained in that they may be spent for any purpose. Only the general fund reports a positive unassigned fund balance. Other governmental funds might report a negative balance in this classification because of commitments made, which include future funding sources for specific purposes for which amounts had been restricted, committed or assigned.

When an expenditure is incurred for a purpose for which both restricted and unrestricted fund balance is available, the City considers restricted funds to have been spent first. When an expenditure is incurred for which committed, assigned or unassigned fund balance are available, the City considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds.

11. Net Position
GASB Statement No. 63 requires that the difference between assets added to the deferred outflows of resources and liabilities added to the deferred inflows of resources be reported as net position. Net position is classified as either net investment in capital assets, restricted, or unrestricted.

Net position that is net investment in capital assets consist of capital assets, net of accumulated depreciation, and reduced by the outstanding principal of related debt. Restricted net position is the portion of net position that has external constraints placed on it by creditors, grantors, contributors, laws, or regulations of other governments, or through constitutional provisions or enabling legislation. Unrestricted net position consists of net position that does not meet the definition of net investment in capital assets or restricted net position. 60 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
The Net Investment in Capital Assets are calculated as below:

Governmental Business-type
Activities Activities Total
$$$
Capital Assets, net of accumulated depreciation: 115,363,976 106,079,574 221,443,550 Less: Capital debt (2,242,597) (12,633,198) (14,875,795) Plus: Unspent bond proceeds - 6,817,766 6,817,766
Net Investment in Capital Assets: 113,121,379 100,264,142 213,385,521 II. Stewardship, compliance, and accountability
A. Budgetary information
Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America for all governmental funds. All annual appropriations lapse at fiscal year-end.

On or before March 31 of each fiscal year, all departments of the City of Watsonville are required to submit requests for appropriations to the City’s management so that a budget may be prepared. Before May 31 the proposed budget is presented to the City Council for review. City Council holds public hearings and a final budget must be prepared and adopted no later than June

30. The appropriated budget is prepared by fund, department, and division, with the exception of the Impact Fees Special Revenue Fund. The City’s budget policy requires that all funds be included in the annual appropriated budget, but the Impact Fee Special Revenue Fund was unintentionally excluded from the fiscal year 2023 budget. The City department heads may make transfers of appropriations within a department. Transfers of appropriations between funds require the approval of the City Manager. The legal level of budgetary control (i.e., the level at which expenditures may not legally exceed appropriations) is the fund level. City Council made several supplemental budget appropriations during the fiscal year. The General Fund budget was increased by $9,273,364 during the fiscal year for a short term loan to the County of Santa Cruz for the purchase of a hospital in the amount of $5 million, also the City had increases in capital improvement costs for Ramsay Park, increased expenditures for public safety for increases in salary and overtime costs.

Encumbrance accounting is employed in governmental funds. The commitments will be reappropriated and honored during the subsequent fiscal year. Encumbrances were as follows at fiscal year-end: General Fund - $14,316,880, Housing Fund - $467,025, and Other Governmental Funds - $7,627,748.
61 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
B. Deficit fund equity
As of June 30, 2023, the Parking Garage Special Revenue Fund had a fund balance deficit of ($334,479). The fund will make up the deficits with future licenses, permits and fees collected.

The Inclusionary Housing Fund had a fund balance deficit of ($3,340). The fund will make up the deficits with future Inclusionary Housing fee collections. The Internal Services Fund had a fund balance deficit of ($1,002,822). The fund will make up the deficits with future reimbursements from other funds.

III. Detailed notes on all funds
A. Cash and investments
Cash and investments (including monies held by trustees and fiscal agents) as of June 30, 2023 were as follows:

Balance
June 30, 2023
Cash: $$
Demand Deposits 7,711,558 -
Outstanding Checks (1,407,669) -
Deposits in Transit 270,095 -
Net Demand Deposits 6,573,984 -
Petty Cash 12,686 -
Cash Subtotal - 6,586,670
Investments:

Guaranteed Investment Contracts 1,322,827 -
California Asset Management Program 80,599,438 -
Local Agency Investment Fund 50,462,845 -
Money Market Mutual Funds 6,041,426 -
Investment Subtotal 138,426,536
Total Cash and Investments 145,013,206
62 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
The cash and investments of Governmental Activities, Business-Type Activities, and the Private Purpose Trust Fund was as follows as of June 30, 2023:

Balance
June 30, 2023
Governmental Activities: $
General Fund 23,905,029
Impact Fees Special Revenue Fund 7,262,655
Housing Special Revenue Fund 3,280,443
Redevelopment and Housing Grants Special Revenue Fund 2,721,553 American Rescue Plan Act Special Revenue Fund 16,162,714 Debt Service Fund 324,294
Other Nonmajor Funds 15,664,934
Total Governmental Activities: 69,321,622
Business-type Activities:

Water Fund 31,730,377
Sewer Fund 16,328,536
Solid Waste Fund 16,916,396
Airport Fund 817,481
Fiber Optic Fund 191,909
Total Business-Type Activities 65,984,699
Internal Service Fund 5,994,886
Private Purpose Trust Fiduciary Fund 3,711,999
Total City Cash and Investments 145,013,206
The City of Watsonville categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs.

The City of Watsonville has the following fair value hierarchy as of June 30, 2023:

Total Exempt
Investments measured at amortized cost: $ $
Guaranteed Investments Contracts 1,322,827 1,322,827
Local Agency Investment Fund 50,462,845 50,462,845
California Asset Management Program 80,599,438 80,599,438 Money Market Mutual Funds 6,041,426 6,041,426
Total Investments 138,426,536 138,426,536
63 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
POOLED DEPOSITS/CREDIT RISK:

The California Government Code requires California banks and savings and loan associations to secure a government's deposits by pledging government securities as collateral. The fair value of pledged securities must equal at least 110% of a government's deposits. California law also allows financial institutions to secure the City’s deposits by pledging first trust deed mortgage notes having a value of 150% of the City’s total deposit.

The City may waive collateral requirements for deposits, which are fully insured up to $250,000 by federal depository insurance.

At June 30, 2023, the City’s carrying amount of deposits and cash on hand was $6,586,670 and bank balances were $7,711,558. Bank balances in excess of the FDIC insurance limitations are fully collateralized by the Bank by pledging identified U.S. Government Securities.

Investments Authorized by the California Government Code and the City’s Investment Policy
Maximum Maximum
Maximum Percentage Investment
Authorized Investment Type Maturity of Portfolio * In One Issuer U.S. Treasury Obligations 5 years None None
U.S. Agency Securities 5 years None None
Banker's Acceptances 180 days 40% 30%
Commercial Paper 270 days 40% 10%
Negotiable Certificates of Deposit 5 years 30% None
Repurchase Agreements 1 year None None
Passbook Savings Account Demand Deposit N/A None None
Medium-Term Corporate Notes 5 years 30% None
Debt of City of Watsonville N/A None None
Money Market Mutual Funds N/A 20% None
Local Agency Investment Fund (LAIF) N/A None $75,000,000 California Asset Management Program (CAMP) N/A None None * Excluding amounts held by bond trustee that are not subject to California Govenrment Code restrictions Investments Authorized by Debt Agreements
Maximum Maximum
Maximum Percentage Investment
Authorized Investment Type Maturity of Portfolio In One Issuer U.S. Treasury Obligations None None None
U.S. Agency Securities None None None
Banker's Acceptances 180 days None None
Commercial Paper 270 days None None
Money Market Mutual Funds N/A None None
Guaranteed Investment Contracts 30 years None None
64 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
Disclosures Relating to Interest Rate Risk
Remaining Maturity (in Months)
Investment Type 12 Months or Less 121 Months Total
$ $$
Local Agency Investment Fund 50,462,845 - 50,462,845
California Asset Management Program 80,599,438 - 80,599,438 Guaranteed Investment Contracts - 1,322,827 1,322,827
Money Market Mutual Funds 6,041,426 6,041,426 -
Total 137,103,709 1,322,827 138,426,536
Disclosures Relating to Credit Risk
Ratings as of Fiscal Year End
Investment Type AAA AA Not Rated Total
$ $$
Local Agency Investment Fund - - 50,462,845 50,462,845
California Asset Management Program - - 80,599,438 80,599,438 Guaranteed Investment Contracts - 1,322,827 1,322,827 - Money Market Mutual Funds 6,041,426 - 6,041,426 -
Total 6,041,426 1,322,827 131,062,283 138,426,536
(1) The management of the State of California Pooled Money Investment Account (generally referred to as LAIF) has indicated to the City that as of June 30, 2023 the amortized cost value of the pool was $179,160,181,981 and the estimated fair value of the pool was $176,442,053,163. The reported value of the City’s portion of LAIF is the same value as the fair value of LAIF shares. LAIF’s (and the City’s) exposure to risk (credit, market or legal) is not currently available. The State’s Local Agency Investment Fund (LAIF) operates in accordance with appropriate state laws and regulations. At June 30, 2023, these investments had an average maturity of 260 days.
(2) The City is a participant in the California Asset Management Program (CAMP). CAMP is an investment pool offered by the California Asset Management Trust (the Trust). The Trust is a joint powers authority and public agency created by the Declaration of Trust and established under the provisions of the California Joint Exercise of Powers Act (California Government Code Sections 6500 et seq., or the "Act") for the purpose of exercising the common power of CAMP participants to invest certain proceeds of debt issues and surplus funds. CAMP investments are limited to investments permitted by subdivisions (a) to (n), inclusive, of Section 53601 of the California Government Code.

The City reports its investments in CAMP at the fair value amounts provided by CAMP, which is the same as the value of the pool share in accordance with GASB 79 requirements. At June 30, 2023, fair value was approximate to the City's cost. At June 30, 2023, these investments had an average maturity of 26 days.

The City has funds held by trustees or fiscal agents pledged to the payment or security of certain bonds. The California Government Code provides that these funds, in absence of specific statutory provisions governing the issuance of bonds or certificates, may be invested in accordance with the ordinance, resolutions, or indentures specifying the types of investments the trustees or fiscal agent may make.
65 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
B. Capital assets
Capital asset activity for the fiscal year ended June 30, 2023 was as follows:

Governmental activities:

Balance at
June 30, 2022 Balance at
(as restated) Additions Deletions Transfers June 30, 2023 Capital Assets not being depreciated: $ $ $ $ $
Land and Improvements 16,467,923 575,945 - - 17,043,868 Construction in Progress 8,635,424 5,470,743 - (992,752) 13,113,415 Total Capital Assets not being depreciated 25,103,347 6,046,688 - (992,752) 30,157,283 Capital Assets being depreciated and amortized:

Buildings and Improvements 136,836,525 87,848 (100,000) 992,752 137,817,125 Machinery and Equipment 17,925,098 624,242 (35,571) - 18,513,769 Infrastructure 41,148,423 15,191 - - 41,163,614
Right to Use Subscription Assets 1,196,545 - - - 1,196,545 Total Capital Assets being depreciated and amortized 197,106,591 727,281 (135,571) 992,752 198,691,053 Less accumulated depreciation and amortization for:

Buildings and Improvements (67,158,200) (3,678,928) 100,000 - (70,737,128) Machinery and Equipment (13,062,730) (1,081,112) 35,571 - (14,108,271) Infrastructure (27,433,866) (988,772) - (28,422,638) -
Right to Use Subscription Assets - (216,323) - (216,323) - Total accumulated depreciation (107,654,796) (5,965,135) 135,571 (113,484,360) - Total Capital Assets being depreciated and amortized, net 89,451,795 (5,237,854) 992,752 - 85,206,693 Governmental activity Capital Assets, net 114,555,142 808,834 - 115,363,976 - In fiscal year 2023, the City implemented the provisions of GASB Statement No. 96, Subscription-Based Information Technology Arrangements, which required the City to record an intangible right-to-use subscription asset. As a result, a right-to-use subscription asset was recorded in the amount of $1,196,545 as part of the Governmental Activities capital assets at July 1, 2022. As of June 30, 2023, the City has recorded a net intangible right-to use subscription asset amounting to $980,222, with accumulated amortization of $216,323. The subscription asset is offset with a subscription liability as discussed in Note III. F.

Business-type activities:

Balance at Balance at
June 30, 2022 Additions Deletions Transfers June 30, 2023 Capital Assets, not being depreciated: $ $ $ $ $
Land and improvement 14,771,215 49,347 - - 14,820,562
Construction in progress 5,685,774 7,147,707 - (5,784,139) 7,049,342 Total Capital Assets not being depreciated 20,456,989 7,197,054 - (5,784,139) 21,869,904 Capital Assets, being depreciated:

Buildings and Improvements 91,981,906 13,096 - - 91,995,002 Machinery, Equipment and Vehicles 27,224,944 705,411 (150,974) - 27,779,381 Infrastructure 70,826,194 828,401 - 5,784,139 77,438,734 Total Capital Assets being depreciated 190,033,044 1,546,908 (150,974) 5,784,139 197,213,117 Less accumulated depreciation for:

Buildings and Improvements (40,710,790) (2,110,691) - - (42,821,481) Machinery Equipment (18,561,689) (1,131,977) 150,974 - (19,542,692) Infrastructure (49,558,610) (1,080,664) - - (50,639,274) Total accumulated depreciation (108,831,089) (4,323,332) 150,974 (113,003,447) - Total Capital Assets being depreciated 81,201,955 (2,776,424) 5,784,139 - 84,209,670 Business-type activities Capital Assets, net 101,658,944 4,420,630 - 106,079,574 -

66 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
Depreciation expenses were charged to functions/programs of the primary government as follows:

Governmental activities: $
General government 816,491
Public safety 920,731
Streets 2,586,646
Culture and recreation 1,635,615
Internal Services Fund 5,652
Total depreciation expense - governmental activities 5,965,135 Business-Type activities:

Water Fund 1,590,021
Sewer Fund 1,548,318
Solid Waste Fund 753,322
Airport Fund 396,325
Fiber Optic Fund 35,346
Total depreciation expense - business-type activities 4,323,332 C. Interfund receivables, payables, and transfers
The composition of interfund activities as of June 30, 2023, is as follows:

Due from/to other funds
Current interfund balances arise in the normal course of business and are expected to be repaid shortly after the end of the fiscal year. Due from/to other funds balances at June 30, 2023 were as follows:

Due from
other funds
Due to
other funds
Governmental Funds: $$
General Fund 462,405 -
Impact Fees Special Revenue Fund - 20,916
Redevelopment & Housing Grants Fund - 114,209
Nonmajor Funds - 327,280
Total Governmental Funds 462,405 462,405

67 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
Advances receivable/payable
Long-term interfund balances arise in the normal course of business and are not expected to be repaid during the next fiscal year. Advances receivable/payable funds balances at June 30, 2023 were as follows:

Advances Receivable Advances Payable
Governmental Funds: $$
General Fund 1,253,516 -
Impact Fees Special Revenue Fund - 46,864
Nonmajor Funds - 18,577
Total Governmental Funds 65,441 1,253,516
Enterprise Funds:

Water Fund 1,022,141 -
Sewer Fund 97,665 -
Solid Waste Fund 68,269 -
Total Enterprise Funds 1,188,075 -
Total Government 1,253,516 1,253,516
With Council approval, resources may be transferred from one City fund to another. The City made various interfund transfers as follows:

General Fund
Housing Special
Revenue Fund
Debt
Service Fund
Nonmajor
Funds
Total
Transfers Out
Transfers Out $ $ $$ $
General Fund 201,985 148,711 - 13,483 364,179
Impact Fee Special Revenue Fund 5,000 - - - 5,000
Redevelopment & Housing Special Revenue Fund 122,068 166,308 - 288,376 - Nonmajor Governmental Funds 3,995,003 312,647 59,488 4,367,138 - Water Fund - 26,595 5,056 31,651 -
Sewer Fund - 197,457 5,056 202,513 -
Airport Fund - 40,780 - 5,056 45,836
Solid Waste Fund - - 5,056 - 5,056
Total Transfers In 4,122,071 201,985 892,498 93,195 5,309,749 Transfers In
The City approved various interfund transfers within its budget for various recommencements such as the transfer from the Retirement Fund to the General Fund for recommencements of General Fund employee’s retirement costs, the transfer from the CDBG Fund to the General Fund for the recommencements of qualified recreations staff costs and recommencements of debt payments to the Debt Service Fund. The General Fund also transferred 20% of its reimbursement from the Successor Agency to the Successor Agency Housing Fund as required by State law.

68 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
D. Leases
Policies
A lease is defined as a contract that conveys control of the right to use another entity’s nonfinancial asset (the underlying asset) as specified in the contract for a period of time in an exchange or exchange-like transaction. Examples of nonfinancial assets include buildings, land, vehicles, and equipment. The City recognizes lease receivable or liabilities with an initial, individual value of $200,000 or more, based on the future lease payments remaining at the start of the lease.

Lessor
The City is a lessor for noncancellable leases of buildings and facilities. The City recognizes a lease receivable and a deferred inflow of resources in the government‐wide and fund financial statements.

At the commencement of a lease, the City initially measures the lease receivable at the present value of payments expected to be received during the lease term. Subsequently, the lease receivable is reduced by the principal portion of lease payments received. The deferred inflow of resources is initially measured as the initial amount of the lease receivable, adjusted for lease payments received at or before the lease commencement date. Subsequently, the deferred inflow of resources is recognized as revenue over the life of the lease term.

Key estimates and judgments include how the City determines (1) the discount rate it uses to discount the expected lease receipts to present value, (2) lease term, and (3) lease receipts as follows:
• The City uses bond interest rate as the discount rate for leases. • The lease term includes the noncancellable period of the lease. • Lease receipts included in the measurement of the lease receivable is composed of fixed payments from the lessee.

The City monitors changes in circumstances that would require a remeasurement of its lease, and will remeasure the lease receivable and deferred inflows of resources if certain changes occur that are expected to significantly affect the amount of the lease receivable. 69 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
Leases Receivable (City as Lessor)
The terms and balances related to leases receivable and deferred inflows of resources recorded in the Enterprise Funds as of June 30, 2023 were:

Lessee Property Address
Original
Lease Date
Lease Ending
Date
Term
Duration
(Years)
Remaining
Lease Term
(years)
Extension
Years
Expiration
Date Including
Options
Zayo Group, LLC
Running between Room
MPOE of the City's Civic
Center and Fire Station
Two, 370 Airport
Boulevard 6/30/2021 6/30/2024 3 1 - 6/30/2024
EKB Partners 45 Aviation Way 12/28/2016 12/31/2053 20 14 15 12/31/2053 Mid Valley Supply 220 Airport Blvd 10/1/2014 9/30/2024 5 0 5 9/30/2024 Pacific Golf Centers 101 Ranport Rd 7/2/2013 7/1/2038 5 0 20 7/1/2038 Specialized Helicopter 150 Aviation Way 3/1/2020 2/29/2024 4 1 0 2/29/2024 Watsonville Diesel 101 Aviation Way 8/1/2016 7/31/2056 30 24 10 7/31/2056 United Flight 120 Aviation Way 6/24/2009 11/14/2038 20 7 10 11/14/2038 Ellas 100 Aviation Way 4/1/2022 3/31/2027 5 3 6 3/31/2033 SC Animal Services 580 Airport 7/1/2022 7/1/2047 25 24 5 7/1/1947 Expoimaging 121 Aviation Way 10/1/2021 9/30/2025 4 3 0 9/30/2025 (Continued below)
Lessee
Interest
Revenue Lease Revenue
Monthly Revenue
as of
June 30, 2023
Lease Receivable
Balance at
June 30, 2023
Deferred Inflow
of Resources at
June 30, 2023
$$ $ $ $
Zayo Group, LLC 808 61,543 9,551 111,238 109,625
EKB Partners 20,653 16,797 1,719 642,778 610,278
Mid Valley Supply 5,062 91,364 8,633 365,261 358,443
Pacific Golf Centers 8,946 26,468 2,203 404,729 387,163 Specialized Helicopter 709 80,369 6,690 53,937 52,067
Watsonville Diesel 21,718 24,125 2,008 838,211 796,515
United Flight 7,559 21,849 1,819 342,219 327,386
Ellas 11,263 61,677 5,609 676,075 662,693
SC Animal Services 31,313 37,306 3,378 985,434 954,121
Expoimaging 1,439 57,036 5,164 140,459 139,020
105,614 482,390 46,774 4,560,341 4,397,311
70 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
The future principal and interest lease receivables as of June 30, were as follows:

For the Year
Ended June 30 Principal Interest Total
$$$
2024 472,858 108,868 581,726
2025 318,958 101,235 420,193
2026 281,570 94,458 376,028
2027 218,781 88,183 306,964
2028 169,169 83,974 253,143
2029-2033 901,695 358,908 1,260,603
2034-2038 659,642 263,899 923,541
2039-2043 511,968 181,107 693,075
2044-2048 527,434 100,701 628,135
2049-2053 344,146 42,981 387,127
2054-2057 154,120 5,873 159,993
Totals 4,560,341 1,430,187 5,990,528
E. Long-term debt
The City's long-term debt obligations are repaid by the following funds: General Fund, Debt Service Fund, Water Enterprise Fund, Sewer Enterprise Fund, Solid Waste Enterprise Fund and the Airport Enterprise Fund.

Debt payable (Direct Borrowing) – Governmental Activities On April 13, 2012, the City entered into a commercial term loan with Santa Cruz County Bank to finance the cost of installing solar panels through the City of Watsonville. The total amount for which the City was obligated under the loan was $3,014,285. Installation of the solar panels was completed in the 2012/13 fiscal year.

Interest rate for the loan was 5.29% with principal payments ranging from $206,431 to $282,376 through fiscal year 2027.

Notes payable:

Governmental Activities -
Section 108 Loan Payable (Direct Borrowing)
The City entered into a contract with the Secretary of U.S. Department of Housing and Urban Development. The contract is for loan guarantee assistance under Section 108 of the Housing and Community Development Act of 1974, as amended, 42 U.S.C. #5308. The promissory note, in the amount of $2,530,000, is for the Downtown Parking Garage Project. The loan is to be repaid with future Community Development Block Grant funds over a period of twenty years at an interest rate of 1.26%.
71 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
The annual requirements to amortize the Section 108 loan outstanding as of June 30, 2023 is as follows:

Fiscal Year Principal Interest Debt Service
$$$
2024 163,000 2,902 165,902
2025 170,000 2,423 172,423
Total 333,000 5,325 338,325
PG&E 2019 Notes (Direct Borrowing)
The City entered into several agreements with Pacific Gas & Electric Company (PG&E) to retrofit City lighting with qualified energy saving lights throughout the City. The notes are to be repaid with future energy savings over various periods at interest rates of 0%.

Governmental Type Activities
The terms and maximum payments required on the 2019 notes are as follows:

Old City Hall - $47,181, 5 year loan, maximum annual payment of $11,323, Civic Center - $60,070, 4 year loan, maximum annual payment of $16,518, Marinovich - $33,071, 4 year loan, maximum annual payment of $9,229, Youth Center - $27,876, 6 year loan, maximum annual payment of $4,993, Ramsay Park - $29,807, 5 year loan, maximum annual payment of $7,013, Beach St Parking - $35,429, 6 year loan, maximum annual payment of $7,330, Police Station - $85,545, 5 year loan, maximum annual payment of $19,010, Senior Center - $20,657, 8 year loan, maximum annual payment of $2,882.

The annual requirements to repay the PG&E 2019 governmental activities notes outstanding as of June 30, 2023 are as follows:

Fiscal Year Principal
$
2024 49,374
2025 11,292
2026 3,709
2027 2,882
2028 243
Total 67,500

72 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
Business Type Activities
The original note amounts, terms and maximum annual payments required on the 2019 notes are as follows:

Corralitos - $23,326, 5 year loan, maximum annual payment of $5,281, MSC - $34,323, 7 year loan, maximum annual payment of $5,492.

For the Water Fund as follows:

The annual requirements to repay the PG&E 2019 Water Fund notes outstanding as of June 30, 2023 are as follows:

Fiscal Year Principal
$
2024 10,333
2025 5,489
2026 4,121
Total 19,943
For the Waste Water Fund as follows:

Waste Water Treatment Plant - $86,422, 5 year loan, maximum annual payment of $19,205.

The annual requirements to repay the PG&E 2019 Waste Water Fund note outstanding as of June 30, 2023 are as follows:

Fiscal Year Principal
$
2024 19,205
2025 8,002
Total 27,207
For the Airport Fund as follows:

Airport - $153,579, 7 year loan, maximum annual payment of $23,037.

The annual requirements to repay the PG&E 2019 Airport Fund note outstanding as of June 30, 2023 are as follows:

Fiscal Year Principal
$
2024 23,037
2025 23,037
2026 23,037
2027 5,759
Total 74,870
73 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
For the Solid Waste Fund as follows:

Landfill - $9,110, 7 year loan, maximum annual payment of $1,458.

The annual requirements to repay the PG&E 2019 Solid Waste Fund note outstanding as of June 30, 2023 are as follows:

Fiscal Year Principal
$
2024 1,458
2025 1,458
2026 970
Total 3,886
State Water Resources Control Board Loans (Direct Borrowing) On December 18, 2015, the City entered into an agreement with the California State Water Resources Control Board for a Clean Water State Revolving Fund Loan to finance the Manana Lane Sewer Replacement Project. The amount of the loan is $1,486,310. The interest rate for the 20 year loan is 1.6% with principal payments ranging from $66,227 to $86,741.

The City’s outstanding loan under the California State Water Resources Control Board is secured by a pledge of revenues from the Sewer Enterprise Fund. Events of default include non-payment of interest or principal when due. The City shall have 10 days to clear any default. A penalty of highest legal rate of interest from date of default will be added for each charge, fees, taxes, assessments tools or other charges or imposed by the Recipient of non-payment. There have been no events of default since the loan was issued.

The annual debt services requirements for the loan outstanding as of June 30, 2023 is as follows:

Fiscal Year Principal Interest Debt Service
$$$
2024 69,457 18,673 88,130
2025 70,569 17,561 88,130
2026 71,698 16,432 88,130
2027 72,845 15,285 88,130
2028 74,011 14,120 88,131
2029-2033 388,199 52,451 440,650
2034-2038 420,263 20,386 440,649
Total 1,167,042 154,908 1,321,950
74 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
On April 15, 2019, the City entered into an agreement with the California State Water Resources Control Board for a Clean Water State Revolving Fund Loan to finance the Freedom Sanitation Trunk Sewer Line Project. The total amount of the loan is $4,600,840, however, the City has only drawn down $4,490,677, of which only $4,067,155 remains unpaid as of June 30, 2023. The interest rate for the 20 year loan is 1.7% with principal payments ranging from $191,784 to $259,771 as of June 30, 2023.

The City’s outstanding loan under the California State Water Resources Control Board is secured by a pledge of revenues from the Sewer Enterprise Fund. Events of default include non-payment of interest or principal when due. The City shall have 10 days to clear any default. A penalty of highest legal rate of interest from date of default will be added for each charge, fees, taxes, assessments tools or other charges or imposed by the Recipient of non-payment. There have been no events of default since the loan was issued.

The annual requirements to amortize the loan outstanding as of June 30, 2023 is as follows:

Fiscal Year Principal Interest Debt Service
$$$
2024 195,043 69,142 264,185
2025 198,359 65,826 264,185
2026 201,731 62,454 264,185
2027 205,160 59,025 264,185
2028 208,648 55,537 264,185
2029-2033 1,097,666 223,257 1,320,923
2034-2038 1,194,194 126,728 1,320,922
2039-2041 766,354 26,202 792,556
Total 4,067,155 688,171 4,755,326
iBank Loan (Direct Borrowing)
On March 20, 2023, the City received a loan in the amount of $6,000,000, plus accrued interest, from the California Infrastructure and Economic Development Bank. Proceeds from the loan are to be used for construction of a 7.1 acre landfill site. Principal is due annually on August 1st and interest is due semi-annually on August 1st and February 1st, commencing August 1, 2023. The interest rate for the 20 year loan is 3.93% with principal payments ranging from $139,665 to $377,497 as of June 30, 2023.

The loan is secured by a pledge of revenues from the Solid Waste Enterprise Fund. Events of default include non-payment of interest or principal when due. The City shall have 10 days to clear any default. A penalty of highest legal rate of interest from date of default will be added for each charge, fees, taxes, assessments tools or other charges or imposed by the Recipient of nonpayment. There have been no events of default since the loan was issued.

75 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
The annual requirements for loan repayments on the loan outstanding as of June 30, 2023 is as follows:

Fiscal Year Principal Interest Debt Service
$$$
2024 139,665 216,301 355,966
2025 145,573 244,813 390,386
2026 151,731 238,525 390,256
2027 158,149 231,971 390,120
2028 164,839 225,140 389,979
2029-2033 934,872 1,012,681 1,947,553
2034-2038 1,150,047 792,955 1,943,002
2039-2043 1,414,749 522,654 1,937,403
2044-2048 1,740,375 190,141 1,930,516
Total 6,000,000 3,675,181 9,675,181
Business-type Activities - Municipal landfill closure and post-closure liability and requirements
The City operates a landfill solely for the disposal of Watsonville residents’ solid waste. The landfill is regulated by the California Integrated Waste Management Board, which requires that the City set aside certain funds for the landfill's eventual closure. As of June 30, 1998, the City’s Solid Waste Division had completed the closure of the old landfill cell and recognized $403,773 of expenditures to complete the closure. The City is now operating a new cell, which was expected to provide landfill capacity for 23 years with an estimated post-closure costs of $1,591,230 as of June 30, 2023.

The City recognizes a portion of the closure and post closure care costs in each operating period.

The amount recognized each year to date for the new landfill is based on the landfill capacity used as of the balance sheet date. As of June 30, 2023, the new landfill cell had used 96.7% of its projected space. The estimated closure and post-closure costs were $1,876,793 and $1,803,644, respectively, which will be recognized as the remaining capacity is used (estimated to be 0.6 years). To date, the fund has $239,650 for post closure costs for the closed phase I and II cells and has set aside closure costs of $1,876,793 and post-closure costs of $1,563,994 for the open phase III cell for a total of $3,680,437. The estimated costs of closure and post closure care are subject to changes such as the effects of inflation, revision of laws and other variables.

NET OPEB LIABILITY
Starting July 1, 2015, the City ceased to pay cash subsidies for retirees. The retirees pay the full amount of their CSAC IEA premiums. The medical/drug implicit subsidy was the only source of liability related for OPEB. Since there is no cash subsidy, as of June 30, 2023, the net OPEB liability was calculated to be immaterial for GASB#75 presentation purposes. However, the net OPEB liabilities of $2,582,860 is still reflected as part of the long-term liabilities in the City’s Statements of Net Position as follows: Governmental Activities - $1,177,720, Business-type Activities - $1,405,140.
76 Attachment B

CITY OF WATSONVILLE, CALIFORNIA

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023
Financed Purchases (Direct Borrowings):

Governmental Activities -
On March 12, 2018, the City entered into an Equipment Lease Purchase agreement with Community First National Bank for the purchase of a Rosenbauer EXT Aerial Tiller Fire Truck.

The amount of the lease pertaining to governmental activities was $1,291,081. The interest rate for the 5 year lease is 3.544% with principal lease payments ranging from $249,076 to $276,507.

The lease is fully paid off as of June 30, 2023.

On March 9, 2021, the City entered into a Master Equipment Lease Purchase Agreement with Bank of America for the refinancing of the Solar Project Equipment by prepayment of the 2012 Solar Lease with Santa Cruz County and acquiring four solid waste collection vehicles and one sewer cleaning vehicle. See Financed Purchase (Direct Borrowing) – Business-Type Activities for further information. The amount of the lease pertaining to governmental activities was $1,649,451. Interest rate for the 7 year lease is 1.25% with principal lease payments ranging from $137,956 to $279,708.

If the City should default under any of the provisions hereof, the lessor may (1) declare defaulted and all other amounts payable to be immediately due, (2) retake possession or require the City to promptly return such equipment, (3) terminate the lease or (4) take legal action necessary and desirable to enforce its rights. There have been no events of default since the lease was entered into.

The annual requirement to amortize the lease outstanding for governmental activities as of June 30, 2023 is as follows:

Fiscal Year Principal Interest Debt Service
$$$
2024 274,086 11,961 286,047
2025 276,883 9,192 286,075
2026 279,708 6,396 286,104
2027 140,922 3,571 144,493
Total 971,599 31,120 1,002,719
Business-Type Activities -
On March 9, 2021, the City entered into a Master Equipment Lease Purchase agreement with Bank of America for the purchase of a Sewer Cleaning Vehicle Truck. The amount of the lease pertaining to the Sewer Fund was $503,037. Interest rate for the 6 year lease is 1.25% with principal lease payments ranging from $45,873 to $93,206.

If the City should default under any of the provisions hereof, the lessor may (1) declare defaulted and all other amounts payable to be immediately due, (2) retake possession or require the City to promptly return such equipment, (3) terminate the lease or (4) take legal action necessary and desirable to enforce its rights. There have been no events of default since the lease was entered into.
77 Attachment B