HomeMy WebLinkAboutPublic Hearing to Consider Adopting Public Financing Authori Dept. ID FN 14-014 Page 1 of 3
Meeting Date:8/18/2014
AVW 7�L
CITY OF HUNTINGTON BEACH
REQUEST FOR. PUBLIC FINANCING AUTHORITY ACTION
MEETING DATE: 8/18/2014
SUBMITTED TO: Honorable Chair and Board Members
SUBMITTED BY: Fred A. Wilson, Executive Director
PREPARED BY: Lori Ann Farrell, Director of Finance
SUBJECT: Public Hearing to Consider Adopting Public Financing Authority Resolution No.
22 Authorizing the Issuance of Huntington Beach Public Financing Authority
2014 Lease Revenue Bonds 2014 Series A.
Statement of Issue:
Authorization is requested from the Public Financing Authority to approve a bond issuance to
finance the construction of a new Senior Center in an amount not to exceed $16,405,000 to cover
construction, debt service reserve requirements and related costs.
Financial Impact:
The Senior Center project is an estimated $21.5 million project. A total of $4.5 million in General
Fund and Infrastructure Fund cash support has been identified to help cover project costs. It is
anticipated an additional $2.0 million will be raised from grants, donations and capital campaign
efforts, for a total of $6.5 million in cash funding. It is recommended the remaining $15.0 million
funding gap be financed by the issuance of bonds. A total bond issuance of $16,405,000 is
requested to fund: 1) A $15.0 million Construction Fund; 2) A $1.2 million required Debt Service
Reserve Fund; and, 3) Costs of Issuance totaling $244,000 for financial advisory, bond counsel,
underwriter and bank trustee costs. Average annual debt service is estimated at $1,156,600 with
an estimated true annual interest cost of 3.5 percent for a 20-year, level debt service bond. The FY
2014/15 Proposed General Fund Budget includes funding for the first year of debt service. Future
debt service payments will be appropriated in annual budgets from General Fund savings
associated with the complete payoff of other, previously issued bonds starting in FY 2016/17. Total
principal and interest costs are estimated at $23.1 million over the 20-year life of the bonds. Please
note these estimates may be subject to change based on market conditions at the time of pricing.
Public Financing Authority Recommended Action:
A) Approve Resolution 22, "Resolution of the Board of Directors of the Huntington Beach
Public Financing Authority Authorizing the Execution and Delivery by the Authority of a First
Amendment to Site Lease, A First Amendment to Lease Agreement, A First Supplemental
Indenture, A Bond Purchase Agreement in Connection with the Issuance of Huntington
Beach Public Financing Authority (Orange County, California) Lease Revenue Bonds, 2014
Series A (Senior Center Project), Authorizing the Issuance of Such Bonds in an Aggregate
Principal Amount of Not to Exceed $16,405,000, Authorizing the Distribution of an Official
Statement in Connection Therewith and Authorizing the Execution of Necessary Documents
and Certificates and Related Actions" and,
B) Authorize the Executive Director and Authority Secretary to take all administrative and
budgetary actions necessary to perform the bond issuance.
11B -511- Item 13. - I
Dept. ID FN 14-014 Page 2 of 3
Meeting Date:8/18/2014
Alternative Action(s):
Do not approve the recommended actions and the issuance of the bonds and direct staff
accordingly.
Analysis:
The Michael E. Rodgers Seniors' Center is the current location for the City's community-based
programs for seniors. A former World War II army barracks built in the 1940s and converted to a
Senior Center in 1975, the facility is at the end of its useful life, and is no longer sufficient to meet
the needs of the City's growing population of seniors. A new Senior Center facility designed to
meet the needs of the current and future senior population has been approved for construction.
Total costs of the project, estimated at $21.5 million, will be funded from multiple sources.
Specifically, a total of $4.5 million in City funds have already been identified, with an additional $2.0
million expected to be received in private/corporate donations. If private donations are not realized,
the City will be forced to dip into its Capital Improvement Reserves to make up the difference. To
fund the remaining $15 million gap, staff recommends a General Fund-backed lease revenue bond
in an amount not to exceed $16,405,000. Funding sources for the project are as follows:
Item �� ,j Fund/Source Amount
FY 2013/14 Capital Improvement Plan Infrastructure Fund $ 1,500,000
FY 2012/13 General Fund Year End Transfer Infrastructure Fund 1,000,000
General Fund Balance Set-Aside General Fund 2,000,000
Total Cash In-gland $ 4,500,000
Capital Campaign/Private Donations TBD 2,000,000
2014 Series A Lease Revenue Bond HBPFA Debt Service Fund 15,000,000
Total Project Funding $ 21,500,000
The recommended "not to exceed" amount is determined by the City's financial advisors and
represents an estimated $15.0 million for project construction costs, costs of issuance totaling
$244,000, and the legally required debt service reserve of $1.2 million (essentially equal to one
year of debt service) for a total of $16.4 million. Bond related legal, financial advisory, trustee and
recordkeeping costs of the bond issuance will be paid from bond proceeds. Please note these
estimates may be subject to change based on market conditions at the time of pricing.
The bonds will be payable from rental payments received by the Huntington Beach Public Financing
Authority from General Fund lease payments made from the City-owned Civic Center Complex.
Currently, the Site Lease Agreement for the Civic Center Complex allows for rental payments to be
used for debt service of the 2011 Series A Lease Revenue Bonds. Given current assessed
property valuations, the Civic Center Complex can serve as a lease property for both the 2011
Series A Lease Revenue Bonds and the proposed 2014 Series A Lease Revenue Bonds. An
amendment to the Site Lease and the Lease Agreement will be made in order to provide for the
issuance of additional bonds. It is anticipated these bonds will receive an AA rating from Standard
& Poor's and Fitch rating agencies, the highest credit rating available for bonds of this type.
Staff is recommending that the bonds be sold through its selected underwriters, Bank of America
Merrill Lynch through a negotiated sale, with bond counsel represented by the firm, Orrick,
Herrington & Sutcliffe LLP. These firms provided the most competitive qualified proposals and
were selected through a competitive Request for Proposals process for the 2011 Series A Lease
Revenue Bond financing, providing for the expedited financing of this critical project.
Environmental Status:
Item 13. - 2 HB -51
Dept. ID FN 14-014 Page 3 of 3
Meeting Date:8/18/2014
The site for the Senior Center project is a 5-acre parcel of undeveloped land within the Huntington
Central Park. The site has been assessed for hazardous materials and no significant hazardous
materials were found or are expected to exist on the site. The Project was subject to review under
the California Environmental Quality Act (CEQA) by the City, which resulted in a Final
Environmental Impact Report (FEIR) that was successfully challenged in litigation under CEQA,
following which the City prepared a Subsequent Environmental Impact Report (SEIR). All
environmental impacts were determined to be mitigated and insignificant except one —the aesthetic
impact upon parkland within the City. For several reasons (including multiple initiatives to expand
and improve parkland throughout the City), the City approved the SEIR and adopted a Statement of
Overriding Considerations under CEQA, which concluded that the impact upon aesthetics and
parkland were acceptable in light of the positive benefits of the project as a whole. A new lawsuit
was filed challenging the SEIR. The Superior Court, however, ruled that the SEIR had adequately
addressed the areas of concern regarding the FEIR and, on July 25, 2014, the Court of Appeal
affirmed this ruling. The FEIR, SEIR and Statement of Overriding Considerations are now final. A
related case challenging the SEIR is still pending, but the City expects that case to be resolved on
the basis of the recent Court of Appeal decision without further adverse impact on the timing or
financing of the Senior Center. The Authority's resolution acknowledges and concurs with the
City's findings in the FEIR, the SEIR and the statement of overriding considerations
Strategic Plan Goal:
Improve the City's infrastructure.
Enhance Quality of Life.
Enhance Economic Development.
Attachment(s):
1. Public Financing Authority Resolution No. 22, "Resolution of the Board of Directors of the
Huntington Beach Public Financing Authority Authorizing the Execution and Delivery by the
Authority of a First Amendment to Site Lease, A First Amendment to Lease Agreement, A
First Supplemental Indenture, A Bond Purchase Agreement in Connection with the Issuance
of Huntington Beach Public Financing Authority (Orange County, California) Lease Revenue
Bonds, 2014 Series A (Senior Center Project), Authorizing the Issuance of Such Bonds in
an Aggregate Principal Amount of Not to Exceed $16,405,000, Authorizing the Distribution
of an Official Statement in Connection Therewith and Authorizing the Execution of
Necessary Documents and Certificates and Related Actions".
2. First Amendment to Site Lease.
3. First Amendment to Lease Agreement.
4. First Amendment Supplemental Indenture.
5. Bond Purchase Agreement.
6. Preliminary Official Statement.
1-1B -513- Item 13. - 3
ATImom ACHMEtV `f # 1
RESOLUTION NO. 22
RESOLUTION OF THE BOARD OF DIRECTORS OF THE
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
AUTHORIZING THE EXECUTION AND DELIVERY BY THE
AUTHORITY OF A FIRST AMENDMENT TO SITE LEASE, A FIRST
AMENDMENT TO LEASE AGREEMENT, A FIRST SUPPLEMENTAL
INDENTURE AND A BOND PURCHASE AGREEMENT IN
CONNECTION WITH THE ISSUANCE OF HUNTINGTON BEACH
PUBLIC FINANCING AUTHORITY (ORANGE COUNTY,
CALIFORNIA) LEASE REVENUE BONDS, 2014 SERIES A (SENIOR
CENTER PROJECT), AUTHORIZING THE ISSUANCE OF SUCH
BONDS . IN AN AGGREGATE PRINCIPAL AMOUNT OF NOT TO
EXCEED $16,405,000, AUTHORIZING THE DISTRIBUTION OF AN
OFFICIAL STATEMENT IN CONNECTION THEREWITH AND
AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS
AND CERTIFICATES AND RELATED ACTIONS
WHEREAS, in order to finance certain capital improvements, including the Huntington
Central Park Sports Complex and certain beach improvements along Pacific Coast Highway
from First Street and Pacific Coast Highway to Huntington Street and Pacific Coast Highway
(the "2001 Project"), the Huntington Beach Public Financing Authority (the "Authority") issued
its Huntington Beach Public Financing Authority (Orange County, California) Lease Revenue
Bonds, 2001 Series A (Capital Improvement Financing Project) (the "Prior 2001A Bonds"),
payable from certain lease payments to be made by the City of Huntington Beach (the "City");
and
In order to refinance certain capital improvements, including certain improvements to the
Civic Center, including the Police Administration Building (the "1993 Project" and together with
the 2001 Project, the "Prior Projects"), the Authority issued its Huntington Beach Public
Financing Authority (Orange County, California) Lease Revenue Bonds, 2001 Series B (Capital
Improvement Refinancing Project) (the "Prior 2001B Bonds" and together with the Prior 2001A
Bonds, the "Prior Bonds"), payable from certain lease payments to be made by the City; and
In order to refund the Prior Bonds to achieve certain savings, the City leased certain real
property owned by the City, including the improvements thereto, known as the Civic Center (the
"Property") to the Huntington Beach Public Financing Authority (the "Authority") pursuant to a
Site Lease, dated as of September 1, 2011 (the "Original Site Lease"), and subleased the Property
back from the Authority pursuant to a Lease Agreement, dated as of September 1, 2011 (the
"Original Lease Agreement"); and
The City and the Authority determined that it would be in the best interests of the City
and the Authority to provide the funds necessary to refinance the Prior Projects through the
issuance by the Authority of Huntington Beach Public Financing Authority (Orange County,
California) Lease Revenue Refunding Bonds, 2011 Series A (Capital Improvement Refinancing
Project) (the "Series 2011A Bonds"), pursuant to an Indenture, dated as of September 1, 2011
(the "Original Indenture"), by and among the Authority, the City and The Bank of New York
144335/111791 -1-
PFA Resolution No. 22
Mellon Trust Company, N.A., as trustee (the "Trustee"), payable from the base rental payments
(the "Base Rental Payments") to be made by the City under the Original Lease Agreement and
the other assets pledged therefor under the Original Indenture; and
All rights to receive such Base Rental Payments were assigned without recourse by the
Authority to the Trustee pursuant to the Indenture; and
In consideration of such assignment and the execution of the Original Indenture, the
Authority issued the Series 2011A Bonds (capitalized undefined terms used in these recitals shall
have the meanings ascribed thereto in the Original Indenture); and
The Original Indenture provides that, subject to the conditions set forth therein, in
addition to the Series 2011A Bonds, the City, the Authority and the Trustee may by execution of
a supplemental Indenture, without the consent of the Owners of the Series 2011 A Bonds, provide
for the issuance of Additional Bonds, payable from Lease Revenues; and
The Original Site Lease provides that the Original Site Lease may be amended only in
accordance with the provisions of the Original Lease Agreement; and
The Original Lease Agreement provides that, the Original Lease Agreement and the
Original Site Lease and the rights and obligations of the Authority and the City thereunder may
be amended at any time by an amendment thereof which shall become binding upon execution
by the Authority and the City, without the written consents of any Owners of the Series 2011 A
Bonds, in order to provide for the issuance of Additional Bonds in accordance with the
provisions of the Indenture; and
The City desires to finance the construction of certain capital improvements, consisting
of the Huntington Beach Senior Center, within the boundaries of the City (the "Project"); and
The City is a "lead agency" under the California Environmental Quality Act ("CEQA"),
and the Authority is a"responsible agency" and a"local agency" under CEQA; and
The Authority has reviewed (i) the Final Environmental Impact Report ("FEIR"), EIR
No. 07-002, SCH#2007041027, dated December 2007; (ii) the resolution of the City, Resolution
No. 2008-06 pursuant to which the City certified the FEIR; and (iii) approvals for Conditional
Use Permit, CUP No. 07-39 issued by the City with respect to the Project; and
The Authority has reviewed (i) the Subsequent Environmental Impact Report ("SEIR")
No. 07-002, SCH#2007041027, and the City's resolution, Resolution No. 2012-18, adopting it
on April 16, 2012; (ii) the Conditional Use Permit, CUP No. 07-39R (the "CUP") with General
Plan Amendment No. 11-004 approved and issued by the City's Resolution No. 2012-19 on
April 16, 2012; (iii) the City's Findings of Fact and Statement of Overriding Considerations
("Statement of Overriding Considerations") with respect to FEIR and SEIR, dated January 2012,
approved by the City on April 16, 2012; and (iv) the July 25, 2014, Court of Appeal ruling that
the SEIR adequately addressed the areas of concern regarding the FEIR (Appeal Case No.
G048620); and
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14-4335/111791
PFA Resolution No. 22
In order to accomplish the financing of the Project, the Authority and the City desire to
enter into a First Amendment to Site Lease (the "First Site Lease Amendment") in order to
amend the Original Site Lease so as to extend the term thereof and to make certain other
modifications in order to provide for the issuance of Additional Bonds in accordance with the
provisions of the Original Indenture (the Original Site Lease as so amended is referred to as the
"Site Lease"); and
In order to accomplish the financing of the Project, the Authority and the City also desire
to enter into a First Amendment to Lease Agreement (the "First Lease Amendment") in order to
amend the Original Lease Agreement so as to extend the term thereof and increase the amount of
Base Rental Payments payable thereunder and to make certain other modifications in order to
provide for the issuance of Additional Bonds in accordance with the provisions of the Original
Indenture (the Original Lease Agreement as so amended is referred to as the "Lease
Agreement"); and
The City and the Authority have determined that it would be in the best interests of the
City and the Authority to provide the funds necessary to finance the Project through the issuance
of Additional Bonds, designated "Huntington Beach Public Financing Authority (Orange
County, California) Lease Revenue Bonds, 2014 Series A (Senior Center Project)" (the "Series
2014A Bonds"), payable from Lease Revenues; and
The Authority and the City desire that the Trustee, the Authority and the City enter into a
First Supplemental Indenture (the "First Supplemental Indenture") in order to provide for the
issuance of the Series 2014A Bonds and to expressly provide that all rights to receive the Base
Rental Payments, including the increased amounts thereof provided for in the First Lease
Amendment, have been assigned without recourse by the Authority to the Trustee; and
The Series 2014A Bonds will be issued pursuant to the Marks-Roos Local Bond Pooling
Act of 1985, commencing with Section 6584 of the California Govermnent Code; and
The Board of Directors of the Authority (the `Board of Directors") has determined that
securing the timely payment of the principal of and interest on the Series 2014A Bonds by
obtaining a municipal bond insurance policy and/or a reserve surety policy or bond with respect
thereto could be economically advantageous to the Authority; and
Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Underwriter"), has submitted
to the Authority and the City a proposal to purchase the Series 2014A Bonds in the form of a
Bond Purchase Agreement (the"Bond Purchase Agreement"); and
A form of the Preliminary Official Statement (the "Preliminary Official Statement") to be
distributed in connection with the public offering of the Series 2014A Bonds has been prepared;
and
The City is a member of the Authority and the Project is to be located within the boundaries
of the City; and
On the date hereof, the City Council of the City held a public hearing on the financing of
the Project in accordance with Section 6586.5 of the Act; and
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14-4335/111791
PFA Resolution No. 22
In accordance with Section 6586.5 of the Act, notice of such hearing was published once
at least five days prior to the hearing in the Independent and the Orange County Register,
newspapers of general circulation in the City and the County of Orange, respectively; and
The Board of Directors has been presented with the form of each document referred to
herein relating to the financing contemplated hereby, and the Board of Directors has examined
and approved each document and desires to authorize and direct the execution of such documents
and the consummation of such financing; and
All acts, conditions and things required by the laws of the State of California to exist, to
have happened and to have been performed precedent to and in connection with the
consummation of such financing authorized hereby do exist, have happened and have been
performed in regular and due time, form and manner as required by law, and the Authority is
now duly authorized and empowered, pursuant to each and every requirement of law, to
consummate such financing for the purpose, in the manner and upon the terms herein provided;
NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF
THE HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY, as follows:
Section 1. All of the recitals herein contained are true and correct and the Board of
Directors so finds.
Section 2. The Authority has reviewed and agrees with the analysis and findings in the
FEIR, SEIR and Statement of Overriding Considerations, and finds as follows:
(a) The City's Statement of Overriding Considerations identify potentially
significant environmental impacts that have been mitigated as provided in the CUP issued for the
Project and in the FEIR and SEIR for the Project.
(b) The City, and not the Authority, is the best public agency to assess the
environmental impacts from the perspective of compliance with codes, integration into the
neighborhood, noise and light impacts, and many other impacts identified in the Statement of
Overriding Considerations.
(c) All of the potentially significant impacts have been or will be mitigated
sufficiently to render them insignificant, assuming compliance with the conditions imposed by
the City;
(d) The City identified a significant adverse impact that the Project would
have upon aesthetics, namely, that the Project would modify land that is currently undeveloped,
and the character of Central Park would be altered, and the Authority agrees that this impact is
significant;
(e) The City's plans for preservation, expansion and enhancement of city
parks more than offset the significant aesthetic environmental impact identified by the City in the
Statement of Overriding Considerations;
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14-4335/111791
WA Resolution No. 22
(f) The Project would have significant benefits, including, the following:
(i) The proposed project would provide a new, centrally located state-
of-the-art senior center that would be large enough to respond to the changing
needs of the population and meet the diverse interests of the City's senior
residents.
(ii) Development of the proposed project would allow the City to serve
a higher percentage of its senior population with service comparable to other
cities.
(iii) The proposed project emphasizes compatibility and sensitivity to
the existing uses surrounding the site and would include a variety of sustainable
features.
(iv) The City is actively pursuing the feasibility of additional features
that would enhance the Project's ability to obtain LEED certification.
(v) The project will maintain and enhance the community image of
Huntington Beach through the construction of high quality development.
(g) These findings are contingent upon the Authority receiving all monitoring
reports and records prepared by or obtained by the City pursuant to'the FEIR, the CUP and the
SEIR;
(h) The records upon which the foregoing CEQA findings are based are
maintained by the City Clerk of the City at the Office of the City Clerk located at City's Civic
Center, 2000 Main Street, Huntington Beach, California.
Section 3. The form of the First Site Lease Amendment, on file with the Secretary of the
Authority, is hereby approved, and the Chair of the Board of Directors of the Authority, and such
other member of the Board of Directors as the Chair may designate, the Executive Director of
the Authority and the Treasurer of the Authority, and such other officers of the Authority as the
Executive Director of the Authority may designate (the "Authorized Officers"), are each hereby
authorized and directed, for and in the name and on behalf of the Authority, to execute and
deliver the First Site Lease Amendment in substantially said form, with such changes, insertions
and omissions therein as the Authorized Officer executing the same may require or approve,
such approval to be conclusively evidenced by the execution and delivery thereof; provided,
however, that the term of the Site Lease shall terminate no later than September 1, 2034
(provided that such term may be extended as provided therein).
Section 4. The form of the First Lease Amendment, on file with the Secretary of the
Authority, is hereby approved, and the Authorized Officers are each hereby authorized and
directed, for and in the name and on behalf of the Authority, to execute and deliver the First
Lease Amendment in substantially said forin, with such changes, insertions and omissions
therein as the Authorized Officer executing the same may require or approve, such approval to
be conclusively evidenced by the execution and delivery thereof; provided, however, that the
aggregate amount of the principal components of the Base Rental Payments shall not exceed
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14-4335/111791
PFA Resolution No. 22
$16,405,000, the term of the Lease Agreement shall terminate no later than September 1, 2034
(provided that such term may be extended as provided therein) and the true interest cost
applicable to the interest components of the Base Rental Payments shall not exceed 4.70% per
annurn.
Section 5. The form of First Supplemental Indenture, on file with the Secretary of the
Authority, is hereby approved, and the Authorized Officers are each hereby authorized and
directed, for and in the name and on behalf of the Authority, to execute and deliver the First
Supplemental Indenture in substantially said form, with such changes, insertions and omissions
therein as the Authorized Officer executing the same may require or approve, such approval to
be conclusively evidenced by the execution and delivery thereof; provided, however, that the
aggregate principal amount of the Series 2014A Bonds shall not exceed $16,405,000, the final
maturity date of the Series 2014A Bonds shall be no later than September 1, 2034 and the true
interest cost applicable to the Series 2014A Bonds shall not exceed 4.70%per annum.
Section 6. The issuance of not to exceed $16,405,000 aggregate principal amount of the
Series 2014A Bonds, in the principal amounts, bearing interest at the rates and maturing on the
dates as specified in the Indenture as finally executed, is hereby authorized and approved.
Section 7. The form of the Bond Purchase Agreement, submitted to and on file with the
Secretary of the Board of Directors, is hereby approved, and the Authorized Officers are each
hereby authorized and directed, for and in the name and on behalf of the Authority, to execute
and deliver the Bond Purchase Agreements in substantially said form, with such changes,
insertions and omissions therein as the Authorized Officer executing the same may require or
approve, such approval to be conclusively evidenced by the execution and delivery thereof;
provided, however, that the underwriter's discount for the sale of the Series 2014A Bonds shall
not exceed 0.50% of the aggregate principal amount of the Series 2014A Bonds.
Section 8. The form of Preliminary Official Statement, on file with the Secretary of the
Authority, with such changes, insertions and omissions therein as may be approved by an
Authorized Officer, is hereby approved, and the use of the Preliminary Official Statement in
connection with the offering and sale of the Series 2014A Bonds is hereby authorized and
approved. The Authorized Officers are each hereby authorized to certify on behalf of the
Authority that the Preliminary Official Statement is deemed final as of its date, within the
meaning of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 (except for the
omission of certain final pricing, rating and related information as permitted by such Rule).
Section 9. The preparation and delivery of an Official Statement, and its use in
connection with the offering and sale of the Series 2014A Bonds, is hereby authorized and
approved. The Official Statement shall be in substantially the form of the Preliminary Official
Statement with such changes, insertions and omissions as may be approved by an Authorized
Officer, such approval to be conclusively evidenced by the execution and delivery thereof. The
Authorized Officers are each hereby authorized and directed, for and in the name of and on
behalf of the Authority, to execute the final Official Statement and any amendment or
supplement thereto for and in the name and on behalf of the Authority.
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PFA Resolution No. 22
Section 10. The Authorized Officers are hereby authorized and directed, jointly and
severally, to do any and all things which they may deem necessary or advisable in order to
consummate the transactions herein authorized and otherwise to carry out, give effect to and
comply with the terms and intent of this Resolution, including, without limitation, applying for,
and negotiating the terms of, municipal bond insurance and/or a reserve surety policy or bond
(and any contract or mutual insurance agreement for such insurance or surety) for all or a portion
of the Series 2014A Bonds if such insurance or surety is determined to be in the best interests of
the Authority, and the preparation and filing or posting of a notice of determination with respect
to the Project as provided under CEQA.
Section 11. All actions heretofore taken by the officers and agents of the Authority with
respect to the transactions set forth above are hereby approved, confirmed and ratified.
Section 12. This Resolution shall take effect from and after its date of adoption.
PASSED AND ADOPTED,by the Board of Directors of the Huntington Beach Public
Financing Authority at a regular meeting thereof held on the 18th day of
August ,2014.
Chair
REVIEWED AND APPROVED: INITIATED AND APPROVED:
/I
lk—
Ex >i'ti�e Pirector "Execut__iy�eDi�ector
APPROVED AS TO FORM:
m .
Authority Attorney) r
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14-4335/111791
Res. No. 22
STATE OF CALIFORNIA )
COUNTY OF ORANGE )
CITY OF HUNTINGTON BEACH )
I, JOAN FLYNN, the duly elected, qualified Secretary of the
Huntington Beach Public Financing Authority, do hereby certify that the
whole number of members of the Board of Directors of the Huntington Beach
Public Financing Authority is seven; that the foregoing resolution was passed and
adopted by the affirmative vote of at least a majority of all the members of said
Board at a Regular meeting thereof held on August 18, 2014 and that it was so
adopted by the following vote:
AYES: Directors: Katapodis, Hardy, Shaw, Harper, Boardman ,Sullivan, Carchio
NOES: Directors: None
ABSENT: Directors: None
ABSTAIN: Directors: None
Secretag of the Board of Directors
of the Huntington Beach Public
Financing Authority
AT112%CT HMENT #2
TO BE RECORDED AND WHEN RECORDED
RETURN TO:
Orrick, Herrington & Sutcliffe LLP
2050 Main Street, Suite 1100
Irvine, CA 92614-2558
Attention: Donald S. Field, Esq.
THIS TRANSACTION IS EXEMPT FROM CALIFORNIA DOCUMENTARY
TRANSFER TAX PURSUANT TO SECTION 11921 OF THE CALIFORNIA REVENUE
AND TAXATION CODE. THIS DOCUMENT IS EXEMPT FROM RECORDING FEES
PURSUANT TO SECTION 27383 OF THE CALIFORNIA GOVERNMENT CODE.
FIRST AMENDMENT TO
SITE LEASE
by and between
CITY OF HUNTINGTON BEACH
and
HUNTINGTON BEACH
PUBLIC FINANCING AUTHORITY
Dated as of 192014
OHSUSA:758613562.1
H -s21- Item 13. - 11
TABLE OF CONTENTS
Page
PART 1
PARTICULAR AMENDMENTS
Part 1.1 Amendments to Section 7.01 .................................................................................... 3
Part 1.2 Amendments to Section 7.02.................................................................................... 3
PART 2
MISCELLANEOUS
Part 2.1 Effect of First Amendment. ..................................................................................... 3
Part 2.2 Execution in Counterparts.........................................................................................4
Part2.3 Effective Date ...........................................................................................................4
DHSIJSA:758613562.1
Item 13. - 12 HB _s221_
FIRST AMENDMENT TO
SITE LEASE
THIS FIRST AMENDMENT TO SITE LEASE (this "First Amendment') executed
and entered into as of 1, 2014, is by and between the CITY OF HUNTINGTON
BEACH, a municipal corporation and charter city duly organized and existing under and by
virtue of the Constitution and laws of the State of California and its Charter (the "City"), and the
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY, a joint exercise of powers entity
organized and existing under and by virtue of the laws of the State of California (the
"Authority").
RECITALS
WHEREAS, in order to finance certain capital improvements, including the Huntington
Central Park Sports Complex and certain beach improvements along Pacific Coast Highway
from First Street and Pacific Coast Highway to Huntington Street and Pacific Coast Highway
(the "2001 Project'), the Authority issued its Huntington Beach Public Financing Authority
(Orange County, California) Lease Revenue Bonds, 2001 Series A (Capital Improvement
Financing Project) (the "Prior 2001 A Bonds"), payable from certain lease payments to be made
by the City; and
WHEREAS, in order to refinance certain capital improvements, including certain
improvements to the Civic Center, including the Police Administration Building (the "1993
Project" and together with the 2001 Project, the "Prior Projects"), the Authority issued its
Huntington Beach Public Financing Authority (Orange County, California) Lease Revenue
Bonds, 2001 Series B (Capital Improvement Refinancing Project) (the "Prior 2001B Bonds" and
together with the Prior 2001A Bonds, the "Prior Bonds"), payable from certain lease payments to
be made by the City; and
WHEREAS, in order to refund the Prior Bonds to achieve certain savings, the City
leased certain real property owned by the City, including the improvements thereto, known as the
Civic Center, more particularly described in Exhibit A hereto (the "Property"), to the Authority
pursuant to a Site Lease, dated as of September 1, 2011 (the "Original Site Lease"), Orange
County Recorder (the "Recorder") Instrument No. 2011000479933, and subleased the Property
and the Project back from the Authority pursuant to a Lease Agreement, dated as of September 1,
2011 (the "Original Lease Agreement'), with regard to which a Memorandum of Lease
Agreement and Assignment was recorded, Recorder Instrument No. 2011000479934 (the .
"Memorandum of Lease Agreement and Assignment'); and
WHEREAS, the City and the Authority determined that it would be in the best interests
of the City and the Authority to provide the funds necessary to refinance the Prior Projects
through the issuance by the Authority of Huntington Beach Public Financing Authority (Orange
County, California) Lease Revenue Refunding Bonds, 2011 Series A (Capital Improvement
Refinancing Project) (the "Series 2011A Bonds"), pursuant to an Indenture, dated as of
September 1, 2011 (the "Original Indenture"), by and among the Authority, the City and The
Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee"), payable from the
base rental payments (the "Base Rental Payments") to be made by the City under the Original
Lease Agreement and the other assets pledged therefor under the Original Indenture; and
OHSUSA:758613562.1
HB -523- Item 13. - 13
WHEREAS, all rights to receive such Base Rental Payments were assigned without
recourse by the Authority to the Trustee pursuant to the Original Indenture, with regard to which
the Memorandum of Lease Agreement and Assignment was recorded; and
WHEREAS, in consideration of such assignment and the execution of the Original
Indenture, the Authority issued the Series 2011A Bonds (capitalized undefined terms used in
these recitals shall have the meanings ascribed thereto in the Original Indenture); and
WHEREAS, the Original Indenture provides that, subject to the conditions set forth
therein, in addition to the Series 2011A Bonds, the City, the Authority and the Trustee may by
execution of a supplemental Indenture without the consent of the Owners, provide for the
issuance of Additional Bonds, payable from Lease Revenues; and
WHEREAS, the Original Site Lease provides that the Original Site Lease may be
amended only in accordance with the provisions of the Original Lease Agreement; and
WHEREAS, the Original Lease Agreement provides that, the Original Lease Agreement
and the Original Site Lease and the rights and obligations of the Authority and the City
thereunder may be amended at any time by an amendment thereof which shall become binding
upon execution by the Authority and the City, without the written consents of any Owners, in
order to provide for the issuance of Additional Bonds in accordance with the provisions of the
Indenture; and
WHEREAS,the City desires to finance the construction of certain capital improvements,
consisting of a senior center, within the boundaries of the City (the "Project"); and
WHEREAS, in order to accomplish such financing, the Authority and the City are
entering into this First Amendment in order to amend the Original Site Lease so as to extend the
term thereof and to make certain other modifications in order to provide for the issuance of
Additional Bonds in accordance with the provisions of the Original Indenture (the Original Site
Lease as so amended is referred to as the "Site Lease"); and
WHEREAS, in order to accomplish such financing, the Authority and the City are
entering into a First Amendment to Lease Agreement, dated as of the date hereof (the "First
Lease Amendment") in order to amend the Original Lease Agreement so as to extend the term
thereof and increase the amount of Base Rental Payments payable thereunder and to make
certain other modifications in order to provide for the issuance of Additional Bonds in
accordance with the provisions of the Original Indenture (the Original Lease Agreement as so
amended is referred to as the "Lease Agreement"); and
WHEREAS, the City and the Authority have determined that it would be in the best
interests of the City and the Authority to provide the funds necessary to finance the Project
through the sale and delivery of Additional Bonds, designated "Huntington Beach Public
Financing Authority (Orange County, California) Lease Revenue Bonds, 2014 Series A (Senior
Center Project)" (the "Series 2014A Bonds")payable from Lease Revenues; and
WHEREAS, the Trustee, the Authority and the City are entering into a First
Supplemental Indenture, dated as of the date hereof(the "First Supplemental Indenture"), by and
nHSIJSA:758613562.1 2
Item 13. - 14 1113 -524-
among the Trustee, the Authority and the City, in order to provide for the issuance of the Series
2014A Bonds and to expressly provide that all rights to receive the Base Rental Payments,
including the increased amounts thereof provided for in this First Amendment, have been
assigned without recourse by the Authority to the Trustee; and
WHEREAS, all acts, conditions and things required by law to exist, to have happened
and to have been performed precedent to and in connection with the execution and entering into
of this First Amendment do exist, have happened and have been performed in regular and due
time, form and manner as required by law, and the parties hereto are now duly authorized to
execute and enter into this First Amendment;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained,
the parties hereto agree as follows:
PART 1
PARTICULAR AMENDMENTS
Part 1.1 Amendments to Section 7.01. (a) Section 7.01 of the Original Site Lease is
hereby amended in full to read as follows:
Section 7.01. Term. The term of this Site Lease shall commence as of
the date of commencement of the term of the Lease Agreement and shall remain
in full force and effect from such date to and including September 1, 20_, unless
such term is extended or sooner terminated as hereinafter provided.
Part 1.2 Amendments to Section 7.02. (a) Section 7.02 of the Original Site Lease is
hereby amended in full to read as follows:
Section 7.02. Extension; Early Termination. If, on September 1, 20_,
the Bonds shall not be fully paid, or provision therefor made in accordance with
Article IX of the Indenture, or the Indenture shall not be discharged by its terms,
or if the Rental Payments payable under the Lease Agreement shall have been
abated at any time, then the term of this Site Lease shall be automatically
extended until the date upon which all Bonds shall be fully paid, or provision
therefor made in accordance with Article IX of the Indenture, and the Indenture
shall be discharged by its terms, except that the term of this Site Lease shall in no
event be extended more than ten years. If, prior to September 1, 20 , all Bonds
shall be fully paid, or provisions therefor made in accordance with Article IX of
the Indenture, and the Indenture shall be discharged by its terms, the term of this
Site Lease shall end simultaneously therewith.
PART 2
MISCELLANEOUS
Part 2.1 Effect of First Amendment. This First Amendment and all of the terms and
provisions herein contained shall form part of the Original Site Lease as fully and with the same
OHSUSA:758613562.1 3
1 11B _525_ Item 13. - 15
effect as if all such terms and provisions had been set forth in the Original Site Lease. The
Original Site Lease is hereby ratified and confirmed and shall continue in full force and effect in
accordance with the terms and provisions thereof, as heretofore amended and supplemented, and
as amended and supplemented hereby. If there shall be any conflict between the terms of this
First Amendment and the terms of the Original Site Lease (as in effect on the day prior to the
effective date of this First Amendment), the terms of this First Amendment shall prevail.
Part 2.2 Execution in Counterparts. This First Amendment may be executed in
several counterparts, each of which shall be deemed an original, and all of which shall constitute
but one and the same instrument.
Part 2.3 Effective Date. This First Amendment shall become effective upon the Series
2014A Bonds Closing Date.
OHSUSA:758613562.1 4
Item 13. - 16 11B -526-
IN WITNESS WHEREOF, the City and the Authority have caused this First
Amendment to be executed by their respective officers thereunto duly authorized, all as of the
day and year first above written.
CITY OF HUNTINGTON BEACH
By:
HUNTINGTON BEACH PUBLIC
FINANCING AUTHORITY
By:
OHSUSA:758613562.1
1-1 B _5-27_ Item 13. - 17
EXHIBIT A
DESCRIPTION OF THE PROPERTY
All that real property situated in the County of Orange, State of California, described as
follows, and any improvements thereto:
OHSIJSA:758613562.1 A-1
Item 13. - 18 14B -529-
ATTAC H M E N T #3_1
TO BE RECORDED AND WHEN RECORDED
RETURN TO:
Orrick,Herrington & Sutcliffe LLP
2050 Main Street, Suite 1100
Irvine, CA 92614-2558
Attention: Donald S. Field,Esq.
THIS TRANSACTION IS EXEMPT FROM CALIFORNIA DOCUMENTARY
TRANSFER TAX PURSUANT TO SECTION 11921 OF THE CALIFORNIA REVENUE
AND TAXATION CODE. THIS DOCUMENT IS EXEMPT FROM RECORDING FEES
PURSUANT TO SECTION 27383 OF THE CALIFORNIA GOVERNMENT CODE.
FIRST AMENDMENT TO
LEASE AGREEMENT
by and between
CITY OF HUNTINGTON BEACH
and
HUNTINGTON BEACH
PUBLIC FINANCING AUTHORITY
Dated as of 192014
OHSUSA:758607570.2
T i B - 2 9- Item 13. - 19
TABLE OF CONTENTS
Page
PART 1
PARTICULAR AMENDMENTS
Part 1.1 Amendments to Section 1.01 .................................................................................... 3
Part 1.2 Amendments to Section 3.01(b) ............................................................................... 3
PART 2
MISCELLANEOUS
Part 2.1 Effect of First Amendment. .....................................................................................4
Part 2.2 Execution in Counterparts.........................................................................................4
Part2.3 Effective Date ...........................................................................................................4
i)HSLJSA:758607570.2
Item 13. - 20 11 r 7 -s 0-
FIRST AMENDMENT TO
LEASE AGREEMENT
THIS FIRST AMENDMENT TO LEASE AGREEMENT (this "First Amendment")
executed and entered into as of 1, 2014, is by and between the CITY OF
HUNTINGTON BEACH, a municipal corporation and charter city duly organized and existing
under and by virtue of the Constitution and laws of the State of California and its Charter (the
"City"), and the HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY, a joint exercise
of powers entity organized and existing under and by virtue of the laws of the State of California
(the "Authority").
RECITALS
WHEREAS, in order to finance certain capital improvements, including the Huntington
Central Park Sports Complex and certain beach improvements along Pacific Coast Highway
from First Street and Pacific Coast Highway to Huntington Street and Pacific Coast Highway
(the "2001 Project"), the Authority issued its Huntington Beach Public Financing Authority
(Orange County, California) Lease Revenue Bonds, 2001 Series A (Capital Improvement
Financing Project) (the "Prior 2001A Bonds"), payable from certain lease payments to be made
by the City; and
WHEREAS, in order to refinance certain capital improvements, including certain
improvements to the Civic Center, including the Police Administration Building (the "1993
Project" and together with the 2001 Project, the "Prior Projects"), the Authority issued its
Huntington Beach Public Financing Authority (Orange County, California) Lease Revenue
Bonds, 2001 Series B.(Capital Improvement Refinancing Project) (the "Prior 2001B Bonds" and
together with the Prior 2001A Bonds, the "Prior Bonds"), payable from certain lease payments to
be made by the City; and
WHEREAS, in order to refund the Prior Bonds to achieve certain savings, the City
leased certain real property owned by the City, including the improvements thereto, known as the
Civic Center, more particularly described in Exhibit A hereto (the "Property"), to the Authority
pursuant to a Site Lease, dated as of September 1, 2011 (the "Original Site Lease"), Orange
County Recorder (the "Recorder") Instrument No. 2011000479933, and subleased the Property
and the Project back from the Authority pursuant to a Lease Agreement, dated as of September 1,
2011 (the "Original Lease Agreement"), with regard to which a Memorandum of Lease
Agreement and Assignment was recorded, Recorder Instrument No. 2011000479934 (the
"Memorandum of Lease Agreement and Assignment"); and
WHEREAS, the City and the Authority determined that it would be in the best interests
of the City and the Authority to provide the funds necessary to refinance the Prior Projects
through the issuance by the Authority of Huntington Beach Public Financing Authority (Orange
County, California) Lease Revenue Refunding Bonds, 2011 Series A (Capital Improvement
Refinancing Project) (the "Series 2011A Bonds"), pursuant to an Indenture, dated as of
September 1, 2011 (the "Original Indenture"), by and among the Authority, the City and The
Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee"), payable from the
base rental payments (the "Base Rental Payments") to be made by the City under the Original
Lease Agreement and the other assets pledged therefor under the Original Indenture; and
OHSUSA:758607570.2
HB -531- Item 13. - 21
WHEREAS, all rights to receive such Base Rental Payments were assigned without
recourse by the Authority to the Trustee pursuant to the Original Indenture, with regard to which
the Memorandum of Lease Agreement and Assignment was recorded; and
WHEREAS, in consideration of such assignment and the execution of the Original
Indenture, the Authority issued the Series 2011A Bonds (capitalized undefined terms used in
these recitals shall have the meanings ascribed thereto in the Original Indenture); and
WHEREAS, the Original Indenture provides that, subject to the conditions set forth
therein, in addition to the Series 2011A Bonds, the City, the Authority and the Trustee may by
execution of a supplemental Indenture without the consent of the Owners, provide for the
issuance of Additional Bonds, payable from Lease Revenues; and
WHEREAS, the Original Site Lease provides that the Original Site Lease may be
amended only in accordance with the provisions of the Original Lease Agreement; and
WHEREAS, the Original Lease Agreement provides that, the Original Lease Agreement
and the Original Site Lease and the rights and obligations of the Authority and the City
thereunder may be amended at any time by an amendment thereof which shall become binding
upon execution by the Authority and the City, without the written consents of any Owners, in
order to provide for the issuance of Additional Bonds in accordance with the provisions of the
Indenture; and
WHEREAS,the City desires to finance the construction of certain capital improvements,
consisting of a senior center, within the boundaries of the City (the"Project"); and
WHEREAS, in order to accomplish such financing, the Authority and the City are
entering into a First Amendment to Site Lease, dated as of the date hereof(the "First Site Lease
Amendment") in order to amend the Original Site Lease so as to extend the term thereof and to
make certain other modifications in order to provide for the issuance of Additional Bonds in
accordance with the provisions of the Original Indenture (the Original Site Lease as so amended
is referred to as the "Site Lease"); and
WHEREAS, in order to accomplish such financing, the Authority and the City are
entering into this First Amendment in order to amend the Original Lease Agreement so as to
extend the term thereof and increase the amount of Base Rental Payments payable thereunder
and to make certain other modifications in order to provide for the issuance of Additional Bonds
in accordance with the provisions of the Original Indenture (the Original Lease Agreement as so
amended is referred to as the "Lease Agreement"); and
WHEREAS, the City and the Authority have determined that it would be in the best
interests of the City and the Authority to provide the funds necessary to finance the Project
through the sale and delivery of Additional Bonds, designated "Huntington Beach Public
Financing Authority (Orange County, California) Lease Revenue Bonds, 2014 Series A (Senior
Center Project)" (the "Series 2014A Bonds") payable from Lease Revenues; and
WHEREAS, the Trustee, the Authority and the City are entering into a First
Supplemental Indenture, dated as of the date hereof(the "First Supplemental Indenture"), by and
OHSIJSA:758607570.2 2
Item 13. - 22 1-113 -5 3-2-
among the Trustee, the Authority and the City, in order to provide for the issuance of the Series
2014A Bonds and to expressly provide that all rights to receive the Base Rental Payments,
including the increased amounts thereof provided for in this First Amendment, have been
assigned without recourse by the Authority to the Trustee; and
WHEREAS, all acts, conditions and things required by law to exist, to have happened
and to have been performed precedent to and in connection with the execution and entering into
of this First Amendment do exist, have happened and have been performed in regular and due
time, form and manner as required by law, and the parties hereto are now duly authorized to
execute and enter into this First Amendment;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained,
the parties hereto agree as follows:
PART 1
PARTICULAR AMENDMENTS
Part 1.1 Amendments to Section 1.01. (a) Section 1.01 of the Original Lease
Agreement is hereby amended by modifying the following terms:
"Closing Date" means, as appropriate to the context, the Series 2011A
Closing Date, the Series 2014A Closing Date and/or the closing date(s) for any
series of Additional Bonds.
"Scheduled Termination Date" means September 1, 20_.
(b) Section 1.01 of the Original Lease Agreement is hereby amended by adding
thereto the following definitions:
"Series 2011A Closing Date" means the date upon which the Series
201 IA Bonds are delivered to the Original Purchaser thereof, being September 28,
2011.
"Series 2014A Closing Date" means the date upon which the Series
2014A Bonds are delivered to the Original Purchaser thereof, being ,
2014.
"Series 2014A Bonds" means the Huntington Beach Public Financing
Authority Lease Revenue Bonds, 2014 Series A (Senior Center Project), issued
under the Indenture.
Part 1.2 Amendments to Section 3.01(b}. (a) Section 3.01(b) of the Original Lease
Agreement is hereby amended in full to read as follows:
(b) Base Rental Payments. Subject to the provisions of Section 3.06
hereof, the City shall, on each Base Rental Deposit Date, pay to the Authority a
Base Rental Payment in an amount equal to the principal of, and interest on, the
oHSUSA:7586075702 3
11B _533- Item 13. - 23
Bonds, including the Series 2011A Bonds and the Series 2014A Bonds, due and
payable on the next succeeding Principal Payment Date or Interest Payment Date,
as applicable, including any such principal due and payable by reason of
mandatory sinking fund redemption of the Bonds; provided, however, that the
amount of such Base Rental Payment shall be reduced by the amount, if any,
available in the Payment Fund, the Principal Account or the Interest Account on
such Base Rental Deposit Date to pay such principal of, or interest on, the Bonds.
PART 2
MISCELLANEOUS
Part 2.1 Effect of first Amendment. This First Amendment and all of the terms and
provisions herein contained shall form part of the Original Lease Agreement as fully and with the
same effect as if all such terms and provisions had been set forth in the Original Lease
Agreement. The Original Lease Agreement is hereby ratified and confirmed and shall continue
in full force and effect in accordance with the terms and provisions thereof, as heretofore
amended and supplemented, and as amended and supplemented hereby. If there shall be any
conflict between the terms of this First Amendment and the terms of the Original Lease
Agreement (as in effect on the day prior to the effective date of this First Amendment), the terms
of this First Amendment shall prevail.
Part 2.2 Execution in Counterparts. This First Amendment may be executed in
several counterparts, each of which shall be deemed an original, and all of which shall constitute
but one and the same instrument.
Part 2.3 Effective Date. This First Amendment shall become effective upon the Series
2014A Bonds Closing Date.
OHSi JSA:758607570.2 4
Item 13. - 24 I-IB -534-
IN WITNESS WHEREOF, the Authority and the City have caused this First
Amendment to be executed by their respective officers thereunto duly authorized, all as of the
day and year first above written.
HUNTINGTON BEACH PUBLIC
FINANCING AUTHORITY
By:
CITY OF HUNTINGTON BEACH
By:
OHSUSA:758607570.2
1413 -535- Item 13. - 25
EXHIBIT A
DESCRIPTION OF THE PROPERTY
All that real property situated in the County of Orange, State of California, described as
follows, and any improvements thereto:
OHSiJSA:758607570.2 A-1
Item 13. - 26 14B -5-36-
ATTACHMENT #4
FIRST SUPPLEMENTAL
INDENTURE
by and among
HUNTINGTON BEACH
PUBLIC FINANCING AUTHORITY
and
CITY OF HUNTINGTON BEACH
and
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.
Dated as of 1, 2014
Relating to
Huntington Beach Public Financing Authority
(Orange County, California)
Lease Revenue Bonds, 2014 Series A
(Senior Center Project)
OHSUSA:758607582.2
xB _ti37_ Item 13. - 27
OHSUSA:758607582.2 2
Item 13. - 28 HB -s�s-
TABLE OF CONTENTS
Page
PART 1
PARTICULAR AMENDMENTS
Part 1.1. Amendments to Section 1.01..........................................................................................3
Part 1.7. Section 4.015
Part 1.7. Section 4.07 5
Part 1.7. Amendment to Article IV............................................................................................... 5
PART 2
ADDITION OF ARTICLE XI
Part 2.1. Addition of Article XI.................................................................................................... 6
ARTICLE XI
SERIES 2014A BONDS
Section 11.01. Issuance of Series 2014A Bonds................................................................ 6
Section 11.02. Terms of Series 2014A Bonds; Interest Computation...............................6
Section 11.03. Form of Series 2014A Bonds..................................................................... 8
Section 11.04. Deposit of Proceeds of Series 2014A Bonds............................................. 8
Section 11.05. Redemption of Series 2014A Bonds......................................................... 8
Section11.06. Tax Covenants ........................................................................................... 9
Section 11.07. Rebate Fund............................................................................................. 10
Section 11.08. Continuing Disclosure ............................................................................. 10
PART 3
MISCELLANEOUS
Part 3.1. Effect of First Supplemental Indenture......................................................................... 10
Part 3.2. Execution in Counterparts............................................................................................ 11
Part3.3. Effective Date............................................................................................................... 11
EXHIBIT A FORM OF SERIES 2014A BOND............................................................ 1
OHSUSA:758607582.2 i
HB _5,;9_ Item 13. - 29
FIRST SUPPLEMENTAL INDENTURE
THIS FIRST SUPPLEMENTAL INDENTURE (this "First Supplemental Indenture"),
is made and entered into as of 1, 2014, by and among the HUNTINGTON BEACH
PUBLIC FINANCING AUTHORITY, a joint exercise of powers entity organized and existing
under and by virtue of the laws of the State of California (the "Authority"), the CITY OF
HUNTINGTON BEACH, a municipal corporation and charter city duly organized and existing
under and by virtue of the Constitution and laws of the State of California and its Charter (the
"City"), and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., a banking
corporation duly organized and existing under and by virtue of the laws of the State of California
(the "Trustee").
WITNESSETH:
WHEREAS, in order to finance certain capital improvements, including the Huntington
Central Park Sports Complex and certain beach improvements along Pacific Coast Highway
from First Street and Pacific Coast Highway to Huntington Street and Pacific Coast Highway
(the "2001 Project"), the Authority issued its Huntington Beach Public Financing Authority
(Orange County, California) Lease Revenue Bonds, 2001 Series A (Capital Improvement
Financing Project) (the "Prior 2001A Bonds"), payable from certain lease payments to be made
by the City; and
WHEREAS, in order to refinance certain capital improvements, including certain
improvements to the Civic Center, including the Police Administration Building (the "1993
Project" and together with the 2001 Project, the "Prior Projects"), the Authority issued its
Huntington Beach Public Financing Authority (Orange County, California) Lease Revenue
Bonds, 2001 Series B (Capital Improvement Refinancing Project) (the "Prior 2001B Bonds" and
together with the Prior 2001 A Bonds, the "Prior Bonds"), payable from certain lease payments to
be made by the City; and
WHEREAS, in order to refund the Prior Bonds to achieve certain savings, the City
leased certain real property owned by the City, including the improvements thereto, known as the
Civic Center(the "Property"), to the Authority pursuant to a Site Lease, dated as of September 1,
2011 (the "Original Site Lease"), Orange County Recorder (the "Recorder") Instrument No.
2011000479933, and subleased the Property and the Project back from the Authority pursuant to
a Lease Agreement, dated as of September 1, 2011 (the "Original Lease Agreement"), with
regard to which a Memorandum of Lease Agreement and Assignment was recorded, Recorder
Instrument No. 2011000479934 (the"Memorandum of Lease Agreement and Assignment"); and
WHEREAS, the City and the Authority determined that it would be in the best interests
of the City and the Authority to provide the funds necessary to refinance the Prior Projects
through the issuance by the Authority of Huntington Beach Public Financing Authority (Orange
County, California) Lease Revenue Refunding Bonds, 2011 Series A (Capital Improvement
Refinancing Project) (the "Series 2011A Bonds"), pursuant to an Indenture, dated as of
September 1, 2011 (the "Original Indenture"), by and among the Authority, the City and The
Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee"), payable from the
base rental payments (the "Base Rental Payments") to be made by the City under the Original
Lease Agreement and the other assets pledged therefor under the Original Indenture; and
OHSUSA:758607582.2
Item 13. - 30 HB -540-
WHEREAS, all rights to receive such Base Rental Payments were assigned without
recourse by the Authority to the Trustee pursuant to the Original Indenture, with regard to which
the Memorandum of Lease Agreement and Assignment was recorded; and
WHEREAS, in consideration of such assignment and the execution of the Original
Indenture, the Authority issued the Series 2011A Bonds (capitalized undefined terms used in
these recitals shall have the meanings ascribed thereto in the Original Indenture); and
WHEREAS, the Original Indenture provides that, subject to the conditions set forth
therein, in addition to the Series 2011A Bonds, the City, the Authority and the Trustee may by
execution of a supplemental Indenture without the consent of the Owners, provide for the
issuance of Additional Bonds, payable from Lease Revenues; and
WHEREAS, the Original Site Lease provides that the Original Site Lease may be
amended only in accordance with the provisions of the Original Lease Agreement; and
WHEREAS, the Original Lease Agreement provides that, the Original Lease Agreement
and the Original Site Lease and the rights and obligations of the Authority and the City
thereunder may be amended at any time by an amendment thereof which shall become binding
upon execution by the Authority and the City, without the written consents of any Owners, in
order to provide for the issuance of Additional Bonds in accordance with the provisions of the
Indenture; and
WHEREAS, the City desires to finance the construction of certain capital improvements,
consisting of a senior center, within the boundaries of the City(the"Project"); and
WHEREAS, in order to accomplish such financing, the Authority and the City desire to
enter into a First Amendment to Site Lease (the "First Site Lease Amendment") in order to
amend the Original Site Lease so as to extend the term thereof and to make certain other
modifications in order to provide for the issuance of Additional Bonds in accordance with the
provisions of the Original Indenture (the Original Site Lease as so amended is referred to as the
"Site Lease"); and
WHEREAS, in order to accomplish such financing, the Authority and the City desire to
enter into a First Amendment to Lease Agreement (the "First Lease Amendment") in order to
amend the Original Lease Agreement so as to extend the term thereof and increase the amount of
Base Rental Payments payable thereunder and to make certain other modifications in order to
provide for the issuance of Additional Bonds in accordance with the provisions of the Original
Indenture (the Original Lease Agreement as so amended is referred to as the "Lease
Agreement"); and
WHEREAS, the City and the Authority have determined that it would be in the best
interests of the City and the Authority to provide the funds necessary to finance the Project
through the issuance of Additional Bonds, designated "Huntington Beach Public Financing
Authority (Orange County, California) Lease Revenue Bonds, 2014 Series A (Senior Center
Project)" (the "Series 2014A Bonds"), payable from Lease Revenues; and
OHSUSA:758607582.2 2
HB -541_ Item 13. - 31
WHEREAS, the Trustee, the Authority and the City are entering into this First
Supplemental Indenture in order to provide for the issuance of the Series 2014A Bonds and to
expressly provide that all rights to receive the Base Rental Payments, including the increased
amounts thereof provided for in the First Lease Amendment, have been assigned without
recourse by the Authority to the Trustee; and
WHEREAS, all acts, conditions and things required by law to exist, to have happened
and to have been performed precedent to and in connection with the execution and entering into
of this First Supplemental Indenture do exist, have happened and have been performed in regular
and due time, form and manner as required by law, and the parties hereto are now duly
authorized to execute and enter into this First Supplemental Indenture;
NOW, THEREFORE, in consideration of the premises and of the mutual agreements
and covenants contained herein and for other valuable consideration, the parties do hereby agree
as follows:
PART 1
PARTICULAR AMENDMENTS
Part I.I. Amendments to Section 1.01. (a) Section 1.01 of the Original Indenture is
hereby amended by modifying the following terms:
"Closing Date" means, as appropriate to the context, the Series 2011A
Closing Date, the Series 2014A Closing Date and/or the closing date(s) for any
series of Additional Bonds.
"Interest Payment Date" means, (a) with respect to the Series 2011A
Bonds, each March 1 and September 1, commencing March 1, 2012, and (b) with
respect to the Series 2014A Bonds, each March 1 and September 1, commencing
1, 201.
"Original Purchaser" means (a) with respect to the Series 2011A Bonds,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, on behalf of itself and on
behalf of E. J. De La Rosa& Co., Inc., the original purchasers of the Series 2011A
Bonds from the Authority, and (b) with respect to the Series 2014A Bonds,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, the original purchaser of the
Series 2014A Bonds from the Authority.
"Projects" means, as appropriate, the 2011 Projects, the 2014 Project
and/or any Additional Project.
(b) Section 1.01 of the Original Indenture is hereby amended by adding
thereto the following definitions:
"Additional Project" means, to the extent identified by the City as such,
the public facilities to be acquired and/or constructed with the proceeds of
Additional Bonds.
OHSl1SA:758607582.2 3
Item 13. - 32 HB -542-
"Continuing Disclosure Certificate (Series 2014A Bonds)" means the
Continuing Disclosure Certificate, dated as of , 2014, executed by the
City, as originally executed and as it may be amended from time to time in
accordance with the terms thereof.
"Participating Underwriter (Series 2014A Bonds)" has the meaning
ascribed thereto in the Continuing Disclosure Certificate (Series 2014A Bonds).
"Project Costs" means all costs of acquiring, constructing and installing a
Project, including but not limited to:
(a) all costs which the City shall be required to pay to a seller
or any other Person under the terms of any contract or contracts for the
purchase of any portion of the Project;
(b) all costs which the City shall be required to pay a contractor
or any other Person for the acquisition, construction and installation of any
portion of the Project;
(c) obligations of the City incurred for services (including
obligations payable to the City for actual out-of-pocket expenses of the
City) in connection with the acquisition, construction and installation of
the Project, including reimbursement to the City for all advances and
payments made in connection with the Project prior to or after issuance of
Bonds;
(d) the actual out-of-pocket costs of the City for test borings,
surveys, estimates and preliminary investigations therefor, as well as for
the performance of all other duties required by or consequent to the proper
acquisition, construction and installation of the Project, including
administrative expenses under the Lease Agreement and hereunder relating
to the acquisition, construction and installation of the Project;
(e) Costs of Issuance, to the extent amounts for the payment
thereof are not available in the Costs of Issuance Fund; and
(f) any sums required to reimburse the Authority or the City
for advances made by the Authority or the City for any of the above items
or for any other costs incurred and for work done by the Authority or the
City which are properly chargeable to the Project.
"Project Fund" means the fund by that name established in accordance
with Section 4.08 hereof.
"Series 2014A Closing Date" means the date upon which the Series
2014A Bonds are delivered to the Original Purchaser thereof, being ,
2014.
OHSUSA:758607582.2 4
x _54 3_ Item 13. - 33
Series 2011A Projects" means the capital improvement projects described
in recital clauses to the Original Indenture.
Series 2014A Project" means the capital improvement project described
in recital clauses to this First Supplemental Indenture.
"Series 2014A Bonds" means the Huntington Beach Public Financing
Authority (Orange County, California) Lease Revenue Bonds, 2014 Series A
(Senior Center Project), issued under the Indenture.
"Tax Certificate (Series 2014A Bonds)" means the Tax Certificate
executed by the Authority and the City at the time of issuance of the Series 2014A
Bonds relating to the requirements of Section 148 of the Code, as originally
executed and as it may from time to time be amended in accordance with the
provisions thereof.
Part 1.7. Section 4.01. Section 4.01 of the Original Indenture is hereby amended and
supplemented amending the second paragraph thereof to read as follows:
In order to secure the pledge of the Lease Revenues contained in this
Section, the Authority hereby sells, assigns and transfers to the Trustee,
irrevocably and absolutely, without recourse, for the benefit of the Owners, all of
its right, title and interest in and to the Site Lease (as amended by the First
Amendment to Site Lease) and the Lease Agreement (as amended by the First
Amendment to Lease Agreement, including, without limitation, the right to
receive Base Rental Payments and the right to exercise any remedies provided in
the Lease Agreement in the event of a default by the City thereunder; provided,
however, that the Authority shall retain the rights to indemnification and to
payment or reimbursement of its reasonable costs and expenses under the Lease
Agreement. The Trustee hereby accepts said assignment for the benefit of the
Owners, subject to the provisions of this Indenture.
Part 1.7. Section 4.07. Section 4.07 of the Original Indenture is hereby amended and
supplemented to add the following sentence immediately prior to the last sentence of subsection
(b) as follows:
Investments purchased with funds on deposit in the Project Fund shall mature not
later than the dates upon which such funds shall be needed to be expended for the
payment of Project Costs.
Part 1.7. Amendment to Article IV. Article IV of the Original Indenture is hereby
amended and supplemented by adding thereto an additional Section as follows:
Section 4.08. Project Fund. (a) The Trustee shall establish and maintain
a separate fund designated the "Project Fund."
(b) The moneys in each account and subaccount within the Project
Fund shall be used and withdrawn by the Trustee from time to time to pay Project
OHSIlSA:758607582.2 5
Item 13. - 34 FIB -544-
Costs upon submission to the Trustee of a Written Request of the City. Upon
receipt of each such Written Request of the City, the Trustee shall pay the amount
set forth in such Written Request of the City as directed by the terms thereof.
(c) Upon completion of the Project, the City shall file with the Trustee
a Written Certificate of the City notifying the Trustee of such completion. Upon
the filing of such Written Certificate of the City, all amounts remaining on deposit
in the Project Fund shall be transferred to the Interest Account and used to pay
interest on the Bonds in accordance with Section 4.03 hereof, and upon such
transfer the Project Fund shall be closed.
(d) If the Project Fund has been closed in accordance with the
provisions hereof, the Project Fund shall be reopened and reestablished by the
Trustee in connection with the issuance of any Additional Bonds, if so provided in
the Supplemental Indenture pursuant to which such Additional Bonds are issued.
There shall be deposited in the Project Fund the portion, if any, of the proceeds of
the sale of any Additional Bonds required to be deposited therein under the
Supplemental Indenture pursuant to which such Additional Bonds are issued.
PART 2
ADDITION OF ARTICLE XI
Part 2.1. Addition of Article X1. The Original Indenture is hereby amended and
supplemented by adding thereto an additional Article as follows:
ARTICLE XI
SERIES 2014A BONDS
Section 11.01. Issuance of Series 2014A Bonds. The Authority may, at any time,
execute the Series 2014A Bonds, in the aggregate principal amount of$ , for issuance
hereunder and deliver the same to the Trustee. The Trustee shall authenticate the Series 2014A
Bonds and deliver the Series 2014A Bonds to the original purchaser thereof upon receipt of a
Written Request of the Authority and upon receipt of the purchase price therefor.
Section 11.02. Terms of Series 2014A Bonds; Interest Computation. (a) The Series
2014A Bonds shall be designated the "Huntington Beach Public Financing Authority (Orange
County, California) Lease Revenue Bonds, 2014 Series A (Senior Center Project)." The
aggregate principal amount of Series 2014A Bonds that may be issued and Outstanding under
this Indenture shall not exceed $ , except as may be otherwise provided in Section 2.11
hereof.
(b) The Series 2014A Bonds shall be issued in fully registered form without coupons
in Authorized Denominations, so long as no Series 2014A Bond shall have more than one
maturity date. The Series 2014A Bonds shall be dated the Series 2014A Closing Date, shall be
issued in the aggregate principal amount of$ , shall mature on September 1 of each
OHSUSA:758607582.2 6
1-bB -545- Item 13. - 35
year and shall bear interest (calculated on the basis of a 360-day year comprised of twelve 30-day
months) at the rates per annum as follows:
Maturity Date Principal Interest
(September 1) Amount Rate
(c) Interest on the Series 2014A Bonds shall be payable from the Interest Payment
Date next preceding the date of authentication thereof unless (i) a Series 2014A Bond is
authenticated on or before an Interest Payment Date and after the close of business on the
preceding Record Date, in which event it shall bear interest from such Interest Payment Date, (ii)
a Series 2014A Bond is authenticated on or before the first Record Date, in which event interest
thereon shall be payable from the dated date thereof, or (iii) interest on any Series 2014A Bond is
in default as of the date of authentication thereof, in which event interest thereon shall be payable
from the date to which interest has been paid in full, payable on each Interest Payment Date.
Interest shall be paid in lawful money of the United States on each Interest Payment Date to the
Persons in whose names the ownership of the Series 2014A Bonds is registered on the
Registration Books at the close of business on the immediately preceding Record Date, except as
provided below. Interest shall be paid by check of the Trustee mailed by first class mail, postage
prepaid, on each Interest Payment Date to the Series 2014A Bond Owners at their respective
addresses shown on the Registration Books as of the close of business on the preceding Record
Date.
(d) The principal and premium, if any, of the Series 2014A Bonds shall be payable in
lawful money of the United States of America upon presentation and surrender thereof upon
maturity or earlier redemption at the Office of the Trustee.
(e) The Series 2014A Bonds shall be subject to redemption as provided in Section
11.07.
(f) The Series 2014A Bonds shall initially be issued as Book-Entry Bonds.
OHSiJSA:758607582.2 7
Item 13. - 36 NB -546-
Section 11.03. Form of Series 2014A Bonds. The Series 2014A Bonds shall be in
substantially the form set forth in Exhibit A hereto, with appropriate or necessary insertions,
omissions and variations as permitted or required hereby.
Section 11.04. Deposit of Proceeds of Series 2014A Bonds. On the Series 2014A
Closing Date, the proceeds received from the sale of the Series 2014A Bonds shall be deposited
by the Trustee in the following respective funds, as directed by a Written Request of the City:
(1) The Trustee shall deposit in the Costs of Issuance Fund the amount of
$ which the Trustee shall reopen and reestablish in connection with the
issuance of the Series 2014A Bonds. On the date that is six months after the Series
2014A Closing Date, the Trustee shall transfer any amounts then remaining in the Costs
of Issuance Fund to the Project Fund, and upon such transfer the Costs of Issuance Fund
shall be closed
(2) The Trustee shall deposit in the Reserve Fund the amount of $ ,
which, together with the other amounts on deposit therein, is an amount equal to the
Reserve Requirement.
(3) The Trustee shall deposit in the Project Fund the amount of$
Section 11.05. Redemption of Series 2014A Bonds. The Series 2014A Bonds shall be
subject to redemption as follows:
(a) Optional Redemption. The Series 2014A Bonds maturing on or before September
1, 20_, are not subject to optional redemption prior to their respective stated maturity dates. The
Series 2014A Bonds maturing on or after September 1, 20_, are subject to optional redemption
prior to their respective stated maturity dates, on any date on or after September 1, 20 , in
whole or in part, in Authorized Denominations, from (i) amounts received from the City in
connection with the City's exercise of its right pursuant to Section 6.02 of the Lease Agreement
to cause Bonds to be optionally redeemed, or (ii) any other source of available funds, at a
redemption price equal to the principal amount thereof, plus accrued interest thereon to the date
fixed for redemption, without premium.
(b) Mandatory Sinking Fund Redemption. The Series 2014A Bonds maturing
September 1, 20_ shall be subject to mandatory sinking fund redemption, in part, on September
I in each year, commencing September 1, 20_, at a redemption price equal to the principal
amount thereof, plus accrued interest thereon to the date fixed for redemption, without premium,
in the aggregate respective principal amounts in the respective years as follows:
Sinking Fund Principal Amount
Redemption Date to be
(September 1) Redeemed
(Maturity)
OHSUSA:758607582.2 8
i£B -547- Item 13. - 37
If some but not all of the Series 2014A Bonds maturing on September 1, 20_ are
redeemed pursuant to Section 3.01 hereof, the principal amount of Series 2014A Bonds maturing
on September 1, 20_to be redeemed pursuant to this Section shall be reduced by the aggregate
principal amount of the Series 2014A Bonds maturing on September 1, 20_ so redeemed
pursuant to Section 3.01 hereof, such reduction to be allocated among redemption dates as nearly
as practicable on a pro rata basis, in amounts equal to Authorized Denominations, as determined
by the Trustee, notice of which determination shall be given by the Trustee to the Authority and
the City. If some but not all of the Series 2014A Bonds maturing on September 1, 20_ are
redeemed pursuant to Section 11.05(a) hereof, the principal amount of Series 2014A Bonds
maturing on September 1, 20_to be redeemed pursuant to this Section shall be reduced by the
aggregate principal amount of the Series 2014A Bonds maturing on September 1, 20 so
redeemed pursuant to Section 11.05(a) hereof, such reduction to be allocated among redemption
dates in Authorized Denominations, as designated by the City in a Written Certificate of the City.
(c) Selection. If some but not all of the Series 2014A Bonds are redeemed pursuant
to Section 11.05(a) hereof, the Trustee shall select the Series 2014A Bonds to be redeemed as
directed in a Written Certificate of the City.
Section 11.06. Tax Covenants. (a)Neither the Authority nor the City will take any
action, or fail to take any action, if such action or failure to take such action would adversely
affect the exclusion from gross income of interest on the Series 2014A Bonds under Section 103
of the Code. Without limiting the generality of the foregoing, the Authority and the City will
comply with the requirements of the Tax Certificate (Series 2014A Bonds), which is
incorporated herein as if fully set forth herein. This covenant shall survive payment in full or
defeasance of the Series 2014A Bonds.
(b) In the event that at any time the Authority is of the opinion that for purposes of
this Section it is necessary or helpful to restrict or limit the yield on the investment of any
moneys held by the Trustee in any of the funds or accounts established hereunder, the Authority
shall so instruct the Trustee in writing, and the Trustee shall take such action as may be necessary
in accordance with such instructions.
(c) Notwithstanding any provisions of this Section, if the Authority shall provide to
the Trustee an Opinion of Counsel to the effect that any specified action required under this
Section is no longer required or that some further or different action is required to maintain the
exclusion from federal income tax of interest on the Series 2014A Bonds, the Trustee may
conclusively rely on such opinion in complying with the requirements of this Section and of the
Tax Certificate (Series 2014A Bonds), and the covenants hereunder shall be deemed to be
modified to that extent.
Section 11.07. Rebate Fund. (a) There shall be deposited in the Rebate Fund such
amounts as are required to be deposited therein pursuant to the Tax Certificate (Series 2014A
Bonds). All money at any time deposited in the Rebate Fund shall be held by the Trustee in trust,
to the extent required to satisfy the Rebate Requirement (as defined in the Tax Certificate (Series
2014A Bonds)), for payment to the United States of America. Notwithstanding defeasance of the
Series 2014A Bonds pursuant to Article IX hereof or anything to the contrary contained herein,
all amounts required to be deposited into or on deposit in the Rebate Fund with respect to the
OHSIJSA:758607582.2 9
Item 13. - 3 8 1 1B -548-
Series 2014A Bonds shall be governed exclusively by this Section and by the Tax Certificate
(Series 2014A Bonds) (which is incorporated herein by reference). The Trustee shall be deemed
conclusively to have complied with such provisions if it follows the written directions of the
Authority, and shall have no liability or responsibility to enforce compliance by the Authority
with the terms of the Tax Certificate (Series 2014A Bonds). The Trustee may conclusively rely
upon the Authority's determinations, calculations and certifications required by the Tax
Certificate (Series 2014A Bonds). The Trustee shall have no responsibility to independently
make any calculation or determination or to review the Authority's calculations.
(b) Any funds remaining in the Rebate Fund with respect to the Series 2014A Bonds after
payment in full of all of the Series 2014A Bonds and after payment of any amounts described in
this Section, shall, upon receipt by the Trustee of a Written Request of the City, be withdrawn by
the Trustee and remitted to the City.
Section 11.08. Continuing Disclosure. The City shall comply with and carry out all of
the provisions of the Continuing Disclosure Certificate (Series 2014A Bonds). Notwithstanding
any other provision of this Indenture, failure of the City to comply with the Continuing
Disclosure Certificate (Series 2014A Bonds) shall not constitute an event of default hereunder;
provided, however, that the Trustee may (and, at the written direction of any Participating
Underwriter (Series 2014A Bonds) or the holders of at least 25% of the aggregate principal
evidenced by Outstanding Series 2014A Bonds, shall) or any holder or beneficial owner of the
Series 2014A Bonds may take such actions as may be necessary and appropriate to compel
performance, including seeking mandate or specific performance by court order.
PART 3
MISCELLANEOUS
Part 3.1. Effect of First Supplemental Indenture. This First Supplemental Indenture
and all of the terms and provisions herein contained shall form part of the Indenture as fully and
with the same effect as if all such terms and provisions had been set forth in the Indenture. The
Indenture is hereby ratified and confirmed and shall continue in full force and effect in
accordance with the terms and provisions thereof, as heretofore amended and supplemented, and
as amended and supplemented hereby. If there shall be any conflict between the terms of this
First Supplemental Indenture and the terms of the Indenture (as in effect on the day prior to the
effective date of this First Supplemental Indenture), the terms of this First Supplemental
Indenture shall prevail.
Part 3.2. Execution in Counterparts. This First Supplemental Indenture may be
executed in several counterparts, each of which shall be deemed an original, and all of which
shall constitute but one and the same instrument.
Part 3.3. Effective Date. This First Supplemental Indenture shall become effective
upon Series 2014A Closing Date.
oxsUSA:758607582.2 10
14 B -549- Item 13. - 39
IN WITNESS WHEREOF, the parties hereto have executed this First Supplemental
Indenture by their officers thereunto duly authorized as of the day and year first written above.
THE BAND OF NEW YORK MELLON
TRUST COMPANY,N.A., as Trustee
By:
Authorized Officer
HUNTINGTON BEACH PUBLIC
FINANCING AUTHORITY
By:
CITY OF HUNTINGTON BEACH
By:
OHSDSA:758607582.2 I I
Item 13. - 40 FIB -550-
EXHIBIT A
FORM OF SERIES 2014A BOND
No. $
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
(ORANGE COUNTY, CALIFORNIA)
LEASE REVENUE BOND
2014 SERIES A
(SENIOR CENTER PROJECT)
INTEREST RATE MATURITY DATE DATED DATE CUSIP
% September 1, 20_ 1, 2014
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT: DOLLARS
The Huntington Beach Public Financing Authority (the "Authority"), for value received,
hereby promises to pay, solely from the Lease Revenues as provided in the Indenture (as
hereinafter defined) or amounts in certain funds and accounts held under the Indenture, to the
Registered Owner identified above or registered assigns (the "Registered Owner"), on the
Maturity Date identified above or on any earlier redemption date, the Principal Amount identified
above in lawful money of the United States of America; and to pay interest thereon at the Rate of
Interest identified above in like lawful money from the date hereof payable semiannually on
March 1 and September I in each year, commencing 1, 201_ (the "Interest Payment
Dates"), until payment of such Principal Amount in full. This Bond shall bear interest from the
Interest Payment Date next preceding the date of authentication of this Bond (unless this Bond is
authenticated on or before an Interest Payment Date and after the fifteenth calendar day of the
month preceding such Interest Payment Date, whether or not such day is a business day, in which
event it shall bear interest from such Interest Payment Date, or unless this Bond is authenticated
on or prior to 15, 201_, in which event it shall bear interest from the Dated Date
identified above; provided, however, that if, at the time of authentication of this Bond, interest is
in default on this Bond, this Bond shall bear interest from the Interest Payment Date to which
interest hereon has previously been paid or duly provided for). The Principal Amount hereof is
payable upon surrender hereof upon maturity or earlier redemption at the Office of the Trustee
(as hereinafter defined). Interest hereon is payable by check of The Bank of New York Mellon
Trust Company, N.A., as Trustee (the "Trustee"), mailed by first class mail on each Interest
Payment Date to the Registered Owner hereof at the address of the Registered Owner as it
appears on the Registration Books of the Trustee as of the close of business on the fifteenth
OHSUSA:758607582.2 A-1
HB _551- Item 13. - 41
calendar day of the month preceding such Interest Payment Date. "Office of the Trustee" means
the principal corporate trust office of the Trustee in Los Angeles, California, or such other office
as may be specified to the Authority by the Trustee in writing.
This Bond is one of a series of a duly authorized issue of bonds issued for the purpose of
financing the construction of certain public facilities (the "Project"), and is one of the series of
bonds designated "Huntington Beach Public Financing Authority (Orange County, California)
Lease Revenue Bonds, 2014 Series A (Senior Center Project)" (the "Series 2014A Bonds") in the
aggregate principal amount of$ . The Series 2014A Bonds are issued pursuant to the
Indenture, dated as of September 1, 2011, by and among the Authority, the City of Huntington
Beach (the "City") and the Trustee, as amended and supplemented by the First Supplemental
Indenture, dated as of 1, 2014, by and among the Authority, the City and the Trustee
(collectively, the "Indenture"), and this reference incorporates the Indenture herein, and by
acceptance hereof the owner of this Bond assents to said terms and conditions. The Series 2014A
Bonds are on a parity with the Huntington Beach Public Financing Authority (Orange County,
California) Lease Revenue Refunding Bonds, 2011 Series A (Capital Improvement Refinancing
Project) (the "Series 2011A Bonds"), issued in the aggregate original principal amount of
$36,275,000, previously executed pursuant to the terms of the Indenture. Pursuant to and as
more particularly provided in the Indenture, additional bonds ("Additional Bonds") may be
issued by the Authority secured by a lien on a parity with the lien securing the Series 2014A
Bonds and the Series 2011A Bonds. The Series 2014A Bonds, the Series 2011A Bonds and any
Additional Bonds are collectively referred to as the "Bonds". The Indenture is entered into, and
this Bond is issued under, the Marks-Roos Local Bond Pooling Act of 1985 (the "Act") and the
laws of the State of California. Capitalized undefined terms used herein have the meanings
ascribed thereto in the Indenture.
Reference is hereby made to the Indenture and to any and all amendments thereof and
supplements thereto for a description of the agreements, conditions, covenants and terms
securing the Bonds, for the nature, extent and manner of enforcement of such agreements, .
conditions, covenants and terms, for the rights, duties and immunities of the Trustee, for the
rights and remedies of the Owners of the Bonds with respect thereto and for the other
agreements, conditions, covenants and terms upon which the Bonds are issued thereunder, to all
of which provisions the Registered Owner by acceptance hereof, assents and agrees.
The Bonds are special obligations of the Authority, payable solely from the Lease
Revenues and the other assets pledged therefor under the Indenture. Neither the faith and credit
nor the taxing power of the Authority, the City or the State of California, or any political
subdivision thereof, is pledged to the payment of the Bonds. The Lease Revenues consist of all
Base Rental Payments payable by the City pursuant to the Lease Agreement, dated as of
September 1, 2011, by and between the City, as lessee, and the Authority, as lessor, as amended
and supplemented by the First Amendment to Lease Agreement, dated as of 1, 2014,
by and between the City, as lessee, and the Authority, as lessor (collectively, the "Lease
Agreement"), including any prepayments thereof, any Net Proceeds and any amounts received by
the Trustee as a result of or in connection with the Trustee's pursuit of remedies under the Lease
Agreement upon a Lease Default Event. Subject only to the provisions of the Indenture
permitting the application thereof for the purposes and on the terms and conditions set forth
therein, all of the Lease Revenues and all amounts on deposit from time to time in the funds and
0HsUsa:758607582.2 A-2
Item 13. - 42 1-1B -552-
accounts established under the Indenture (other than the Rebate Fund) are pledged to the payment
of the principal of and interest on the Bonds as provided therein, and the Lease Revenues shall
not be used for any other purpose while any of the Bonds remain Outstanding. Said pledge
constitutes a first lien on such assets. In order to secure such pledge of the Lease Revenues, the
Authority has sold assigned and transferred to the Trustee, irrevocably and absolutely, without
recourse, for the benefit of the Owners, all of its right, title and interest in and to the Site Lease
and the Lease Agreement, including, without limitation, the right to receive Base Rental
Payments and the right to exercise any remedies provided in the Lease Agreement in the event of
a default by the City thereunder; provided, however, that the Authority has retained the rights to
indemnification and to payment or reimbursement of its reasonable costs and expenses under the
Lease Agreement.
The Series 2014A Bonds are authorized to be issued in the form of fully registered bonds
in denominations of$5,000 or any integral multiple thereof("Authorized Denominations").
The Series 2014A Bonds are subject to extraordinary[, optional and mandatory]
redemption at the times, in the manner, at the redemption prices and upon notice as specified in
the Indenture.
Any Bond may, in accordance with its terms, be transferred upon the Registration Books
by the Person in whose name it is registered, in person or by his duly authorized attorney, upon
surrender of such Bond for cancellation, accompanied by delivery of a written instrument of
transfer, duly executed in a form acceptable to the Trustee. Whenever any Bond or Bonds shall
be surrendered for transfer, the Authority shall execute and the Trustee shall authenticate and
shall deliver a new Bond or Bonds of the same Series and maturity in a like aggregate principal
amount, in any Authorized Denomination. The Trustee shall require the Owner requesting such
transfer to pay any tax or other governmental charge required to be paid with respect to such
transfer. The Bonds may be exchanged at the Office of the Trustee for a like aggregate principal
amount of Bonds of the same Series and maturity of other Authorized Denominations. The
Trustee shall require the payment by the Owner requesting such exchange of any tax or other
governmental charge required to be paid with respect to such exchange.
To the extent and in the manner permitted by the terms of the Indenture, the provisions of
the Indenture may be amended or supplemented by the parties thereto.
The Indenture contains provisions permitting the Authority to make provision for the
payment of interest on, and the principal and premium, if any, of any of the Bond so that such
Bonds shall no longer be deemed to be outstanding under the terms of the Indenture.
This Bond shall not be entitled to any benefit, protection or security under the Indenture
or become valid or obligatory for any purpose until the certificate of authentication and
registration hereon endorsed shall have been executed and dated by an authorized signatory of
the Trustee.
Unless this Bond is presented by an authorized representative of The Depository Trust
Company to the Trustee for registration of transfer, exchange or payment, and any Bond issued is
registered in the name of Cede & Co. or such other name as requested by an authorized
representative of The Depository Trust Company and any payment is made to Cede & Co., ANY
oxsusA:758607582.2 A-3
l-TB -5J3- Item 13. - 43
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an
interest herein.
It is hereby certified that all acts, conditions and things required by law to exist, to have
happened and to have been performed precedent to and in the issuance of the Bonds do exist,
have happened and have been performed in due time, form and manner as required by law.
OHSiJSA:758607582.2 A-4
Item 13. - 44 FIB -s
IN WITNESS WHEREOF, the Authority has caused this Bond to be signed in its name
and on its behalf by the facsimile signatures of its Executive Director and Secretary, all as of the
Dated Date identified above.
HUNTINGTON BEACH)PUBLIC
FINANCING AUTHORITY
By:
Chair
Attest:
Secretary
oxsusA:758607582.2 A-5
IB -555- Item 13. - 45
FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Series 2014A Bonds described in the within-mentioned Indenture and
registered on the Registration Books.
Date:
THE BAND OF NEW YORK MEL,L ON
TRUST COMPANY,N.A., AS TRUSTEE
By:
Authorized Signatory
OHSIJSA:758607582.2 A-6
Item 13. - 46 `1B -_556-
ASSIGNMENT
For value received the undersigned hereby sells, assigns and transfers unto
whose address and social security or other tax
identifying number is the within-mentioned Bond and hereby
irrevocably constitute(s) and appoint(s) attorney, to transfer
the same on the registration books of the Trustee with full power of substitution in the premises.
Dated:
Signature Guaranteed:
Note: Signature(s)must be guaranteed by an eligible Note:The signature(s)on this Assignment must
guarantor. correspond with the name(s)as written on the face of the
within Bond in every particular without alteration or
enlargement or any change whatsoever.
oxsusA:758607582.2 A-7
- _5i7_ Item 13. - 47
ATTACHMENT #5
Stradling Yocca Carlson&Rauth
Draft of 7130114
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
(ORANGE COUNTY, CALIFORNIA)
LEASE REVENUE BONDS,2014 SERIES A
(Senior Center Project)
BOND PURCHASE AGREEMENT
, 2014
Huntington Beach Public Financing Authority
c/o City of Huntington Beach Department of Finance
2000 Main Street
Huntington Beach, California 92648.
Attention: Executive Director
City of Huntington Beach
c/o City of Huntington Beach Department of Finance
2000 Main Street
Huntington Beach, California 92648
Ladies and Gentlemen:
The undersigned, Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Underwriter"),
acting not as a fiduciary or agent for you, but on behalf of itself, offers to enter into this Bond
Purchase Agreement (which, together with Exhibit A, is referred to as the "Purchase Agreement")
with the Huntington Beach Public Financing Authority (the "Authority") and the City of Huntington
Beach, California (the "City"), which, upon the acceptance of the Authority and the City, will be
binding upon the Authority, the City and the Underwriter. This offer is made subject to acceptance
by the Authority and by the City by the execution of this Purchase Agreement and delivery of the
same to the Underwriter prior to 6:00 P.M., Pacific Standard Time, on the date hereof, and, if not so
accepted, will be subject to withdrawal by the Underwriter upon notice delivered to the Authority
and the City at any time prior to the acceptance hereof by the Authority and the City. Capitalized
terms used herein and not otherwise defined shall have the meanings set forth in the Indenture, dated
as of September 1, 2011 (the "Original Indenture"), as amended and supplemented by that First
Supplemental Indenture, dated as of 1, 2014 (the Original Indenture as amended, the
"Indenture"), each by and among the City, the Authority and The Bank of New York Mellon Trust
Company, N.A., as trustee (the "Trustee") substantially in the form previously submitted to the
Underwriter with only such changes therein as shall be mutually agreed upon by the Authority, the
City and the Underwriter.
Section 1. Purchase and Sale. Upon the terms and conditions and upon the basis of the
representations, warranties and agreements herein set forth, the Underwriter hereby agrees to
purchase from the Authority and the City, and the Authority and the City hereby agree to issue, sell
and deliver to the Underwriter all (but not less than all) of the Huntington Beach Public Financing
Authority (Orange County, California) Lease Revenue Bonds, 2014 Series A (Senior Center Project)
in the aggregate principal amount of$ (the `Bonds"). The Bonds will be dated as of their
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date of delivery. Interest on the Bonds shall be payable semiannually on March 1 and September I in
each year, commencing 1, 201_ and will bear interest at the rates and on the dates as set
forth in Exhibit A hereto. The purchase price for the Bonds shall be equal to $ (being
the aggregate principal amount thereof plus/less net original issue premium/discount of$
and less an underwriter's discount of$ ).
The City and Authority acknowledge and agree that: (i) the purchase and sale of the Bonds
pursuant to this Purchase Agreement is an arm's-length commercial transaction among the City, the
Authority and the Underwriter; (ii) in connection therewith and with the discussions, undertakings
and procedures leading up to the consummation of such transaction, the Underwriter is and has been
acting solely as a principal and is not acting as a Municipal Advisor (as defined in Section 15B of
The Securities Exchange Act of 1934, as amended), financial advisor or fiduciary; (iii) the
Underwriter has not assumed an advisory or fiduciary responsibility in favor of the City or the
Authority with respect to the offering contemplated hereby or the discussions, undertakings and .
procedures leading thereto (irrespective of whether the Underwriter has provided other services or
are currently providing other services to the City or the Authority on other matters); and (iv) the City
and the Authority have consulted their own legal, financial and other advisors to the extent they have
deemed appropriate.
Section 2. The Bonds. The Bonds shall be secured by revenues consisting primarily of
base rental payments ("Base Rental Payments") to be paid by the City pursuant to the Lease
Agreement, dated as of September 1, 2011 (the "Original Lease Agreement'), as amended by that
First Supplement to Lease Agreement dated as of 1, 2014 (the Original Lease Agreement, as
amended, the "Lease Agreement"), each by and between the City and the Authority. The Authority's
right to receive the Base Rental Payments due under the Lease Agreement and to exercise remedies
upon default under such Lease Agreement shall be assigned to the Trustee for the benefit of the
owners of the Bonds pursuant to the Indenture.
The Bonds shall be as described in, and shall be secured under and pursuant to the Indenture.
The proceeds of the Bonds shall be used to: (i) [finance the costs of the acquisition,
construction, installation and equipping of certain public capital improvements, including the costs of
construction of a senior center], (ii) [fund capitalized interest on the Bonds through ], (iii) fund
a reserve fund for the Bonds, and (iv)pay costs of issuance of the Bonds.
The Bonds, this Purchase Agreement, the Indenture, the Lease Agreement, the Site Lease
dated as of September 1, 2011 (the "Original Site Lease") as amended by the First Amendment to
Site Lease dated as of , 2014 (the Original Site Lease, as amended, the "Site Lease"), each
by and between the City and the Authority, and the resolution of the Authority authorizing the
issuance of the Bonds and the execution and delivery of the Authority Documents (hereinafter
defined) are collectively referred to herein as the "Authority Documents."
This Purchase Agreement, the Continuing Disclosure Certificate, dated as of the Closing
Date (as hereinafter defined) and entered into by the City (the "Continuing Disclosure Certificate"),
the Indenture, the Lease Agreement, the Site Lease and the resolution of the City authorizing the
execution and delivery of the City Documents (hereinafter defined) are collectively referred to herein
as the "City Documents."
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Section 3. Public Offering. The Underwriter agrees to make an initial public offering
of all of the Bonds at the public offering prices (or yields) set forth on Exhibit A attached hereto and
incorporated herein by reference. Subsequent to the initial public offering, the Underwriter reserves
the right to change the public offering prices (or yields) as the Underwriter deems necessary in
connection with the marketing of the Bonds, provided that the Underwriter shall not change the
interest rates set forth on Exhibit A. The Bonds may be offered and sold to certain dealers (including
dealers depositing the Bonds into investment trusts) at prices lower than such initial public offering
prices.
Section 4. The Official Statement. By its acceptance of this proposal, the Authority
and the City ratify, confirm and approve of the use and distribution by the Underwriter prior to the
date hereof of the preliminary official statement relating to the Bonds dated , 2014
(including the cover page, all appendices and all information incorporated therein and any
supplements or amendments thereto and as disseminated in its printed physical form or in electronic
form in all respects materially consistent with such physical form, the "Preliminary Official
Statement") that authorized officers of the Authority and the City deemed "final" as of its date, for
purposes of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 ("Rule 15c2-12"),
except for certain information permitted to be omitted therefrom by Rule 15c2-12. The Authority
and the City hereby agree to deliver or cause to be delivered to the Underwriter, within seven
business days of the date hereof, copies of the final official statement, dated the date hereof, relating
to the Bonds (including all information previously permitted to have been omitted by Rule 15c2-12)
(including the cover page, all appendices, all information incorporated therein and any amendments
or supplements as have been approved by the Authority, the City and the Underwriter, the "Official
Statement"), in such quantity and format as the Underwriter shall reasonably request to comply with
Section (b)(4) of Rule 15c2-12 and the rules of the Municipal Securities Rulemaking Board (the
"M SRB").
The Underwriter hereby agrees that it will not request that payment be made by any
purchaser of the Bonds prior to delivery by the Underwriter to the purchaser of a copy of the Official
Statement. The Underwriter agrees: (i)to provide the Authority and the City upon request with final
pricing information on the Bonds on a timely basis; and (ii)to promptly file a copy of the Official
Statement, including any supplements prepared by the Authority or the City with the MSRB at
http://emma.msrb.org. The Authority and the City hereby approve of the use and distribution by the
Underwriter of the Official Statement in connection with the offer and sale of the Bonds. The
Authority and the City will cooperate with the Underwriter in the filing by the Underwriter of the
Official Statement with the MSRB.
Section 5. Closing. At 8:00 a.m., Pacific Standard Time, on 2014 (the
"Closing Date"), or at such other time or date as the Authority and the Underwriter agree upon, the
Authority shall deliver or cause to be delivered to the Trustee, and the Trustee shall deliver or cause
to be delivered to The Depository Trust Company, New York New York ("DTC"), the Bonds in
definitive form, duly executed and authenticated. Concurrently with the delivery of the Bonds, the
Authority and the City will deliver the documents hereinafter mentioned at the offices of Orrick
Herrington & Sutcliffe LLP, Los Angeles, California ("Bond Counsel"), or another place to be
mutually agreed upon by the Authority, the City and the Underwriter. The Underwriter will accept
such delivery and pay the purchase price of the Bonds as set forth in Section 1 hereof by wire transfer
in immediately available funds. This payment for and delivery of the Bonds, together with the
delivery of the aforementioned documents, is herein called the "Closing."
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The Bonds shall be registered in the name of Cede & Co., as nominee of DTC in
denominations of five thousand dollars ($5,000) or any integral multiple thereof and shall be made
available to the Underwriter at least one (1) business day before the Closing for purposes of
inspection and packaging. The Authority and the City acknowledge that the services of DTC will be
used initially by the Underwriter in order to permit the issuance of the Bonds in book-entry form, and
agree to cooperate fully with the Underwriter in employing such services.
The Underwriter hereby agrees to make a bona fide public offering of all Bonds at prices not
in excess of the initial public offering prices (or yields) set forth on the cover page of the Official
Statement, reserving, however, the right to change such yields or prices after the initial public
offering as the Underwriter shall deem necessary in connection with the offering of the Bonds. The
Underwriter shall provide to the Authority and the City on the Closing Date a certificate setting forth
the offering prices to the public of each maturity of the Bonds at which a substantial amount of such
maturities were sold, such certificate to be in a form mutually acceptable to Bond Counsel and the
Underwriter.
Section 6. Representations, Warranties and Covenants of the Authority. The
Authority represents, warrants and covenants to the Underwriter and the City that:
(a) The Authority is a public body, duly organized and existing under the
Constitution and laws of the State of California(the "State"), including the Authority's Joint Exercise
of Powers Agreement (the "JPA Agreement") and the Joint Exercise of Powers Act (Government
Code Division 7, Chapter 5, Section 6500 et seq.) (the "JPA Act").
(b) The Authority has full legal right, power and authority to adopt or enter into,
as the case may be, and to carry out and consummate the transactions on its part contemplated by the
Authority Documents.
(c) By all necessary official action, the Authority has duly adopted, authorized
and approved the Authority Documents, has duly authorized and approved the Preliminary Official
Statement, will, by execution thereof, duly authorize and approve the Official Statement, and has
duly adopted or authorized and approved the execution and delivery of, and the performance by the
Authority of the obligations on its part contained in, the Authority Documents and the consummation
by it of all other transactions contemplated by the Authority Documents in connection with the
issuance of the Bonds. As of the date hereof, such authorizations and approvals are in full force and
effect and have not been amended, modified or rescinded. When executed and delivered, and
assuming due execution and delivery by the other parties thereto, if applicable, the Authority
Documents will constitute the legally valid and binding obligations of the Authority enforceable in
accordance with their respective terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws or equitable principles relating to or affecting
creditors' rights generally, or by the exercise of judicial discretion and the limitations on legal
remedies against joint powers authorities in the State. The Authority will at the Closing be in
compliance in all respects,with the terms of the Authority Documents.
(d) To the best of its knowledge, the Authority is not in any material respect in
breach of or default under any applicable constitutional provision, law or administrative regulation of
any state or of the United States, or any agency or instrumentality of either, or any applicable
judgment or decree, or any loan agreement, indenture, bond, note, resolution, agreement or other
instrument to which the Authority is a party which breach or default has or may have an adverse
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effect on the ability of the Authority to perform its obligations under the Authority Documents, and
no event has occurred and is continuing which with the passage of time or the giving of notice, or
both, would constitute such a default or event of default under any such instrument; and the adoption,
execution and delivery of the Authority Documents, if applicable, and compliance with the
provisions on the Authority's part contained therein, will not conflict in any material way with or
constitute a material breach of or a material default under any constitutional provision, law,
administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution,
agreement or other instrument to which the Authority is a party, nor will any such execution,
delivery, adoption or compliance result in the creation or imposition of any lien, charge or other
security interest or encumbrance of any nature whatsoever upon any of the property or assets of the
Authority or under the terms of any such law, regulation or instrument, except as may be provided by
the Authority Documents.
(e) To the best of its knowledge, all material authorizations, approvals, licenses,
permits, consents and orders of any governmental authority, legislative body, board, agency or
commission having jurisdiction of the matter which are required for the due authorization by, or
which would constitute a condition precedent to or the absence of which would materially adversely
affect the due performance by the Authority of its obligations in connection with the Authority
Documents have been duly obtained or, when required for future performance, are expected to be
obtained, other than such approvals, consents and orders as may be required under the Blue Sky or
securities laws of any state in connection with the offering and sale of the Bonds; except as described
in or contemplated by the Preliminary Official Statement and the Official Statement, all
authorizations, approvals, licenses, permits, consents and orders of any governmental authority,
board, agency or commission having jurisdiction of the matter which are required for the due
authorization by, or which would constitute a condition precedent to or the absence of which would
materially adversely affect the due performance by, the Authority of its obligations under the
Authority Documents have been duly obtained.
(f) The Authority hereby agrees that it will notify the other parties hereto if,
within the period from the date of this Purchase Agreement to and including the date twenty-five (25)
days following the end of the underwriting period (as defined herein), the Authority discovers any
pre-existing or subsequent fact or becomes aware of the occurrence of any event, in any such case,
which might cause the Official Statement (as the same may have then been supplemented or
amended) to contain any untrue statement of a material fact or to omit to state a material fact
necessary to make the statements therein, in the light of the circumstances under which they were
made, not misleading.
(g) As of the time of acceptance hereof and the Closing, except as disclosed in
the Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in
equity, before or by any court, governmental authority, public board or body, pending, with service
of process having been accomplished, or threatened in writing and delivered to the Authority: (i) in
any way questioning the corporate existence of the Authority or the titles of the officers of the
Authority to their respective offices; (ii) affecting, contesting or seeking to prohibit, restrain or enjoin
the issuance or delivery of any of the Bonds, or the payment or collection of Base Rental Payments
with respect to the Lease Agreement or any amounts pledged or to be pledged to pay the principal of
and interest on the Bonds, or in any way contesting or affecting the validity of the Bonds or the other
Authority Documents or the consummation of the transactions contemplated thereby or hereby, or
contesting the exclusion of the interest on the Bonds from taxation or contesting the powers of the
Authority or its authority to issue the Bonds; (iii) which would be likely to result in any material
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adverse change relating to the business, operations or financial condition of the Authority; or
(iv) contesting the completeness or accuracy of the Preliminary Official Statement or the Official
Statement or any supplement or amendment thereto or asserting that the Preliminary Official
Statement or the Official Statement contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(h) To the best of the Authority's knowledge, there is no basis for any action,
suit, proceeding, inquiry or investigation of the nature described in clauses (i) through (iv) of
paragraph 6(g).
(i) The information in the Official Statement set forth under the captions
"INTRODUCTION—The Authority" and "THE AUTHORITY" does not contain any untrue
statement of a material fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they were made, not
misleading.
0) Any certificate signed by any officer of the Authority authorized to execute
such certificate in connection with the execution, sale and delivery of the Bonds and delivered to the
Underwriter shall be deemed a representation of the Authority to the Underwriter and the City as to
the statements made therein but not of the person signing such certificate.
Section 7. Representations, Warranties and Covenants of the City. The City
represents, warrants and covenants to the Underwriter and the Authority that:
(a) The City is a chartered city and municipal corporation duly organized and
existing under and by virtue of the laws of the State.
(b) The City has full legal right, power and authority to adopt or enter into, as the
case may be, and to carry out and consummate the transactions on its part contemplated by the City
Documents.
(c) By all necessary official action, the City has duly adopted, authorized and
approved the City Documents, has duly authorized and approved the Preliminary Official Statement
and the Official Statement, and has duly adopted or authorized and approved the execution and
delivery of, and the performance by the City of the obligations on its part contained in, the City
Documents and the consummation by it of all other transactions contemplated by the City
Documents in connection with the issuance of the Bonds. As of the date hereof, such authorizations
and approvals are in full force and effect and have not been amended, modified or rescinded. When
executed and delivered, and assuming due execution and delivery by the other parties thereto, if
applicable, the City Documents will constitute the legally valid and binding obligations of the City
enforceable in accordance with their respective terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to
or affecting creditors' rights generally, or by the exercise of judicial discretion and the limitations on
legal remedies against municipal corporations in the State. The City will at the Closing be in
compliance in all respects, with the terms of the City Documents.
(d) To the best of its knowledge, the City is not in any material respect in breach
of or default under any applicable constitutional provision, law or administrative regulation of any
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state or of the United States, or any agency or instrumentality of either, or any applicable judgment or
decree, or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to
which the City is a party which breach or default has or may have an adverse effect on the ability of
the City to perform its obligations under the City Documents, and no event has occurred and is
continuing which with the passage of time or the giving of notice, or both, would constitute such a
default or event of default under any such instrument; and the adoption, execution and delivery of the
City Documents, if applicable, and compliance with the provisions on the City's part contained
therein, will not conflict in any material way with or constitute a material breach of or a material
default under any constitutional provision, law, administrative regulation, judgment, decree, loan
agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a
party nor will any such execution, delivery, adoption or compliance result in the creation or
imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever
upon any of the property or assets of the City or under the terms of any such law, regulation or
instrument, except as may be provided by the City Documents.
(e) To the best of its knowledge, all material authorizations, approvals, licenses,
permits, consents and orders of any governmental authority, legislative body, board, agency or
commission having jurisdiction of the matter which are required for the due authorization by, or
which would constitute a condition precedent to or the absence of which would materially adversely
affect the due performance by the City of its obligations in connection with the City Documents have
been duly obtained or, when required for future performance, are expected to be obtained, other than
such approvals, consents and orders as may be required under the Blue Sky or securities laws of any
state in connection with the offering and sale of the Bonds; except as described in or contemplated by
the Preliminary Official Statement, all authorizations, approvals, licenses, permits, consents and
orders of any governmental authority, board, agency or commission having jurisdiction of the matter
which are required for the due authorization by, or which would constitute a condition precedent to
or the absence of which would materially adversely affect the due performance by, the City of its
obligations under the City Documents have been duly obtained.
(f) The Preliminary Official Statement was as of its date, and the Official
Statement is, and at all times subsequent to the date of the Official Statement up to and including the
Closing will be, true and correct in all material respects, and the Preliminary Official Statement and
the Official Statement do not and will not contain and up to and including the Closing will not
contain any untrue statement of a material fact or omit to state a material fact necessary to make the .
statements contained therein, in the light of the circumstances under which they were made, not
misleading (except that this representation does not include information regarding DTC and its
book-entry only system, information under the caption"UNDERWRITING," CUSIP numbers,prices
and yields for the Bonds and any other information provided by the Underwriter, as to which no view
is expressed).
(g) The City will advise the Underwriter promptly of any proposal to amend or
supplement the Official Statement and will not effect or consent to any such amendment or
supplement without the consent of the Underwriter, which consent will not be unreasonably
withheld. The City will advise the Underwriter promptly of the institution of any proceedings known
to it by any governmental authority prohibiting or otherwise affecting the use of the Official
Statement in connection with the offering, sale or distribution of the Bonds.
(h) As of the time of acceptance hereof and the Closing, except as disclosed in
the Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in
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equity, before or by any court, governmental authority, public board or body, pending, with service
of process having been accomplished, or threatened in writing and delivered to the City: (i) in any
way questioning the corporate existence of the City or the titles of the officers of the City to their
respective offices; (ii) affecting, contesting or seeking to prohibit, restrain or enjoin the issuance or
delivery of any of the Bonds, or the payment or collection of Base Rental Payments with respect to
the Lease Agreement or of any amounts pledged or to be pledged to pay the principal of and interest
on the Bonds, or in any way contesting or affecting the validity of the Bonds, or the City Documents
or the consummation of the transactions contemplated thereby or hereby, or contesting the exclusion
of the interest on the Bonds from taxation, or contesting the powers of the Authority to issue the .
Bonds; (iii) which would be likely to result in any material adverse change relating to the business,
operations or financial condition of the City; and (iv) contesting the completeness or accuracy of the
Preliminary Official Statement or the Official Statement or any supplement or amendment thereto or
asserting that the Preliminary Official Statement or the Official Statement contained any untrue
statement of a material fact or omitted to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances under which they were
made,not misleading.
(i) To the best of the City's knowledge, there is no basis for any action, suit,
proceeding, inquiry or investigation of the nature described in clauses (i) through (iv) of paragraph
7(h).
(j) Until the date which is twenty-five (25) days after the "end of the
underwriting period" (as hereinafter defined), if any event shall occur of which the City is aware that
would cause the Official Statement to contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements in the Official Statement, in light of the
circumstances under which they were made, not misleading, the City shall forthwith notify the
Underwriter of any such event of which it has knowledge and shall cooperate fully in furnishing any
information available to it for any supplement to the Official Statement necessary, in the
Underwriter's reasonable opinion, so that the statements therein as so supplemented will not be
misleading in light of the circumstances existing at such time and the City shall promptly furnish to
the Underwriter a reasonable number of copies of such supplement. As used herein, the term "end of
the underwriting period" means the later of such time as: (i)the Authority delivers the Bonds to the
Underwriter; or (ii)the Underwriter does not retain, directly or as a member of an underwriting
syndicate, an unsold balance of the Bonds for sale to the public. Unless the Underwriter gives
written notice to the contrary, the "end of the underwriting period" shall be deemed to be the Closing
Date. Any notice delivered pursuant to this provision shall be written notice delivered to the
Authority and the City at or prior to the Closing Date of the Bonds and shall specify a date (other
than the Closing Date) to be deemed the "end of the underwriting period." The City agrees to
cooperate with the Underwriter in the filing by the Underwriter of such supplement or amendment to
the Official Statement with the MSRB.
(k) Except as disclosed in the Preliminary Official Statement and the Official
Statement, the City has not within the last five years failed to comply in any material respect with
any continuing disclosure undertakings with regard to Rule 15c2-12, to provide annual reports or
notices of material events specified in such rule.
(1) The financial statements relating to the receipts, expenditures and cash
balances of the City as of September 30, 2013 attached as Appendix B to the Official Statement
fairly represent the receipts, expenditures and cash balances of the City. Except as disclosed in the
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Official Statement or otherwise disclosed in writing to the Underwriter, there has not been any
materially adverse change in the financial condition of the City or in its operations since
September 30, 2013 and there has been no occurrence, circumstance or combination thereof which is
reasonably expected to result in any such materially adverse change.
(m) To the extent required by law, the City will undertake, pursuant to the
Continuing Disclosure Certificate, to provide annual reports and notices of certain enumerated
events. A description of this undertaking is set forth in Appendix F to the Preliminary Official
Statement and will also be set forth in the Official Statement.
(n) Any certificate signed by any officer of the City authorized to execute such
certificate in connection with the execution, sale and delivery of the Bonds and delivered to the
Underwriter shall be deemed a representation of the City to the Underwriter and the Authority as to
the statements made therein but not of the person signing such certificate.
Section 8. Conditions to the Obligations of the Underwriter. The Underwriter has
entered into this Purchase Agreement in reliance upon the representations and warranties of the
Authority and the City contained herein. The obligations of the Underwriter to accept delivery of
and pay for the Bonds on the Closing Date shall be subject, at the option of the Underwriter, to the
accuracy in all material respects of the statements of the officers and other officials of the Authority
and of the City, as well as authorized representatives of the Trustee made in any certificates or other
documents furnished pursuant to the provisions hereof; to the performance by the Authority and the
City of their obligations to be performed hereunder at or prior to the Closing Date; and to the
following additional conditions:
(a) The representations, warranties and covenants of the City and the Authority
contained herein shall be true, complete and correct at the date hereof and at the time of the Closing,
as if made on the Closing Date.
(b) At the time of Closing, the City Documents and the Authority Documents
shall be in full force and effect as valid and binding agreements between or among the various parties
thereto, and the City Documents, the Authority Documents and the Official Statement shall not have
been amended, modified or supplemented except as may have been agreed to in writing by the
Underwriter.
(c) At the time of the Closing, no default shall have occurred or be existing under
the City Documents or the Authority Documents, and the City shall not be in default in the payment
of principal or interest with respect to any of its financial obligations, which default would adversely
impact the ability of the City to pay the Base Rental Payments.
(d) In recognition of the desire of the Authority, the City and the Underwriter to
effect a successful public offering of the Bonds, and in view of the potential adverse impact of any of
the following events on such a public offering, this Purchase Agreement shall be subject to
termination in the absolute discretion of the Underwriter by notification, in writing, to the Authority
and the City prior to delivery of and payment for the Bonds, if at any time prior to such time:
(i) any event shall occur which makes untrue any statement or results in
an omission to state a material fact necessary to make the statements in the Official Statement, in the
light of the circumstances under which they were made, not misleading, which event, in the
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Item 13. - 56 1-1I3 -566-
reasonable opinion of the Underwriter would materially or adversely affect the ability of the
Underwriter to market the Bonds; or
(ii) the marketability of the Bonds or the market price thereof, in the
opinion of the Underwriter, has been materially adversely affected by an amendment to the
Constitution of the United States or by any legislation in or by the Congress of the United States or
by the State, or the amendment of legislation pending as of the date of this Purchase Agreement in
the Congress of the United States, or the recommendation to Congress or endorsement for passage
(by press release, other form of notice or otherwise) of legislation by the President of the United
States, the Treasury Department of the United States, the Internal Revenue Service or the Chairman
or ranking minority member of the Committee on Finance of the United States Senate or the
Committee on Ways and Means of the United States House of Representatives, or the proposal for
consideration of legislation by either such Committee or by any member thereof, or the presentment
of legislation for consideration as an option by either such Committee, or by the staff of the Joint
Committee on Taxation of the Congress of the United States, or the favorable reporting for passage
of legislation to either House of the Congress of the United States by a Committee of such House to
which such legislation has been referred for consideration, or any decision of any federal or state
court or any ruling or regulation (final, temporary or proposed) or official statement on behalf of the
United States Treasury Department, the Internal Revenue Service or other federal or State authority
affecting the federal or State tax status of the Authority or the City, or the interest on or with respect
to bonds or notes (including the Bonds); or
(iii) any legislation, ordinance, rule or regulation shall be introduced in, or
be enacted by any governmental body, department or authority of the State, or a decision by any
court of competent jurisdiction within the State shall be rendered which materially adversely affects
the market price of the Bonds; or
(iv) an order, decree or injunction issued by any court of competent
jurisdiction, or order, ruling, regulation (final, temporary or proposed), official statement or other
form of notice or communication issued or made by or on behalf of the Securities and Exchange
Commission, or any other governmental authority having jurisdiction of the subject matter, to the
effect that: (i) obligations of the general character of the Bonds, or the Bonds, including any or all
underlying arrangements, are not exempt from registration under the Securities Act of 1933, as
amended, or that the Indenture is not exempt from qualification under the Trust Indenture Act of
1939, as amended; or (ii)the issuance, offering or sale of obligations of the general character of the
Bonds, or the issuance, offering or sale of the Bonds, including any or all underlying obligations, as
contemplated hereby or by the Official Statement, is or would be in violation of the federal securities
laws as amended and then in effect; or
(v) legislation shall be enacted by the Congress of the United States, or a
decision by a court of the United States shall be rendered, to the effect that obligations of the general
character of the Bonds, or the Bonds are not exempt from registration under or other requirements of
the Securities Act of 1933, as amended and as then in effect, or the Securities Exchange Act of 1934,
as amended and as then in effect, or that the Indenture is not exempt from qualification under or other
requirements of the Trust Indenture Act of 1939, as amended and as then in effect; or
(vi) additional material restrictions not in force as of the date hereof shall
have been imposed upon trading in securities generally by any domestic governmental authority or
10
DOCSOC/1674234v2/200313-0013
11B -567- Item 13. - 57
by any domestic national securities exchange, which are material to the marketability of the Bonds;
or
(vii) a general banking moratorium shall have been declared by federal,
State or New York authorities, or the general suspension of trading on any national securities
exchange; or
(viii) there shall have occurred any outbreak or escalation of hostilities,
declaration by the United States of a national emergency or war or other calamity or crisis the effect
of which on financial markets is materially adverse such as to make it, in the sole judgment of the
Underwriter, impractical or inadvisable to proceed with the purchase or delivery of the Bonds as
contemplated by the Official Statement(exclusive of any amendment or supplement thereto); or
(ix) any rating of the Bonds or the rating of any obligations of the City
secured by the City's general fund shall have been downgraded or withdrawn by a national rating
service, which, in the opinion of the Underwriter, materially adversely affects the market price of the
Bonds; or
(x) the commencement of any action, suit or proceeding described in
Section 6(g) or Section 7(h).
(e) at or prior to the Closing, the Underwriter shall receive the following
documents, in each case to the reasonable satisfaction in form and substance of the Underwriter:
(i) All resolutions relating to the Bonds adopted by the Authority and
certified by an authorized official of the Authority authorizing the issuance of the Bonds and the
execution and delivery of the Authority Documents;
(ii) All resolutions relating to the Bonds adopted by the City and certified
by an authorized official of the City authorizing the execution and delivery of the City Documents
and the delivery of the Bonds and the Official Statement;
(iii) The City Documents and the Authority Documents duly executed and
delivered by the respective parties thereto, with only such amendments, modifications or
supplements as may have been agreed to in writing by the Underwriter;
(iv) The approving opinion of Bond Counsel dated the Closing Date and
addressed to the Authority and the City, in substantially the form attached as Appendix E to the
Official Statement, and a reliance letter thereon addressed to the Underwriter;
(v) A supplemental opinion of Bond Counsel dated the Closing Date and
addressed to the Underwriter, to the effect that:
(A) the statements in the Official Statement under the captions
"INTRODUCTION," "THE BONDS," "SECURITY FOR THE BONDS" and "TAX MATTERS,"
and in Appendix D—"SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL
DOCUMENTS," excluding any material that may be treated as included under such captions and
appendices by any cross-reference, insofar as such statements expressly summarize provisions of the
Indenture, Lease Agreement, Site Lease and Bond Counsel's final opinion concerning certain federal
tax matters relating to the Bonds, are accurate in all material respects as of the Closing Date;
11
DOC S OC/167423 4v2/200313-0013
Item 13. - 5 8 xB -56 -
(B) The Purchase Agreement has been duly authorized, executed
and delivered by the City and the Authority and is the valid, legal and binding agreement of the City
and the Authority, enforceable in accordance with its terms, except that the rights and obligations
under the Purchase Agreement are subject to bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws affecting creditors' rights, to the application of
equitable principles if equitable remedies are sought, to the exercise of judicial discretion in
appropriate cases and to limitations on legal remedies against public agencies in the State, and
provided that no opinion is expressed with respect to any indemnification or contribution provisions
contained therein; and
(C) The Bonds are not subject to the registration requirements of
the Securities Act of 1933, as amended, and the Indenture is exempt from qualification under the
Trust Indenture Act of 1939, as amended;
(vi) The Official Statement, executed on behalf of the Authority and City,
and the Preliminary Official Statement;
(vii) Evidence that the ratings on the Bonds are as described in the Official
Statement;
(viii) A certificate, dated the Closing Date, signed by a duly authorized
officer of the Authority satisfactory in form and substance to the Underwriter to the effect that:
(i) the representations, warranties and covenants of the Authority contained in this Purchase
Agreement are true and correct in all material respects on and as of the Closing Date with the same .
effect as if made on the Closing Date by the Authority, and the Authority has complied with all of the
terms and conditions of this Purchase Agreement required to be complied with by the Authority at or
prior to the Closing Date; (ii)to the best of such officer's knowledge, no event affecting the
Authority has occurred since the date of the Official Statement which should be disclosed in the
Official Statement for the purposes for which it is to be used or which is necessary to disclose therein
in order to make the statements and information therein not misleading in any material respect;
(iii)the information and statements contained in the Official Statement under the captions
"INTRODUCTION—The Authority" and "THE AUTHORITY" did not as of its date and do not as
of the Closing contain an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances under which they were
made, not misleading in any material respect; and (iv)to the best of its knowledge after reasonable
investigation, the Authority is not in breach of or default under any applicable law or administrative
regulation of the State or the United States or any applicable judgment or decree or any loan
agreement, indenture, bond, note, resolution, agreement or other instrument to which the Authority is
a party or is otherwise subject, which would have a material adverse impact on the Authority's ability
to perform its obligations under the Authority Documents, and no event has occurred and is
continuing which, with the passage of time or the giving of notice, or both, would constitute a default
or an event of default under any such instrument;
(ix) A certificate, dated the Closing Date, signed by a duly authorized
officer of the City satisfactory in form and substance to the Underwriter to the effect that: (i)the
representations, warranties and covenants of the City contained in this Purchase Agreement are true
and correct in all material respects on and as of the Closing Date with the same effect as if made on
the Closing Date by the City, and the City has complied with all of the terms and conditions of the
Purchase Agreement required to be complied with by the City at or prior to the Closing Date; (ii)to
12
DOCSOC/1674234v2/200313-0013
1113 .569_ Item 13. - 59
the best of such officer's knowledge, no event affecting the City has occurred since the date of the
Official Statement which should be disclosed in the Official Statement for the purposes for which it
is to be used or which is necessary to disclose therein in order to make the statements and
information therein not misleading in any material respect; (iii)the information and statements
contained in the Official Statement (except that this representation does not include information
regarding DTC and its book entry only system, information under the caption "UNDERWRITING,"
CUSIP numbers, prices and yields for the Bonds and any other information provided by the
Underwriter, as to which no view is expressed) did not as of its date and do not as of the Closing
contain an untrue statement of a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were made, not misleading in
any material respect; and (iv)to the best of its knowledge after reasonable investigation, the City is
not in breach of or default under any applicable law or administrative regulation of the State or the
United States or any applicable judgment or decree or any loan agreement, indenture, bond, note,
resolution, agreement (including but not limited to the Lease Agreement) or other instrument to
which the City is a party or is otherwise subject, which would have a material adverse impact on the
City's ability to perform its obligations under the City Documents, and no event has occurred and is
continuing which, with the passage of time or the giving of notice, or both, would constitute a default
or an event of default under any such instrument;
(x) An opinion dated the Closing Date and addressed to the Underwriter,
the Authority, the City and Bond Counsel, of the City Attorney of the City of Huntington Beach, as
counsel to the Authority, to the effect that:
(A) The Authority is a public body, organized and existing under
the Constitution and laws of the State, including the JPA Act and the JPA Agreement;
(B) The resolution relating to the Bonds adopted by the Authority
and certified by an authorized official of the Authority authorizing the issuance and sale of the Bonds
and the execution and delivery of the Authority Documents and the Official Statement has been duly
adopted at a regular meeting of the Authority, and is in full force and effect and has not been
modified, amended,rescinded or repealed since the date of its adoption;
(C) The Authority Documents have been duly authorized,
executed and delivered by the Authority and constitute valid, legal and binding agreements of the
Authority enforceable in accordance with their respective terms;
(D) Except as otherwise disclosed in the Official Statement and to
the best knowledge of such counsel after due inquiry, there is no litigation, proceeding, action, suit,
or investigation at law or in equity before or by any court, governmental authority or body, pending,
with service of process having been accomplished, or threatened in writing against the Authority,
challenging the creation, organization or existence of the Authority, or the validity of the Authority
Documents or seeking to restrain or enjoin the collection of Base Rental Payments with respect to the
Lease Agreement or the repayment of the Bonds or in any way contesting or affecting the validity of
the Authority Documents or contesting the authority of the Authority to enter into or perform its
obligations under any of the Authority Documents;
(E) the execution and delivery of the Authority Documents and
the issuance of the Bonds and compliance with the provisions thereof, do not and will not in any
material respect conflict with or constitute on the part of the Authority a breach of or default under
13
DOCSOC/1674234v2/200313-0013
Item 13. - 60 1-113 -=7()-
any agreement or other instrument to which the Authority is a party or by which it is bound or any
existing law, regulation, court order or consent decree to which the Authority is subject, which
breach or default has or may have a material adverse effect on the ability of the Authority to perform
its obligations under the Authority Documents;
(F) no authorization, approval, consent, or other order of the State
or any other governmental body within the State is required for the valid authorization, execution and
delivery of the Authority Documents or the Official Statement by the Authority or the consummation
by the Authority of the transactions on its part contemplated therein, except such as have been
obtained and except such as may be required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Bonds by the Underwriter; and
(G) based on the information made available to such counsel in its
role as counsel to the Authority, and without having undertaken to determine independently or
assume any responsibility for the accuracy, completeness or fairness of the statements contained in
the Official Statement under the caption entitled "THE AUTHORITY," nothing has come to its
attention which would lead it to believe that the statements contained in the above-referenced caption
as of the date of the Official Statement and as of the Closing Date (excluding therefrom the financial
and statistical data and forecasts included therein, as to which no opinion is expressed) contained or .
contains any untrue statement of a material fact or omitted or omits to state a material fact necessary
to make the statements therein, in the light of the circumstances under which they were made, not
misleading;
(xi) an opinion dated the Closing Date and addressed to the Underwriter
and Bond Counsel, of the City Attorney of the City of Huntington Beach,to the effect that:
(A) The City is a chartered city and municipal corporation, duly
organized and existing under and by virtue of the laws of the State;
(B) The resolution relating to the Bonds adopted by the City and
certified by an authorized official of the City authorizing the execution and delivery of the City
Documents and the Official Statement has been duly adopted and is in full force and effect and has
not been modified, amended, rescinded or repealed since the its date of adoption;
(C) The City Documents have been duly authorized, executed and
delivered by the City and, assuming due authorization, execution and delivery by the other parties
thereto, if applicable, constitute the valid, legal and binding agreements of the City enforceable in
accordance with their respective terms;
(D) Except as otherwise disclosed in the Official Statement and to
the best knowledge of such counsel after due inquiry, there is no litigation, proceeding, action, suit,
or investigation at law or in equity before or by any court, governmental authority or body, pending,
with service of process having been accomplished, or threatened in writing against the City,
challenging the creation, organization or existence of the City, or the validity of the City Documents
or seeking to restrain or enjoin the payment of the Base Rental Payments or the repayment of the
Bonds or in any way contesting or affecting the validity of the City Documents or contesting the
authority of the City to enter into or perform its obligations under any of the City Documents, or
which, in any manner, questions the right of the City to pay the Base Rental Payments under the
Lease Agreement;
14
DOCSOC/1674234v2/200313-0013
1-1B _571- Item 13. - 61
(E) [Reserved];
(F) The execution and delivery of the City Documents and
compliance with the provisions thereof, do not and will not in any material respect conflict with or
constitute on the part of the City a breach of or default under any agreement or other instrument to
which the City is a party or by which it is bound or any existing law, regulation, court order or
consent decree to which the City is subject, which breach or default has or may have a material
adverse effect on the ability of the City to perform its obligations under the City Documents;
(G) No authorization, approval, consent, or other order of the
State or any other governmental body within the State is required for the valid authorization,
execution and delivery of the City Documents or the consummation by the City of the transactions on
its part contemplated therein, except such as have been obtained and except such as may be required
under state securities or Blue Sky laws in connection with the purchase and distribution of the Bonds
by the Underwriter; and
(H) Based on the information made available to City Attorney,
and without having undertaken to determine independently or assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the Official Statement, nothing has
come to its attention which would lead it to believe that the Official Statement as of its date and as of
the Closing Date (excluding therefrom financial statements and other statistical data, information
regarding DTC and its book entry only system, information under the caption "UNDERWRITING,"
CUSIP numbers, prices and yields for the Bonds and any other information provided by the
Underwriter, as to which no view need be expressed) contained or contains any untrue statement of a
material fact or omitted or omits to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
(xii) An opinion of Orrick Herrington& Sutcliffe LLP as Disclosure
Counsel to the Authority and the City, dated the Closing Date and addressed to City, Authority and
the Underwriter, to the effect that, based on the information made available to it in its role as
Disclosure Counsel, without having undertaken to determine independently the accuracy,
completeness or fairness of the statements contained in the Official Statement, but on the basis of
their participation in the above-mentioned conferences (which did not extend beyond the date of the
Official Statement), and in reliance thereon and on the records, documents, certificates and matters
mentioned above, such counsel advises the Underwriter as a matter of fact and not opinion that,
during the course of such counsel's role as disclosure counsel with respect to the Bonds, no facts
came to the attention of the attorneys in such firm rendering legal services in connection with such
role which caused them to believe that the Official Statement as of its date (except for any CUSIP
numbers, financial, accounting, statistical, economic or demographic data or forecasts, numbers,
charts, tables, graphs, estimates, projections, assumptions or expressions of opinion, any information
about The Depository Trust Company or its book-entry system, litigation, ratings, rating agencies or
underwriting, and Appendices A, B, C and G included or referred to therein, which such counsel
shall expressly exclude from the scope of this paragraph and as to which such counsel shall express
no opinion or view) contained any untrue statement of a material fact or omitted to state any material
fact necessary to make the statements therein, in the light of the circumstances under which they
were made, not misleading;
(xiii) An opinion of Stradling Yocca Carlson & Rauth, a Professional
Corporation, dated the Closing Date, addressed to the Underwriter to the effect that, although such
15
DOCSOC/1674234v2/2003 1 3-001 3
Item 13. - 62 1113 -572-
attorneys have not undertaken to check the accuracy, completeness or fairness of, or verified the
information contained in, the Official Statement, and are therefore unable to make any representation
in that regard, such attorneys have participated in conferences prior to the date of the Official
Statement with representatives of the City, the Authority, the Underwriter and others, during which
conferences the contents of the Official Statement and related matters were discussed. Based upon
the information made available to such attorneys in the course of their participation in such
conferences, their review of the documents referred to above, their reliance on the certificates and the
opinions of counsel described above and their understanding of applicable law, such attorneys do not
believe that the Official Statement (other than financial statements and projections and statistical data
therein, information about CUSIP numbers, information concerning The Depository Trust Company
and the book-entry system and the Appendices thereto, as to which no view need be expressed) as of
its date contained, or as of the date of such opinion, contains, any untrue statement or a material fact,
or as of its date omitted, or as of the date of such opinion omits,to state a material fact required to be.
stated therein or necessary to make the statements therein, in light of the circumstances under which
they were made,not misleading;
(xiv) An opinion of counsel to the Trustee, addressed to the Underwriter
and dated the Closing Date, in form and substance satisfactory to the Underwriter and to Bond
Counsel;
(xv) A certificate, dated the Closing Date, signed by a duly authorized
official of the Trustee in form and substance satisfactory to the Underwriter;
(xvi) The preliminary and final Notice of Sale required to be delivered to
the California Debt and Investment Advisory Commission pursuant to Section 53583 of the
Government Code and Section 8855(g) of the Government Code;
(xvii) A copy of the executed Blanket Issuer Letter of Representations by
and between the Authority and DTC relating to the book-entry system;
(xxiii) The tax and nonarbitrage certificate of the City and the Authority in
form and substance to the reasonable satisfaction of Bond Counsel and the
Underwriter;
(xix) A certificate, dated the date of the Preliminary Official Statement, of
the City, as required under Rule 15c2-12;
(xx) A certificate, dated the date of the Preliminary Official Statement, of
the Authority, as required under Rule 15c2-12;
(xxi) Certified copies of the JPA Agreement and all amendments thereto
and related certificates issued by the Secretary of State of the State;
(xxii) A certified copy of the general resolution of the Trustee authorizing
the execution and delivery of certain documents by certain officers of the Trustee, which resolution
authorizes the execution and delivery of the Indenture and the authentication and delivery of the
Bonds by the Trustee;
(xxiii) Evidence of insurance as required by the Lease Agreement; and
16
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1I13 -573- Item 13. - 63
(xxiv) Such additional legal opinions, certificates, proceedings, instruments
or other documents as Bond Counsel or the Underwriter may reasonably request.
Section 9. [Reserved]
Section 10. Expenses. Whether or not the transactions contemplated by this Purchase
Agreement are consummated, the Underwriter shall be under no obligation to pay, and the Authority
shall pay only from the proceeds of the Bonds, or cause the City to pay out of the proceeds of the
Bonds or any other legally available funds of the City or the Authority, but only as the Authority and
such other party providing such services may agree, all expenses and costs of the Authority and the
City incident to the performance of their obligations in connection with the authorization, execution,
sale and delivery of the Bonds to the Underwriter, including, without limitation,printing costs,rating
agency fees and charges, initial fees of the Trustee, including fees and disbursements of their
counsel, if any, fees and disbursements of Bond Counsel and Disclosure Counsel and other
professional advisors employed by the Authority or the City, costs of preparation, printing, signing,
transportation, delivery and safekeeping of the Bonds and for expenses (included in the expense
component of the spread) incurred by the Underwriter on behalf of the City's employees which are
incidental to implementing this Purchase Agreement, including, but not limited to, meals,
transportation, lodging, and entertainment of those employees. The Underwriter shall pay all out-of-
pocket expenses of the Underwriter, including, without limitation, the fees and expenses of its
counsel, advertising expenses, the California Debt and Investment Advisory Commission fee, CUSIP
Services Bureau charges, regulatory fees imposed on new securities issuers and any and all other
expenses incurred by the Underwriter in connection with the public offering and distribution of the
Bonds. Certain payments may be in the form of inclusion of such expenses in the expense
component of the Underwriter's discount.
Section 11. Notices. Any notice or other communication to be given to the Underwriter
under this Purchase Agreement may be given by delivering the same in writing to Merrill Lynch,
Pierce, Fenner & Smith Incorporated, 333 South Hope Street, Suite 2310, Los Angeles, California
90071, Attention: Cody Press. All notices or communications hereunder by any party shall be given
and served upon each other party. Any notice or communication to be given the Authority under this
Purchase Agreement may be given by delivering the same in writing to the Huntington Beach Public
Financing Authority, c/o City of Huntington Beach Department of Finance, 2000 Main Street,
Huntington Beach, California 92648, Attention: Executive Director. Any notice or communication
to be given the City under this Purchase Agreement may be given by delivering the same in writing
to the City of Huntington Beach c/o City of Huntington Beach Department of Finance, 2000 Main
Street, Huntington Beach, California 92648.
Section 12. Parties in Interest. This Purchase Agreement is made solely for the benefit
of the Authority, the City and the Underwriter (including the successors or assigns thereof) and no
other person shall acquire or have any right hereunder or by virtue hereof. All representations,
warranties and agreements of the Authority and the City in this Purchase Agreement shall remain
operative and in full force and effect regardless of any investigation made by or on behalf of the
Underwriter and shall survive the delivery of and payment for the Bonds.
Section 13. Severability. In case any one or more of the provisions contained herein
shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision hereof.
17
DOC SOC/1674234v2/200313-0013
Item 13. - 64 11 B -574-
Section 14. Counterparts. This Purchase Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
18
DOC S OC/167423 4v2/200313-0013
fJB -575- Item 13. - 65
Section 15. Governing Law. This Purchase Agreement shall be governed by the laws of
the State.
MERRILL LYNCH,PIERCE,FENNER& SMITH
INCORPORATED
By:
Title: Authorized Officer
Accepted as of the date first stated above:
CITY OF HUNTINGTON BEACH
By:
Its: City Manager
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
By:
Its: Chair
19
DOC S OC/167423 4v2/2003 1 3-001 3
Item 13. - 66 1 B -5 6-
EXHIBIT A
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
(ORANGE COUNTY, CALIFORNIA)
LEASE REVENUE BONDS,2014 SERIES A
(Senior Center Project)
MATURITY SCHEDULE
Maturity
Date Principal
(September 1) Amount Interest Rate Yield
(c) Yield to optional redemption date of September 1,20.
A-1
DOC SOC/1674234v2/200313-0013
HB -577- Item 13. - 67
ATTACHMENT #6
OH&S 8/8/14 Draft
YRl:;L.IMI�F1I�Y OFFiCI_ l_S"hA"hLME�"I DA"I ED 2014
NEW ISSUE BOOK-ENTRY ONLY RATINGS:
Fitch
S&P:,.
See"RATINGS"herein.
In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the 4uthority. based upon an analysis of existing
laws. regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and
compliance with certain covenants, interest on the Series 20144 Bonds is excluded from gross income for federal income tax
purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes.
In the further opinion of Bond Counsel, interest on the Series 2014A Bonds is not a specific preference item for purposes of the
federal individual or corporate alternative minimtan taxes. although Bond Counsel observes that such interest is included in
adjusted current earnings when calculating corporate alternative mininntm taxable income. Bond Counsel expresses no opinion
regarding any other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the
Series 2014A Bonds. See '7A,1 11ATTF,RS"herein.
k
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
s „ (Orange County,California)
Lease Revenue Bonds,2014 Series A
(Senior Center Project)
Dated: Date of Delivery Due: September 1,as shown on inside cover
The$ * aggregate principal amount of Huntington Beach Public Financing Authority Lease Revenue Bonds,2014
Series A (Senior Center Project) (the `'Series 2014A Bonds'). are being issued by the Huntington Beach Public Financing
Authority, a joint exercise of powers entity organized and existing under the laws of the State of California(the "Authority"),
pursuant to Article 4, Chapter 5. Division 7. Title I (commencing with Section 6584) of the California Government Code, a
resolution of the Authority authorizing the issuance of the Series 2614A Bonds and an indenture,dated as of September 1,2011
(the"Original Indenture'). as amended and supplemented by that First Supplemental Indenture, dated as of 1, 2014 (the
Original Indenture as amended,the"Indenture"), each by and among the City of-Huntington Beach (the"City").the Authority
and t'he Bank of New York Mellon'[rust Company,N.A.,as trustee(the`'Trustee" The Series 2014A Bonds are being issued to
(a)finance the costs of the acquisition,construction, installation and equipping of certain public capital improvements, including
the costs of construction of a senior center, (b) [fund capitalized interest on the Series 2014A Bonds through b (c)fund a
reserve fund for the Series 2014A Bonds, and(d)pay costs of issuance of the Series 2014A Bonds. See"PLAN OF FINANCE"
and"ESTIMATED SOURCES AND USFS OF FUNDS" herein. The Authority previously issued its Lease Revenue Refunding
Bonds. 2011 Series A (Capital Improvement Refinancing Project) (the *,Series 2011A Bonds") are secured by a pledge of and
lien on, and the Series 2014A Bonds raid any additional bonds which may be issued in accordance with the Indenture will be
secured by a pledge of and hen on, the Lease Revenues (as defined herein) and the amounts in the Reserve Fund (as defined
herein). The Series 2011 A Bonds.the Series 2014A Bonds and such additional bonds,if any,are referred to herein as"Bonds."
The Series 2014A Bonds are issuable in denominations or$5,000 and any integral multiple thereof. Interest on the Series
2014A Bonds is payable on March 1 and September 1 of each year,commencing I,20.Sec"THE BONDS"herein.
The Series 2014A Bonds will be delivered in fully registered form only.and.when delivered,will be registered in the name
of Cede & Co.. as nominee of The Depository Trust Company. New York. New York ("DTC"), DTC will act as securities
depository of the Series 2014A Bonds. Ownership interests in the Series 2014A Bonds may be purchased in book-entry form
only. Principal of,premium, if any, and interest on the Series 2014A Bonds will be paid by the Trustee to DTC or its nominee,
which will in turn remit such payment to its participants for subsequent disbursement to the beneficial owners of the Series
2014A Bonds. See"THE BONDS"herein and APPENDIX G—"BOOK-ENTRY ONLY SYSTEM."
The Series 2014A Bonds are subiect to optional and extraordinary redemption as described herein. See"THE BONDS—
Redemption"herein.
The City is leasing and will lease certain real property and the improvements thereon from the Authority pursuant to a lease
agreement. dated as of September 1, 2011 (the `Original Lease Agreement'). as amended and supplemented by that First
Amendment to Lease Agreement, dated as of 1. 2014 (the Original Lease Agreement as amended, the "Lease
A(,reement"), each be and between the Authority and the City. Under the Lease Agreement, the City is required to make Base
Rental Payments (as defined herein) from legally available funds in amounts calculated to be sufficient to pay principal of and
Preliminary,subject to change.
Item 13. - 68 HB -s78-
OH&S 8/8/14 Draft
interest on the Series 2014A Bonds when due, subject to abatement. as described herein. All of the Authority's right, title and
interest in and to the Lease Agreement(except for the right to receive any Additional Payments(as defined herein)to the extent
payable to the Authority and certain rights to indemnification), including the right to receive Base Rental Payments under the
Lease Agreement, are assigned to the Trustee under the Indenture for the benefit of the Owners and beneficial owners of the
Bonds.See"SECURITY FOR THE BONDS"herein.
MATURITY SCHEDULE
See Inside Cover Page
THE BONDS ARE SPECIAL LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM AND
SECURED SOLELY BY THE LEASE REVENUES PLEDGED UNDER THE INDENTURE. THE BONDS ARE NOT A
DEBT OF THE CITY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS. EXCEPT THE
AUTHORITY TO THE EXTENT DESCRIBED HEREIN. AND NEITHER THE CITY, THE STATE OF CALIFORNIA NOR
ANY OF ITS POLITICAL SUBDIVISIONS, EXCEPT THE AUTHORITY TO TFIE EXTENT DESCRIBED HEREIN. IS
LIABLE THEREON.IN NO EVENT SHALL THE BONDS OR ANY INTEREST OR REDEMPTION PREMIUM THEREON
BE PAYABLE OUT OF ANY FUNDS OR PROPERTIES OTHER THAN THOSE OF THE AUTHORITY AS SET FORTH IN
THE INDENTURE. THE BONDS DO NOT CONSTITUTE AN INDEBTEDNESS WITHIN THE MEANING OF ANY
CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. NEITHER THE MEMBERS OF THE
AUTHORITY, THE CITY NOR ANY PERSONS EXECUTING TIIE BONDS ARE LIABLE PERSONALLY ON THE
BONDS BY REASON OF THEIR ISSUANCE.
This cover page contains information for quick reference only. It is not a summary of this issue. Potential purchasers must
read the entire Official Statement to obtain information essential to making an informed investment decision.
The Series 2014,4 Bonds",ill be offered"-hen, as and if issued, and received by the Underwriter, subject to the approval as
to their validiht by Orrick, Herrington & Sutclifje LLP, Bond Counsel to the Authority, and certain other conditions. Certain
legal matters will be passed upon for the City and the Authority by dennifer VcGralh, Esq., City Attorney. and by Orrick,
Herrington & Sutcliffe LLP, as Disclosure Counsel. Certain legal matters will be passed on for the underwriter by Stradling
Foeca Carlson& Routh, a Professional Corporation, Newport Beach, California. It is anticipated that the Series 2014.4 Bonds
will be available for ck liver),through DTC on or about
BofA Merrill Lynch
Dated: ,2014
HB -579- Item 13. - 69
MATURITY SCHEDULE"
S Serial Bonds
CUSIP PREFIX:446216
Maturity Principal Interest CUSIP Maturity Principal Interest CUSIP
(September 1) Amount Rate Yield Suffix, (,September 1) Amount Rate Field Suffix'
Prehminarv,subject to change.
Copyright 2014.American Bankers Association.CUSIP-,k is a registered trademark of the American Bankers Association.CUSIP data herein
is prodded by the CUSIP Service Bureau,operated by Standard&Poor's.a division of The McGrww-Hill Companies,Inc. None of the City,the
Authority or the Underwriter shall he responsible for the selection or correctness of the CUSIP numbers set forth herein.
Item 13. - 70 11s -580-
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
CITY OF HUNTINGTON BEACH
City of Huntington Beach
2000 Main Street
Huntington Beach,California 92648
(714)536-5630
http://www.ci.huntington-beach.ca.us/
Authority Board of Directors and CitCouncil
Matthew Harper,Authortt,ChairlMayor
Joe Shaw,Authority Vice ChairlMapor Pro Tem
Connie Boardman,Authoritv/City Council Member
Joe Carchio,.9uthoritylCity Council Member
Jill Hardy,.9uthority)`CityCouncil Alember
Jim Katapodis,Authority/City Council Member
Dave Sullivan,Authority/City Council Member
Authority/City, Staff
Fred Wilson, Executive DirectoriCity ibfanager
Ken Domer,Assistant Cit7,Manager
Joan L.Flynn,SecretarylCity Cleric
Jennifer McGrath,Esq.,.guthority Counsel and Cio,Attorney
Alisa Cutchen,City Treasurer
Joyce Zacks,Deputy City Treasurer
Lori Ann Farrell,Director of Finance
Carol Molina-Espinoza,BudgetVlanager
Dahle Bulosan,Accounting Manager
Sunny Han,Senior Administrative Analyst
Special Services
Orrick, Herrington& Sutcliffe LLP
Los Angeles,California
Bond Counsel and Disclosure Counsel
Public Financial Management,Inc.
Los Angeles,California
Financial Advisor
The Bank of New York Mellon Trust Company,N.A.
Los Angeles,California
Trustee
FIB _581_ Item 13. - 71
OH&S 8/8/14 Draft
No dealer,broker, salesperson or other person has been authorized by the Authority,the City or the Underwriter
to give any information or to make any representations other than as set forth herein and, if given or made, such other
information or representation must not be relied upon as having been authorized by the Authority, the City or the
Underwriter.This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there
be any sale of the Series 2014A Bonds by a person in any jurisdiction in which it is unlawful for such person to make such
an offer,solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers of the Series 2014A Bonds.
Statements contained in this Official Statement that involve estimates, forecasts or matters of opinion, whether or not
expressly so described herein,are intended solely as such and are not to be construed as representations of facts.
The information set forth in this Official Statement has been obtained from official sources and other sources that
are believed to be reliable, but it is not guaranteed as to accuracy or completeness, and is not to be construed as a
representation of the Underwriter. The information and expressions of opinion herein are subject to change without notice,
and neither the delivery of this Official Statement nor any sale made hereunder shall under any circumstances create any
implication that there has been no change in the affairs of the Authority or the City since the date hereof. This Official
Statement is submitted in connection with the sale of the Series 2014A Bonds referred to herein and may not be
reproduced or used, in whole or in part, for any other purpose. The Underwriter has provided the following sentence for
inclusion in this Official Statement:The Underwriter has reviewed the information in this Official Statement in accordance
with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and
circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such
information.
This Official Statement contains forward-looking statements within the meaning of the Federal securities laws.
Such statements are based on currently available information, expectations, estimates, assumptions, projections and
general economic conditions. Such words as expects, intends,plans,believes, estimates, anticipates or variations of such
words or similar expressions are intended to identify forward-looking statements and include, but are not limited to,
statements under the captions "SECURITY FOR THE BONDS," "CITY FINANCIAL INFORMATION" and "OTHER
FINANCIAL INFORMATION." The forward-looking statements are not guarantees of future performance. Actual .
results may vary materially from what is contained in a forward-looking statement. The achievement of certain results or
other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause actual results, performance or achievements described to be materially different from any
future results, performance or achievements expressed or implied by such forward-looking statements. No assurance is
given that actual results will meet the Authority's or the City's forecasts in any way, regardless of the level of optimism
communicated in the information. The City and the Authority assume no obligation to provide public updates of forward-
looking statements.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT
TRANSACTIONS WHiCH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2014A BONDS AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING
TRANSACTIONS. IF COMMENCED. MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY
OFFER AND SELL THE SERIES 2014A BONDS TO CERTAIN DEALERS AND OTHERS AT PRICES LOWER
THAN THE PUBLIC OFFERING PRICES STATED ON THE INSIDE COVER PAGE OF THIS OFFICIAL
STATEMENT, AND SUCH PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE
UNDERWRITER.
CUSIP data herein is provided by the CUSIP Service Bureau, operated by Standard& Poor's, a division of The
McGraw-Hill Companies,Inc. This data is not intended to create a database and does not serve in any way as a substitute
for the CUSIP Services Bureau. CUSIP numbers have been assigned by an independent company not affiliated with the
Authority or the City and are included solely for the convenience of the registered owners of the Series 2014A Bonds.
None of the Authority,the City or the Underwriter is responsible for the selection or uses of these CUSIP numbers,and no
representation is made as to their correctness on the Series 2014A Bonds or as included herein. The CUSIP number for a
specific maturity is subject to being changed after the issuance of the Series 2014A Bonds as a result of various
subsequent actions including, but not limited to, a refunding in whole or in part or as a result of the procurement of
secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of
certain maturities of the Series 2014A Bonds.
The City maintains a website, however, the information presented therein is not a part of this Official Statement
and should not be relied on in making an investment decision with respect to the Series 2014A Bonds.
Item 13. - 72 uB -582-
TABLE OF CONTENTS
Page
INTRODUCTION.......................................................................................................................................................4
ESTIMATED SOURCES AND USES OF FUNDS...................................................................................................8
THEPROPERTY........................................................................................................................................................8
PLANOF FINANCE..................................................................................................................................................8
THEBONDS...............................................................................................................................................................9
General ..........9
..............................................................................................................................................
OptionalRedemption.................................................................................................................................. 10
Extraordinary Redemption from Insurance or Condemnation Proceeds..................................................... 10
Selection of Bonds for Redemption .................................................................................I.......................... 10
Noticeof Redemption ................................................................................................................................. 10
PartialRedemption of Bonds...................................................................................................................... 1 I
Effectof Redemption.................................................................................................................................. I 1
SECURITYFOR THE BONDS................................................................................................................................ 12
General ...................................................................................................................................................... 12
Base Rental Payments and Additional Payments........................................................................................ 12
Insurance and Condemnation Awards......................................................................................................... 13
ReserveFund............................................................................................................................................... 14
Abatement................................................................................................................................................... 16
Insurance..................................................................................................................................................... 16
DebtService Schedule................................................................................................................................. 18
AdditionalBonds......................................................................................................................................... 18
Substitution and Release of Property.......................................................................................................... 19
THEAUTHORITY................................................................................................................................................... 19
THECITY.................................................................................................................................................................20
CITY FINANCIAL INFORMATION.......................................................................................................................20
FinancialStatements...................................................................................................................................20
BudgetaryProcess.......................................................................................................................................21
City Financial Management Policies...........................................................................................................23
Dissolution of Redevelopment Agency and Potential Impact on the City..................................................23
CurrentInvestments....................................................................................................................................25
Relianceon State Budget............................................................................................................................25
Principal Sources of General Fund Revenues.............................................................................................25
PROPERTYTAXES.................................................................................................................................................26
AdValorem Property Taxes........................................................................................................................26
MotorVehicle In-Lieu Tax.........................................................................................................................29
SALESTAXES......................................................................................................................................................... 30
OTHERTAXES........................................................................................................................................................31
UtilitvTaxes................................................................................................................................................31
OtherTaxes.................................................................................................................................................31
OTHERREVENUES................................................................................................................................................31
OTHERFINANCIAL INFORMATION...................................................................................................................35
LaborRelations...........................................................................................................................................35
RiskManagement........................................................................................................................................35
Employee Retirement Plan-CaIPERS........................................................................................................36
RetirementPlan-Supplemental..................................................................................................................43
Post-Employment Medical Insurance..........................................................................................................46
i
IJB -583- Item 13. - 73
TABLE OF CONTENTS
(continued)
Page
Public Agency Retirement Systems(PARS)Notes Payable.......................................................................50
Short-Term Obligations...............................................................................................................................50
Long-Term Obligations...............................................................................................................................50
OverlappingDebt........................................................................................................................................51
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES.REVENUES AND
APPROPRIATIONS...................................................................................................................................53
Article XIIIA of the California Constitution...............................................................................................53
Article XIIIB of the California Constitution................................................................................................54
Proposition218 ...........................................................................................................................................55
PropositionI A of 2004...............................................................................................................................56
RecentlyApproved Initiatives.....................................................................................................................57
FutureInitiatives.........................................................................................................................................58
RISKFACTORS.......................................................................................................................................................58
LimitedObligation..........................................................................................:........................................... 58
Base Rental Payments Are Not Debt...........................................................................................................59
Valid and Binding Covenant to Budget and Appropriate...__............... ...................... ........... .......59
Abatement...................................................................................................................................................60
Riskof Uninsured Loss...............................................................................................................................60
EminentDomain .........................................................................................................................................60
HazardousSubstances.................................................................................................................................61
Earthquakes.................................................................................................................................................61
Tsunamiand Seiche....................................................................................................................................62
Bankruptcy..................................................................................................................................................62
Limitationson Remedies.............................................................................................................................63
No Liability of Authority to the Owners.....................................................................................................63
Riskof Tax Audit.... ................................. __...................................... ......................._............... .......63
StateBudget................................................................................................................................................64
Lossof Tax Exemption...............................................................................................................................67
LimitedSecondary Market........... .........................._...................................... ................ ..................67
Changesin Law...........................................................................................................................................67
TAXMATTERS.......................................................................................................................................................68
CERTAIN LEGAL MATTERS................................................................................................................................69
FINANCIALSTATEMENTS................................................................................................................................... 70
LITIGATION....................................................................................................................... ..............__........70
RATINGS..................................................................................................................................................................70
UNDERWRITING....................................................................................................................................................70
FINANCIALADVISOR...........................................................................................................................................71
CONTINUINGDISCLOSURE.................................................................................................................................71
ADDITIONALINFORMATION .............................................................................................................................71
ADDITIONALINFORMATION .......................................___.............................................................._...............72
APPENDIX A-GENERAL, ECONOMIC AND DEMOGRAPHIC INFORMATION RELATING TO THE
CITY.........................................................................................................................................................A-I
APPENDIX B -COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE FISCAL
YEAR ENDED SEPTEMBER 30,2013................................................................................................... B-I
APPENDIX C-CITY INVESTMENT POLICY...... ...._............._..................._............ ...........C-1
APPENDIX D- SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL DOCUMENTS.....D-I
APPENDIX E- PROPOSED FORM OF BOND COUNSEL OPINION...................____.....................................E-I
APPENDIX F- FORM OF CONTINUING DISCLOSURE CERTIFICATE.........................................................F-I
APPENDIX G- BOOK-ENTRY ONLY SYSTEM................................................................................................G-I
ii
Item 13. - 74 xB -584-
OFFICIAL STATEMENT
S
HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY
(ORANGE COUNTY,CALIFORNIA)
LEASE REVENUE BONDS,2014 SERIES A
(SENIOR CENTER PROJECT)
INTRODUCTION
The following introduction presents a brief description of certain information in connection,with
the Series 2014A Bonds (as defined belon) and is qualified in its entirety by reference to the entire
Official Statement and the documents sunnnarized or described herein. References to, and summaries of,
provisions of the Constitution and the laws of the State of California (the "State") and any documents
referred to herein do not purport to be complete and such references are qualified in their entirety by
reference to the complete provisions thereof Capitalized terms used in this Official Statement and not
defined elsewhere herein have the meanings given such terms in the Indenture (as defined below). See
APPENDIX D "SUMMARY OF CERTAIN PROVISIONS OF THE PRIWIPAL LEGAL
DOCUMENTS—Definitions."
General Description
This Official Statement, including the cover page, the inside cover page and the attached
appendices (this "Official Statement"), provides certain information concerning the issuance of
$ aggregate principal amount of Huntington Beach Public Financing Authority Lease
Revenue Bonds, 2014 Series A (Senior Center Project) (the "Series 2014A Bonds",), by the Huntington
Beach Public Financing Authority, a joint exercise of powers entity organized under the laws of the State
(the "Authority"). The Series 2014A Bonds are being issued pursuant to Article 4, Chapter 5, Division 7,
Title l (commencing with Section 6584) of the California Government Code, a resolution of the
Authority authorizing the issuance of the Series 2014A Bonds (the "Authority Resolution") and an
indenture, dated as of September 1, 20 t I (the "Original Indenture''), as amended and supplemented by
that First Supplemental Indenture, dated as of 1, 2014 (the Original Indenture" as amended, the
"Indenture"), each by and among the City of Huntington Beach (the "City"), the Authority and The Bank _
of New York Mellon Trust Company,N.A., as trustee (the "Trustee"). The Series 2014A Bonds are being
issued to (a) finance the costs of the acquisition, construction, installation and equipping of certain public
capital improvements, including the costs of construction of a senior center, (b) [fund capitalized interest
on the Series 2014A Bonds through _�, (c) fund a reserve fund for the Series 2014A Bonds, and (d)
pay costs of issuance of the Series 2014A Bonds. See "PLAN OF FINANCE" and `ESTIMATED
SOURCES AND USES OF FUNDS."
Terms of the Series 2014A Bonds
The Series 2014A Bonds will mature on the dates and in the principal amounts set forth on the
inside cover page of this Official Statement. Interest on the Series 2014A Bonds is payable semiannually
on each March I and September 1 (each, an "Interest Payment Date"), commencing 1, 20,
computed at the respective rates of interest set forth on the inside cover page of this Official Statement.
The Series 2014A Bonds will be issuable in denominations of $5,000 or any integral multiple thereof.
The Series 2014A Bonds are subject to optional and extraordinary redemption as described herein. See
"THE BONDS."
Preliminary,subject to change.
HB _5g-5_ Item 13. - 75
Book-Entry Only
The Depository Trust Company, New York,New York ("DTC"'). DTC will act as the depository
of the Series 2014A Bonds and all payments due on the Series 2014A Bonds will be made to DTC or its
nominee. Ownership interests in the Series 2014A Bonds may be purchased in book-entry form only. See
APPENDIX G—"BOOK-ENTRY ONLY SYSTEM."
Source of Payment for the Bonds
Pursuant to the site lease, dated as of September 1, 2011 (the "Original Site Lease"), as amended
and supplemented by that First Amendment to Site Lease, dated as of 1, 2014 (the Original Site
Lease as amended, the "Site Lease"), each by and between the City and the Authority, the City is leasing
and will lease to the Authority certain real property and certain facilities and improvements located
thereon (the "Property") owned by the City. See "THE PROPERTY." Concurrently, the City, will
sublease the Property from the Authority pursuant to a lease agreement, dated as of September 1, 2011
(the "Original Lease Agreement"), as amended and supplemented by that First Amendment to Lease
Agreement, dated as of 1, 2014 (the Original Lease Agreement as amended, the "Lease
Agreement"), each by and between the Authority and the City. Under the Lease Agreement, subject to
abatement as provided therein, the City is required to make rental payments(the"Base Rental Payments")
from legally available funds for use and occupancy of the Property in amounts calculated to be sufficient
to pay principal of and interest on the Series 2011A Bonds and the Series 2014A Bonds when due. The
City has covenanted in the Lease Agreement to take such action as may be necessary to include the Base
Rental Payments in each of its annual budgets during the term of the Lease Agreement and has further
covenanted to take such action as may be necessary to include all Rental Payments due under the Lease
Agreement in its annual budgets and to make necessary annual appropriations for all such Rental
Payments, such covenants to be and will be construed to be duties imposed by law and it will be the duty
of each and every public official of the City to take such action and do such things as are required by law
in the performance of the official duty of such officials to enable the City to carry out and perform such
covenants.
Except to the extent of amounts otherwise available to the City for payments under the Lease
Agreement. during any period in which, by reason of material damage or destruction (other than by
condemnation" which is provided for in the Lease Agreement) there is substantial interference with the
use and occupancy by the City of any portion of the Property, Base Rental Payments will be adjusted or
abated in the proportion in which the value of that portion of the Property rendered unusable bears to the
entire value of the Property. Such adjustment or abatement will end with the substantial replacement or
reconstruction of the Property. To the extent proceeds of rental interruption insurance are available or
there are ,moneys available for the payment of Rental Payments in any of the funds and accounts
established under the Indenture,the Lease Agreement provides there will be no abatement of Base Rental
Payments. See "SECURITY FOR THE BONDS—Abatement" The Authority previously issued its
Lease Revenue Refunding Bonds, 2011 Series A (Capital Improvement Refinancing Project) (the "Series
2011 A Bonds") secured by a pledge of and lien on the Lease Revenues (as defined herein) and the
amounts in the Reserve Fund (as defined herein). The Series 2011 A Bonds" the Series 2014A Bonds and
any additional bonds which may be issued in accordance with the Indenture will be secured by a pledge of
and lien on the Lease Revenues (as defined herein) and the amounts in the Reserve Fund (as defined
herein). The Series 201 ]A Bonds,the Series 2014A Bonds and such additional bonds, if any, are referred
to herein as `Bonds."
The Bonds are special limited obligations of the Authority payable solely from and secured by all
of the Lease Revenues and all amounts on deposit from time to time in the funds and accounts established
under the Indenture (other than the Rebate Fund) are pledged to the payment of the principal of and
4
Item 13. - 76 113 -586-
interest on the Bonds as provided the Indenture, and the Lease Revenues may not be used for any other
purpose while any of the Bonds remain Outstanding; provided,however, that the Lease Revenues may be
applied for such other purposes as are permitted under the Indenture. As defined in the Indenture, the term
"Lease Revenues"means all Base Rental Payments payable by the City pursuant to the Lease Agreement,
including any prepayments thereof, any Net Proceeds and any amounts received by the Trustee as a result
of or in connection with the Trustee's pursuit of remedies under the Lease Agreement upon a Lease
Default Event.
Reserve Fund
A debt service reserve fund (the "Reserve Fund") is established and held under the Indenture in
order to secure the payment of principal of and interest on the Series 2011 A Bonds and the Series 2014A
Bonds. On the Closing Date, a portion of the proceeds of the Series 2014A Bonds will be deposited
therein in an amount necessary to increase the amount on deposit in the Reserve Fund to the Reserve
Requirement as of the date of delivery of the Series 2014A Bonds. If, on any Interest Payment Date for
the Series 2011 A Bonds and the Series 2014A Bonds, the amounts on deposit under the Indenture to pay
the principal of and interest due on the Series 2011 A Bonds and the Series 2014A Bonds are insufficient
therefor, the Trustee will draw on the amounts in the Reserve Fund to replenish the Interest Account or
the Principal Account, in that order, to make up such deficiencies. See "SECURITY FOR THE
BONDS—Reserve Fund" and APPENDIX D — "SUMMARY OF CERTAIN PROVISIONS OF THE
PRINCIPAL LEGAL DOCUMENTS"for additional information on the Reserve Fund.
The City
The City is a municipal corporation and chartered city of the State. See "THE CITY," "CITY
FINANCIAL INFORMATION" and APPENDIX A — "GENERAL, ECONOMIC AND .
DEMOGRAPHIC INFORMATION RELATING TO THE CITY."
The Authority
The Authority is a joint exercise of powers entity formed on March 8, 1988, as amended
including by that Second Amendment to Joint Exercise of Powers Agreement, dated as of July 17, 20141.
by and among the City, the Successor Agency to the Redevelopment Agency of the city of Huntington
Beach (the "Agency") and the Huntington Beach Housing Authority (the "Housing Authority"). pursuant
to Articles I through 4, Chapter 5, Division 7, Title 1 of the California Government Code. See "THE
AUTHORITY."
Continuing Disclosure
The ultimate security for the payments of principal and interest on the Bonds comes from the
Base Rental Payments to be made by the City, and, therefore, the City, as an obligated person within the
meaning of the Rule (as defined below), has agreed to undertake the continuing disclosure responsibilities
required by the Rule. The Authority has not undertaken a commitment to provide any continuing
disclosure required by the Rule.
The City has covenanted in the Continuing Disclosure Certificate (the "Continuing Disclosure ,
Certificate") to provide, or cause to be provided, to the Municipal Securities Rulemaking Board's
Electronic Municipal Market Access system (the "EMMA System"), for purposes of Rule 15c2-12(b)(5)
(the "Rule") adopted by the U.S. Securities and Exchange Commission (the "SEC'') under the Securities
Exchange Act of 1934, as amended, certain annual financial unfornnation and operating data of the type set
firth lierein including, but not limited to, its audited financial statements and, in a timely manner, notice
5
HB -587- Item 13. - 77
of certain enumerated events. See "CONTINUING DISCLOSURE." See also APPENDIX F — "FORM
OF CONTINUING DISCLOSURE CERTIFICATE" for a description of the specific nature of the annual
report and notices of enumerated events and a summary description of the terms of the Continuing
Disclosure Certificate pursuant to which such reports and notices are to be made.
Certain Risk Factors
Certain events could affect the ability of the City to make the Base Rental Payments when due. _
See "CERTAIN RISK FACTORS" for a discussion of certain factors that should be considered, in
addition to other matters set forth herein, in evaluating an investment in the Series 2014A Bonds.
Other Information
The descriptions herein of the Indenture, the Lease Agreement and any other agreements relating
to the Series 2014A Bonds are qualified in their entirety by reference to such documents, and the
descriptions herein of the Series 2014A Bonds are qualified in their entirety by the forms thereof and the
information with respect thereto included in the aforementioned documents. See APPENDIX D —
"SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL DOCUMENTS." Copies of
the documents are on file and. upon request and payment to the City of a charge for copying, mailing and
handling, from the Director of Finance. City of Huntington Beach, 2000 Main Street, Huntington Beach,
CA 92648,telephone(714)536-5630.
The information and expressions of opinion herein speak only as of their date and are subject to
change without notice. Neither the delivery of this Official Statement nor any sale made hereunder nor
any future use of this Official Statement, under any circumstances, creates any implication that there has
been no change in the affairs of the City or the Authority since the date hereof.
The presentation of information, including tables of receipt of revenues, is intended to show
recent historical information and is not intended to indicate future or continuing trends in the financial
position or other affairs of the City or the Authority. No representation is made that past experience, as it
might be shown by such financial and other information, will necessarily continue or be repeated in the
future.
6
Item 13. - 78 17T11 .588_
ESTIMATED SOURCES AND USES OF FUNDS
The estimated sources and uses of funds realized upon the sale of, or in connection with, the
Series 2014A Bonds as follows:
Estimated Sources:
Principal Amount of Bonds
Plus: Original Issue Premium
Total Sources
Estimated Uses:
Deposit to Project Fund t't
Deposit to [Interest Account]t')
Deposit to Reserve Fund t')
Deposit to Costs of Issuance Fund r4)
Total Uses
[The City has executed a guaranteed maximum price contract for the completion of the Project,plus a budget contingency of
_%.]See"PLAN OF FINANCE.'
G) [Deposit in an amount equal to capitalized interest on the Series 2014A Bonds through l
(') Represents the amount necessary to increase the amount on deposit in the Reserve fund to the Reserve Requirement as of
the date of delivery,of the Series 2014A Bonds.
(4) Includes.but is not limited to, the UndemriteCs discount,the fees and expenses of Bond Counsel, Disclosure Counsel,the
Financial Advisor, the Trustee, and the rating agencies. costs of printing the Official Statement. the premium for title
insurance and other costs incurred by the Authority and the City in connection with the issuance and delivery of the Series
2014A Bonds.
THE PROPERTY
The Property is located on a 14.28 acre site, and consists of the City's unified civic center
complex located at 2000 Main Street in Huntington Beach. The 189,000 sq. ft. complex, built in 1972,
includes a five level administrative structure, a two story police/public safety building, a single level wing
containing departments relating to municipal development and a connected building containing the City
Council chambers, meeting rooms and related facilities. On December 14, 2009, the City completed an
$8.1 million seismic retrofit of the main Civic Center building. The City's Emergency Operations Center,
featuring modern computer-assisted emergency management systems including a video display wall for
incident tracking, is also located within the complex. As provided in the Lease Agreement, the City and
the Authority have agreed and determined that the Rental Payments are not in excess of the fair rental
value of the Property.
PLAN OF FINANCE
The Series 2014A Bonds are being issued to (a) finance the costs of the acquisition, construction,
installation and equipping of certain public capital improvements, including the costs of construction of a
senior center(the"Project"). (b) [fiend capitalized interest on the Series 2014A Bonds through ], (c)
fund a reserve fund for the Series 2014A Bonds, and(d)pay costs of issuance of the Series 2014A Bonds.
The Project involves the construction of a new one-story senior center (approximately 45,000
square feet) on a currently undeveloped, approximately 5-acre site located within the 343-acre Huntington
Central Park and generally located west of the intersection of Goldenwest Street and Talbert Avenue,
between the disc golf course, which is at a higher elevation, and the Shipley Nature Center.
7
HB -589- Item 13. - 79
The Project will include multi-purpose rooms/community hall, group exercise room, fitness room,
arts/crafts room, multi-use classrooms, kitchen, dance room, lobby, administrative area, outdoor patio,
and outdoor recreation/activity area. The Project includes surface parking for approximately 227 visitor
and City vehicles.
The Project was previously the subject of litigation that has now been resolved. The primary
disputes were initiated by a citizen's group principally alleging violations of the California Environmental
Quality Act (CEQA), a California statute which was originally enacted in 1970. The proceedings
originated with the adoption by the City, on or about January 2012. of its Resolution No.
approving the Final Environmental Impact Report (EIR 07-02), dated December 2011 (the "FE1R"), and
Resolution No. , authorizing the issuance of a Conditional Use Permit (No.07-39) for the
construction of the Project. These initial proceedings were the subject of 'litigation before the Orange
County Superior Court and the California Court of Appeal. In response, the City prepared a Subsequent
Environmental Impact Report("SEIR")and on April 16, 2012, the City approved the SEIR for the Project
in Resolution No. 2012-18, and also adopted Resolution No. 2012-19 approving General Plan
Amendment (GPA) No. 11-004 and approving Conditional Use Permit (CUP) No. 07-039(R) for the
Project. Subsequent judicial appeals have upheld the City's approval of the SEIR, and the Project is now
fully and finally authorized.
THE BONDS
General
The Series 2014A Bonds will .be issued in fully registered form without coupons ill
denominations of $5,000 or any integral multiple thereof. The Series 2014A Bonds will mature on
September I in each of the years and in the amounts, and will bear interest (calculated on the basis of a
360-day year of twelve 30-day months)at the rates set forth on the inside cover page hereof.
Interest on the Series 2014A Bonds will be payable semiannually on each March 1 and
September 1, commencing 1, 20 (each, an "Interest Payment Date"), to the person whose name
appears on the Registration Books as the Owner thereof as of the fifteenth calendar day of the month
immediately preceding each such Interest Payment Date (each, a"Record Date"), such interest to be paid
by check of the Trustee mailed by first-class mail to the Owners at the respective addresses of such
Owners as they appear on the Registration Books; provided, however, that payment of interest may be
made by wire transfer in immediately available funds to an account in the United States of America to any
Owner of Bonds in the aggregate principal amount of $1,000,000 or more who furnishes written wire
instructions to the Trustee at least five days before the applicable Record Date. Principal of any Bond and
any premium upon redemption will be paid by check of the Trustee upon presentation and surrender
thereof at the corporate trust office of the Trustee, except as provided in APPENDIX G — "BOOK-
ENTRY ONLY SYSTEM." Principal of and interest and premium (if any) on the Bonds will be payable
in lawful money of the United States of America.
Each Bond will be dated as of its date of delivery and will bear interest from the Interest Payment
Date next preceding such date of authentication thereof, unless (a) it is authenticated after a Record Date
and on or before the following Interest Payment Date, in which event it will bear interest from such
Interest Payment Date, or (b) it is authenticated on or before 15, 20_, in which event it will bear
interest from the Closing Date; provided, however, that if. as of the date of authentication of any Bond,
interest thereon is in default, such Bond will bear interest from the Interest Payment Date to which
interest has previously been paid or made available for payment thereon.
8
Item 13. - 80 � -s�o-
The Series 2014A Bonds, when issued, will be registered in the name of Cede & Co., as
registered owner and nominee of The Depository Trust Company, New York. New York ("DTC," and
together with any successor securities depository,the"Securities Depository"). DTC will act as Securities
Depository for the Series 2014A Bonds. Individual purchases of the Series 2014A Bonds will be made in
book-entry form. Purchasers will not receive certificates representing their ownership interest in the
Series 2014A Bonds. So long as Cede & Co. is the registered owner of the Series 2014A Bonds, as
nominee of DTC, references herein to the Owners or registered owners thereof means Cede & Co. as
aforesaid, and not the Beneficial Owners of the Series 2014A Bonds. So long as Cede & Co. is the
registered owner of the Series 2014A Bonds, principal of and interest on the Series 2014A Bonds are
payable by wire transfer of same day funds by the Trustee to Cede & Co., as nominee for DTC. DTC is
obligated, in turn,to remit such amounts to the Participants for subsequent disbursement to the Beneficial
Owners. See APPENDIX G—"BOOK-ENTRY ONLY SYSTEM."
Optional Redemption
The Series 2014A Bonds maturing on or after September 1, 20 are subject to optional
redemption prior to their respective stated maturities, on any date on or after September 1, 20_, in whole
or in part, in Authorized Denominations, from (i) amounts received from the City in connection with the
City's exercise of its right pursuant to the Lease Agreement to cause Series 2014A Bonds to be optionally
redeemed, or(ii) any other source of available funds, at a redemption price equal to the principal amount
thereof, plus accrued interest thereon to the date fixed for redemption,without premium.
Extraordinary Redemption from Insurance or Condemnation Proceeds
The Series 2014A Bonds are also subject to redemption, in whole or in part. on any date, in
Authorized Denominations, from and to the extent of any Net Proceeds (other than Net Proceeds of rental
interruption insurance) received with respect to all or a portion of the Property and deposited by the
Trustee in the Redemption Fund in accordance with the provisions of the Indenture at a redemption price
equal to the principal amount thereof, plus accrued interest thereon to the date fixed for redemption.
without premium.
Selection of Bonds for Redemption
Whenever provision is made for the redemption of less than all of the Bonds of a particular
maturity, the Trustee will select the Bonds to be redeemed from all Bonds not previously called for
redemption (a) with respect to any extraordinary redemption from and to the extent of any Net Proceeds
(other than Net Proceeds of rental interruption insurance) received with respect to all or a portion of the
Property, among maturities of all Series of Bonds oil a pro rata basis as nearly as practicable. (b) with
respect to any optional redemption of Series 2011A Bonds and/or Series 2014A Bonds, as directed in a
Written Certificate of the City. and (c) with respect to any other- redemption of Additional Bonds, as
provided in the Supplemental Indenture pursuant to which such Additional Bonds are issued, and by lot
among Bonds of the same Series with the same maturity in any manner which the Trustee in its sole
discretion deems appropriate and fair. The Trustee will promptly notify the Authority and the City in
writing of the numbers of the Bonds so selected for redemption on such date. For purposes of such
selection, any Bond may be redeemed in part in Authorized Denominations.
Notice of Redemption
Notice of redemption will be mailed by first-class mail, postage prepaid, will mail (by first class
mail) notice of any redemption to the respective Owners of any Bonds designated for redemption at their
respective addresses appearing on the Registration Books at least 30 but not more than 60 days prior to
9
11,111 _-591- Item 13. - 81
the date fixed for redemption. Such notice will state the date of the notice, the redemption date, the
redemption place and the redemption price and will designate the CUSIP numbers,the Bond numbers and
the maturity or maturities of the Bonds to be redeemed (except in the event of redemption of a.11 of the
Bonds of such maturity or maturities in whole), and will require that such Bonds be then surrendered at
the Office of the Trustee for redemption at the redemption price, giving notice also that further interest on
such Bonds will not accrue from and after the date fixed for redemption. Neither the failure to receive any
notice so mailed, nor any defect in such notice, will affect the validity of the proceedings for the
redemption of the Bonds or the cessation of accrual of interest thereon from and after the date fixed for .
redemption. With respect to any notice of any optional redemption of Bonds of a Series, unless at the time
such notice is given the Bonds to be redeemed will be deemed to have been paid within the meaning of .
the Indenture, such notice will state that such redemption is conditional upon receipt by the Trustee, on or
prior to the date fixed for such redemption, of moneys that, together with other available amounts held by
the Trustee, are sufficient to pay the redemption price of, and accrued interest on, the Bonds to be
redeemed, and that if such moneys will not have been so received said notice will be of no force and
effect and the Authority will not be required to redeem such Bonds. In the event a notice of redemption of
Bonds contains such a condition and such moneys are not so received, the redemption of Bonds as
described in the conditional notice of redemption will not be made and the Trustee will, within a
reasonable time after the date on which such redemption was to occur, give notice to the Persons and in
the manner in which the notice of redemption was given. that such moneys were not so received and that
there will be no redemption of Bonds pursuant to such notice of redemption.
So long as the book-entry system is used for the Bonds, the Trustee will give any notice of
redemption or any other notices required to be given to registered Owners of Bonds only to DTC. Any
failure of DTC to advise any Participant, or of any Participant to notify the Beneficial Owner, of any such
notice and its content or effect will not affect the validity of the redemption of the Bonds called for
redemption or any other action premised on such notice. Beneficial Owners may desire to make
arrangements with a.Participant so that all notices of redemption or other communications to DTC which
affect such Beneficial Owners, and notification of all interest payments, will be forwarded in writing by
such Participant. See APPENDIX G—"BOOK-ENTRY ONLY SYSTEM."
Partial Redemption of Bonds
Upon surrender of any Bonds redeemed in part only, the Authority will execute and the Trustee
will authenticate and deliver to the Owner thereof. at the expense of the Authority, a new Bond or Bonds
of the same Series in Authorized Denominations equal in aggregate principal amount representing the
unredeemed portion of the Bonds surrendered.
Effect of Redemption
If notice of redemption has been given as aforesaid, and moneys for the redemption price, and the
interest to the applicable date fixed for redemption, having been set aside, the Bonds will become due and
payable on said date and, upon presentation and surrender thereof at the Office of the Trustee, said Bonds
will be paid at the redemption price thereof together with interest accrued and unpaid to said date.
If, on said date fixed for redemption, moneys for the redemption price of all the Bonds to be
redeemed, together with interest to said date, will be held by the Trustee so as to be available therefor on
such date, and, if notice of redemption thereof will have been mailed as aforesaid and not canceled, then,
from and after said date, interest on said Bonds will cease to accrue and become payable. All moneys held
by or on behalf of the Trustee for the redemption of Bonds will be held in trust for the account of the
Owners of the Bonds so to be redeemed without liability to such Owners for interest thereon.
10
Item 13. - 82 xB -59-2-
All Bonds redeemed pursuant to the provisions of the Indenture will be canceled by the Trustee
upon surrender thereof and destroyed.
SECURITY FOR THE BONDS
General
The Bonds are special limited obligations of the Authority payable solely from and secured solely
by the Lease Revenues pledged therefor under the Indenture, together with amounts on deposit from time
to time in the funds and accounts established under the Indenture(other than the Rebate Fund).
Under the Indenture.the Authority assigns to the Trustee,for the benefit of the Owners from time
to time of the Bonds, all of the Lease Revenues and all of the rights of the Authority in the Lease
Agreement(except for the right to receive any Additional Payments to the extent payable to the Authority
and certain rights to indemnification set forth therein). The Trustee is entitled to collect and receive all of
the Lease Revenues, and any Lease Revenues collected or received by the Authority are required to be
held, and to have been collected or received, by the Authority as the agent of the Trustee and must be paid
by the Authority to the Trustee.
THE BONDS ARE SPECIAL LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE
SOLELY FROM AND SECURED SOLELY BY THE LEASE REVENUES AND OTHER MONEYS
PLEDGED THERETO IN THE INDENTURE. THE BONDS ARE NOT A DEBT OF THE
AUTHORITY, THE CITY, THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS AND
NEITHER THE AUTHORITY, THE CITY, THE STATE NOR ANY OF ITS POLITICAL
SUBDIVISIONS. EXCEPT THE AUTHORITY TO THE EXTENT DESCRIBED HEREIN, IS LIABLE
THEREON. IN NO EVENT WILL THE BONDS OR ANY INTEREST OR REDEMPTION PREMIUM
THEREON BE PAYABLE OUT OF ANY FUNDS OR PROPERTIES OTHER THAN THOSE OF THE
AUTHORITY AS SET FORTH IN THE INDENTURE. THE BONDS DO NOT CONSTITUTE AN
INDEBTEDNESS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT
LIMITATION OR RESTRICTION. NEITHER THE MEMBERS OF THE AUTHORITY NOR ANY
PERSONS EXECUTING THE BONDS ARE LIABLE PERSONALLY ON THE BONDS BY REASON
OF THEIR ISSUANCE.
Base Rental Payments and Additional Payments
The Original Lease Agreement has required the City, subject to abatement as provided therein,to
deposit with the Trustee, as assignee of the Authority, on the fifth Business Day next preceding each
Interest Payment Date. The First Amendment to Lease Agreement requires the City, subject to abatement
as provided therein, to deposit with the Trustee, as assignee of the Authority, on the fifth Business Day
next preceding each Interest Payment Date, commencing on _, 20_ (the "Base Rental Deposit
Dates"), an amount equal to the Base Rental Payment coming due and payable on each such Base Rental
Deposit Date. The Base Rental Payments payable in any fiscal year of the City constitute payment for the
use and possession of the Property during such fiscal year. The City will receive a credit towards payment
of Base Rental Payments for amounts on deposit in the Payment Fund (including the Interest Account and
the Principal Account therein)on each Base Rental Deposit Date.
The obligation of the City to make Base Rental Payments is subject to annual appropriations of
the City from funds lawfully available therefor. The obligation of the City to make Base Rental Payments
under the Lease Agreement does not constitute a debt of the City or of the State of California or of any
political subdivision thereof in contravention of any constitutional or statutory debt limit or restriction,
and does not constitute an obligation for which the City or the State of California is obligated to levy or
11
1113 _59;_ Item 13. - 83
pledge any form of taxation or for which the City or the State of California has levied or pledged any
form of taxation. Neither the full faith and credit nor the taxing power of the City, the State or any of its
political subdivisions is pledged to make Base Rental Payments under the Lease Agreement. The
Authority has no taxing power. The Base Rental Payments are calculated to be sufficient to pay, when
due, the principal of and interest on the Bonds.
In addition to the Base Rental Payments, the City is required to pay when due the following
Additional Payments: (a) all taxes and assessments of any type or nature relating to or affecting the
Property; (b) all reasonable administrative costs of the Authority relating to the Property including, but
without limiting the generality of the foregoing, salaries, wages, fees and expenses payable by the
Authority under the Indenture, fees of auditors, accountants, attorneys or engineers, and all other
necessary and reasonable administrative costs of the Authority or charges required to be paid by it in
order to maintain its existence or to comply with the terms of the Indenture or the Lease Agreement or to
defend the Authority and its members, officers. agents and employees; (c) insurance premiums for all
insurance required pursuant to the Lease Agreement; (d) any amounts with respect to the Bonds required
to be rebated to the federal government in accordance with Section 148(f) of the Code; and (e) all other
payments required to be paid by the City under the provisions of the Lease Agreement or the Indenture.
Pursuant to the Lease Agreement, the City covenants to take such action as may be necessary to
include all Rental Payments due under the Lease Agreement in its annual budgets and to make necessary
annual appropriations for all such Rental Payments. As provided in the Lease Agreement, such covenants
of the City thereunder are deemed to be and will be construed to be duties imposed by law and it will be
the duty of each and every public official of the City to take such action and do such things as are
required by law in the performance of the official duty of such officials to enable the City to carry out and
perform such covenants.
California law requires, and the Lease Agreement provides, that Base Rental Payments are
required to be abated in whole or in part during any period in which there is substantial interference with
the use and occupancy of the Property by the City due to damage, destruction or taking in eminent
domain proceedings. Under these circunnstances, failure to make any Base Rental Payment will not be an
event of default under the Lease Agreement. See"SECURITY FOR THE BONDS—Abatement"below.
Base Rental Payments made by the City to the Authority are payable from lawful money of the
United States of America to or upon the order of the Authority at the Principal Office of the Trustee, or
such other place or entity as the Authority may designate. Notwithstanding any dispute between the
Authority and the City, the City will make all Rental Payments when due without deduction or offset of
any kind and will not withhold any Rental Payments pending the final resolution of such dispute. In the
event of a determination that the City was not liable for said Rental Payments or any portion thereof, said
payments or excess of payments, as the case may be, will be credited against subsequent Rental Payments
due under the Lease Agreement or refunded at the time of such determination. The Lease Agreement and
the Indenture require that Base Rental Payments be deposited in the Payment Fund maintained by the
Trustee, which find is held for the benefit of the owners of the Bonds.
Insurance and Condemnation Awards
In the event of any damage to or destruction of any part of the Property covered by insurance,the
Net Proceeds of any insurance (other than Net Proceeds of rental interruption insurance), including the
proceeds of any self-insurance, received on account of any damage or destruction of the Property or a
portion thereof will, as soon as possible, be deposited with the Trustee and be held by the Trustee in a
special account and made available for and, to the extent necessary, will be applied to the cost of repair or
replacement of the Property or the affected portion thereof upon receipt of a Written Request of the City,
12
Item 13. - 84 HB _5()4_
together with invoices therefor. Pending such application, such proceeds may, pursuant to a. Written
Request of the City, be invested by the Trustee in Permitted Investments that mature not later than such
times as moneys are expected to be needed to pay such costs of repair or replacement. In connection
therewith, the City will notify the Trustee in writing as to whether the City intends to replace or repair the
Property- or the portions of the Property which were damaged or destroyed. If the City does intend to
replace or repair the Property or portions thereof, the City will deposit with the Trustee the full amount of
any insurance deductible to be credited to such special account.
If such damage, destruction or loss was such that there resulted a substantial interference with the
City's right to the use or occupancy of the Property and an abatement in whole or in part of Rental
Payments results from such damage or destruction pursuant to the Lease Agreement, then the City will be
required either to(a) apply sufficient funds from the insurance proceeds and other legally available funds
to the replacement or repair of the Property or the portions thereof which have been damaged to the
condition which existed prior to such damage or destruction, or (b) apply sufficient funds from the
insurance proceeds and other legally available funds to the redemption(i)of all of the Outstanding Bonds,
or (ii) of such portion of the Outstanding Bonds as will result in the remaining, non-abated Base Rental
Payments being sufficient to pay, as and when due, the principal of and interest on the Bonds that will
remain Outstanding after such redemption. If the City is required to apply fiends from the insurance
proceeds and other legally available funds to the redemption of Bonds in accordance with clause (b)
above.the City will direct the Trustee, in a Written Request of the City,to transfer the funds to be applied
to such redemption to the Redemption Fund and the Trustee will transfer such funds to the Redemption
Fund. Any proceeds of any insurance, including the proceeds of any self-insurance remaining after the
portion of the Property which was damaged or destroyed is restored to and made available to the City in
substantially the same condition and annual fair rental value as that which existed prior to the damage or
destruction as required by clause (a) above, or the redemption of Bonds as required by clause (b) above,
in each case as evidenced by a. Written Certificate of the City to such effect, will be deposited in the
Reserve Fund to the extent that the amount therein is less than the Reserve Requirement. If the City is not
required to replace or repair the Property, or the affected portion thereof, as set forth in clause (a) above,
or to use such amounts to redeem Bonds as set forth in clause (b) above, then such proceeds will be
deposited in the Reserve Fund to the extent that the amount therein is less than the Reserve Requirement.
Any amounts not required to be so deposited into the Reserve Fund will, if there is first delivered to the
Trustee a Written Certificate of the City to the effect that the annual fair rental value of the Property after
such damage or destruction, and after any repairs or replacements made as a result of such damage or
destruction, is at least equal to 100% of the maximum amount of Base Rental Payments becoming due
under the Lease Agreement in the then current Rental Period or any subsequent Rental Period and the fair
replacement value of the Property after such damage or destruction is at least equal to the sum of tile then
unpaid principal components of Base Rental Payments, be paid to the City to be used for any lawful
purpose.
The proceeds of any award in eminent domain will be deposited by the Trustee in the Redemption
Fund and applied to the redemption of Bonds pursuant to the Indenture. No assurance can be given that
the proceeds of any insurance or condemnation award will be sufficient under all circumstances to repair
or replace any damaged or taken Property or to prepay all Base Rental Payments with respect to the
Property. Also, the City makes no representation as to the sufficiency of any insurance awards or the
adequacy of any self-insurance to pay, when and as due, amounts payable under the Lease Agreement or
the Bonds.
Reserve Fund
The Reserve Fund is established under the Indenture in an amount equal to the Reserve
Requirement, which as of the date of delivery of the Series 2014A Bonds is $ The Reserve
13
1-1 B -595- Item 13. - 85
Fund is established and held under the Indenture in order to secure the payment of principal of and
interest on the Series 2011A Bonds and the Series 2014A Bonds. On the Closing Date. a portion of the
proceeds of the Series 2014A Bonds will be deposited therein in an amount necessary to increase the
amount on deposit in the Reserve Fund to the Reserve Requirement as of the date of delivery of the Series
2014A Bonds. As defined in the Indenture, the term "Reserve Requirement" means, as of the date of any
calculation, the least of(a) 10% of the original aggregate principal amount of the Bonds(excluding Bonds
refunded with the proceeds of subsequently issued Bonds), (b) Maximum Annual Debt Service, and (c)
125% of Average Annual Debt Service. All amounts in the Reserve Fund are required to be used and
withdrawn by the Trustee solely for the purpose of paying principal of or interest on the Bonds when due
and payable to the extent that moneys deposited in the Interest Account or the Principal Account are not
sufficient for such purpose, and making the final payments of principal of and interest on Bonds on the
date on which such Bonds are required to be retired or provision made therefor.
The City may substitute a Reserve Facility for all or part of the moneys on deposit in the Reserve
Fund by depositing such Reserve Facility with the Trustee, provided that, at the time of such substitution,
the amount on deposit in the Reserve Fund, together with the amount available under all Reserve
Facilities, shall be at least equal to the Reserve Requirement. Moneys for which a Reserve Facility has
been substituted as provided in the Indenture will be transferred, at the election of the City, to the
Redemption Fund or, upon receipt of an Opinion of Counsel that such transfer will not, in and of itself,
adversely affect the exclusion of interest on Outstanding Tax-Exempt Bonds from gross income for
federal income tax purposes, to the City and applied to the payment of capital costs of the City. Amounts
on deposit in the Reserve Fund which were not derived from payments under any Reserve Facility
credited to the Reserve Fund to satisfy a portion of the Reserve Requirement will be used and withdrawn
by the Trustee prior to using and withdrawing any amounts derived from payments under such Reserve
Facility. In order to accomplish such use and withdrawal of such amounts not derived from payments
under any such Reserve Facility, the Trustee will, as and to the extent necessary, liquidate any
investments purchased with such amounts.
In the event that, on the second Business Day prior to a date on which the Trustee is to transfer
money from the Payment Fund to the Interest Account or to the Principal Account each pursuant to
Indenture, amounts in the Payment Fund are insufficient for such purpose, the Trustee will withdraw from
the Reserve Fund, to the extent of any funds therein, the amount of such insufficiency, and will transfer
any amounts so withdrawn to the Payment Fund. If the amount on deposit in the Reserve Fund is not
sufficient to make such transfer, the Trustee will make a claim under any available Reserve Facility, in
accordance with the provisions thereof, in order to obtain an amount sufficient to allow the Trustee to
make such transfer as and when required.
In the event of any transfer from the Reserve Fund or the making of any claim tinder a Reserve
Facility,the Trustee will, within two Business Days thereafter. provide written notice to the Authority and
the City of the amount and the date of such transfer or claim; provided, however, that such notice need
not be provided if such transfer is made pursuant to the following two sentences. If, as a result of the
payment of principal of or interest on the Bonds, the Reserve Requirement is reduced, amounts on deposit
in the Reserve Fund in excess of such reduced Reserve Requirement will be transferred to the Payment
Fund. On any date on which Bonds are defeased in accordance with the Indenture, the Trustee will, if so
directed in a Written Request of the City, transfer any moneys in the Reserve Fund in excess of the
Reserve Requirement resulting from such defeasance to the entity or fund so specified in such Written _
Request of the City, to be applied to such defeasance.
If the sum of the amount on deposit in the Reserve Fund, plus the amount available under all
available Reserve Facilities, is less than the Reserve Fund Requirement,the first of Base Rental Payments
thereafter received from the City under the Lease Agreement and not needed to pay the principal of and
14
Item 13. - 86 I-lB -596-
interest on the Bonds on the next Interest Payment Date or Principal Payment Date will be used, fast, to
reinstate the amounts available under any Reserve Facilities that have been drawn upon and, second, to
increase the amount on deposit in the Reserve Fund, so that the amount available under all available
Reserve Facilities, when added to the amount on deposit in the Reserve Fund, will equal the, Reserve
Requirement.
Abatement
The Lease Agreement provides for the abatement of Rental Payments during any period in which,
by reason of material damage to, or destruction or condemnation of, the Property, or any defect in title to
the Property, there is substantial interference with the City's right to use and occupy any portion of the
Property, and the City waives the right to terminate the Lease Agreement by virtue of any such
interference, and the Lease Agreement will continue in frill force and effect. The amount of such
abatement will be agreed upon by the City and the Authority. Such abatement will continue for the period
commencing with the date of interference resulting from such damage, destruction, condemnation or title
defect and, with respect to damage to or destruction of the Property. ending with the substantial
completion of the work of repair or replacement of the Property, or the portion thereof so damaged or
destroyed, and the term of the Lease Agreement will be extended as provided therein.
Notwithstanding the foregoing, to the extent that moneys are available for the payment of Rental
Payments in any of the funds and accounts established under the Indenture, Rental Payments will not be
abated as provided above but, rather, will be payable by the City as a special obligation payable solely
from said finds and accounts. See"—Insurance—Rental Interruption insurance."
If all of the Property is taken permanently under the power of eminent domain or sold to a
government threatening to exercise the power of eminent domain, the Lease Agreement will terminate
with respect to the Property as of the day possession is so taken. If less than all of the Property is taken
permanently, or if all of the Property or any part thereof is taken temporarily Linder the power of eminent
domain, (a) the Lease Agreement will continue in full force and effect, and (b) there will be a partial
abatement of Base Rental Payments in an amount to be agreed upon by the City and the Authority such
that the resulting Base Rental Payments for the Property represent fair consideration for the use and
occupancy of the remaining usable portion of the Property.
Insurance
Fire and Extended Coverage Insurance. The City is required under the Lease Agreement to
maintain reasonable and customary liability insurance, which obligations may be satisfied by self-
insurance, provided that such self-insurance complies with the provisions of the Lease Agreement as
summarized below. The City will maintain or cause to be maintained casualty insurance insuring the
Property against fire, lightning and all other risks covered by an extended coverage endorsement
(excluding earthquake) to the full insurable value of the Property, subject to a $100,000 loss deductible
provision. Full insurable value will not be less than the aggregate principal amount of the Outstanding
Bonds. In addition, the City will maintain rental interruption insurance to cover the Authority's loss, total
or partial, of Base Rental Payments resulting fi-om the loss, total or partial, of the use of any part of the
Property as a result of any of the hazards required to be covered pursuant to the prior sentence in au
amount not less than an amount equal to two times Maximum Annual Debt Service, which insurance may
not be maintained in whole or in part in the form of self-insurance.
Insurance provided through a California joint powers authority of which the City is a member or
with which the City contracts for insurance will be deemed to be self-insurance for purposes of the Lease
Agreement. Any self-insurance maintained by the City pursuant to the Lease Agreement will comply with
15
HB -597- Item 13. - 87
the following terms: (a) the self-insurance program will be approved in writing by an Independent
Insurance Consultant; (b)the self-insurance program will include an actuarially sound claims resei-ve fund
out of which each self-insured claim will be paid, the adequacy of each such fund will be evaluated on an
annual basis by the Independent Insurance Consultant and any deficiencies in any self-insured claims
reserve find will be remedied in accordance with the recommendation of such Independent Insurance
Consultant; (c)the self-insured claims reserve fund will be held in a separate trust fund by an independent
trustee, which may be the Trustee serving as such under the Indenture; and (d) in the event the self-
insurance program will be discontinued, the actuarial soundness of its claims reserve fund, as determined
by an Independent Insurance Consultant. will be maintained.
The City is required to obtain upon the execution and delivery of the Lease Agreement, title
insurance on the Property-, in an amount not less than the aggregate principal amount of Bonds issued by a
company of recognized standing duly authorized to issue the same, subject only to Permitted
Encumbrances. Proceeds of such insurance are required to be delivered to the Trustee as a prepayment of
rent and are required to be applied by the Trustee to the redemption of Bonds.
16
Item 13. - 88 HB -508-
Debt Service Schedule
The following table sets forth the debt service due on the Series 201 ]A Bonds and the Series
2014A Bonds.
Debt Service Schedule
Year Series Series 2014A Bonds
Ending 2011A Bonds
September I Debt Service Principal Interest Total Annual Total
2012 S3,404,356.72
2013 4,306,093.76
2014 4,302,093.76
2015 4,300,593.76
2016 4,296,593.76
2017 2,776,543.76
2018 2,769,093.76
2019 2,770,493.76
2020 1,683,243.76
2021 1,686,443.76
2022 1,686,693.76
2023 1,687,193.76
2024 1,687,200.00
2025 1,682,793.76
2026 1,682,193.76
2027 1,684,593.76
2028 1,684,793.76
2029 1,681,012.50
2030 1,683,1 12.50
2031 102,450.00
20 --
20 --
20 --
20 --
20 --
Pursuant to the Lease Agreement, the City is required to make Base Rental Payments which have
been calculated to be sufficient to make the interest and principal payments on the Series 201]A Bonds
and the Series 2014A Bonds when due. The City's Base Rental Payments are due on the fifth Business _
Day next preceding each Interest Payment Date.
Additional Bonds
Pursuant to the Indenture, the Authority may at any time issue one or more series of Additional
Bonds (in addition to the Series 201]A Bonds and the Series 2014A Bonds) payable from Lease
Revenues as provided in the Indenture on a parity with all other Bonds theretofore issued under the
Indenture subject to certain conditions precedent including the following: (a) the issuance of such
Additional Bonds shal I have been authorized under and pursuant to the Act and under and pursuant to the
Indenture and will have been provided for by a Supplemental Indenture which will specify the following:
(i) the purposes for which such Additional Bonds are to be issued; provided, that the proceeds of the sale
of such Additional Bonds will be applied only for one or more of the following purposes: (A) providing
funds to pay costs of City facilities (including capitalized interest), (B) providing funds to refund any
Bonds issued under the Indenture or other obligations of the City, (C) providing funds to pay Costs of
17
11B -599- Item 13. - 89
Issuance incurred in connection with the issuance of such Additional Bonds, and (D) providing funds to
make any deposit to the Reserve Fund required pursuant to paragraph (b)below; (ii) the principal amount
and designation of such Series of Additional Bonds and the denomination or denominations of the
Additional Bonds. which will be Authorized Denominations; and(iii) that such Additional Bonds will be
payable as to interest on the Interest Payment Dates. except that the first installment of interest may be
payable on either March 1 or September l; (b) upon the issuance of such Additional Bonds, the amount
on deposit in the Reserve Fund will be at least equal to the Reserve Requirement; and (c) upon the
issuance of such Additional Bonds, the sum of Base Rental Payments, including any increase in the Base
Rental Payments as a result of the issuance of such Additional Bonds. plus Additional Rental Payments,
in any Rental Period will not be in excess of the annual fair rental value of the Property after taking into
account the use of the proceeds of such Additional Bonds (evidence of the satisfaction of such condition
will be made by a Written Certificate of the City). See APPENDIX D — "SUMMARY OF CERTAIN
PROVISIONS OF THE PRINCIPAL LEGAL DOCUMENTS."
Substitution and Release of Property
The Lease Agreement provides that. upon compliance with certain conditions specified therein,
the City may release from the Lease Agreement any portion of the Property or substitute alternate real
property for all or any portion of the Property, including the following conditions: (a) an independent
certified real estate appraiser selected by the City shall have found(and shall have delivered a certificate
to the Trustee setting forth its findings) that (1)the sum of Base Rental Payments plus Additional Rental
Payments due under the Lease Agreement in any Rental Period is not in excess of the annual fair rental
value of the Property, as constituted after such substitution or release, and (ii)the Property, as constituted
after such substitution or release,has a useful life equal to or greater than the maximum remaining term of
this Lease Agreement(including extensions); (b)the City shall have obtained or caused to be obtained an
ALTA title insurance policy or policies with respect to any substituted property in the amount of the fair
market value of such substituted property (which fair market value shall have been determined by an
independent certified real estate appraiser), of the type and with the endorsements described in the Lease
Agreement; (c) the City shall have filed or caused to be fled with the Trustee an Opinion of Counsel to
the effect that such substitution or release will not, in and of itself, cause the interest on Tax-Exempt
Bonds to be included in gross income for federal income tax purposes; and (d) the City shall have
certified to the Trustee that the substituted real property is essential for performing the City's
governmental functions. See APPENDIX D — "SUMMARY OF CERTAIN PROVISIONS OF THE
PRINCIPAL LEGAL DOCUMENTS."
THE AUTHORITY
The Authority is a public agency duly organized and existing pursuant to a Joint Exercise of
Powers Agreement, dated as of March 8, 1988, as amended by the First Amendment to Joint Exercise of
Powers Agreement, dated as of May 16, 1988 (collectively, the "First Amended Joint Powers
Agreement"). each by and between the City and the Fortner RDA, as further amended by the Second
Amendment to Joint Exercise of Powers Agreement, dated as of July 17, 2014 (the "Second Amended
Joint Powers Agreement" and, collectively, the"JPA Agreement"), by and among the City, the Successor
Agency to the Redevelopment Agency of the city of Huntington Beach (the "Agency") and the
Huntington Beach Housing Authority (the ``Housing Authority"). The First Amended Joint Powers
Agreement created and established the Authority for the purposes set forth in the First Amended Joint
Powers Agreement and to exercise the powers described in the First Amended Joint Powers Agreement.
The parties executed and delivered the Second Amended Joint Powers Agreement in order to substitute
the Housing Authority for the Agency as a member of the Authority and to make certain other
amendments to the First Amended .Joint Powers Agreement.
18
Item 13. - 90 FIB -600-
The Authority is governed by a board of directors comprised of the five member City Council of
the City. The Authority is statutorily authorized by Article 4 of Chapter 5 of Division 7 of Title 1 of the
Government Code of the State of California and is empowered under the JPA Agreement to issue its
bonds for, among other things, the purposes of the plan of financing described herein. To exercise its
powers, the Authority is authorized, in its own name, to do all necessary acts, including but not limited to
making and entering into contracts; employing agents and employees; and to sue or be sued in its oNvn
name. The Authority has no employees and all staff work is performed by City staff.
THE CITY
Founded in the late 1880's, Huntington Beach was incorporated as a general law city in 1909 and
became a charter city in 1937. The City has a City Council/City Manager form of government. The City
Council has seven members, each of whom is elected to a four-year term. City Council Members are
limited to two consecutive tenus. There are three elected department heads, the City Attorney, City Clerk
and City Treasurer. The position of Mayor is filled on a rotating basis.
The City encompasses 31.6 square miles (26.4 square miles is land, 5.2 square miles is water) in
the coastal area of Orange County, California, adjacent to the Cities of Costa Mesa, Fountain Valley,
Newport Beach, Seal Beach and Westminster. The City is approximately 40 miles southeast of Los
Angeles and 90 miles northwest of San Diego. As of January 1, 2014, the State of California Finance
Department estimated its population at 195,999.
On August 22, 2011, the City completed the process of annexation of the adjacent community of
Sunset Beach, a 134-acre, formerly unincorporated area of about 1,000 residents. The area was placed
under the City's sphere of influence by the Local Agency Formation Commission (LAFCO). which
oversees the process of municipal boundary changes, in an effort to reduce the number of Orange County
"islands," the generally small, unincorporated areas that are hard to serve.
See APPENDIX A — "GENERAL. ECONOMIC AND DEMOGRAPHIC INFORMATION
RELATING TO THE CITY" for a general description of the City as well as certain demographic and
statistical information.
CITY FINANCIAL INFORMATION
Financial Statements
The City's accounting policies conform to generally accepted accounting principles. The audited
financial statements also conform to the principles and standards for public financial reporting established
by the Governmental Accounting Standards Board.
Basis of Aceounting and Financial Statement Presentation. The government-wide financial
statements are reported using the accrual basis of accounting. 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 fund financial statements are reported using 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 collectible within the current period or soon enough thereafter to
pay liabilities of the current period. Expenditures generally are recorded when a 'liability is incurred, as
under accrual accounting. However, debt service expenditures are recorded only when payment is due.
19
11413 -601- Item 13. - 91
Audited Financial Statements. The City retained the firm of Vavrinek, Trine, Day and Co., LLP,
Certified Public Accountants, Newport Beach, California, to examine the general purpose financial
statements of the City as of and for the year ended September 30, 2013. The City is the recipient of the
Government Finance Officers Association Certificate of Achievement for Excellence in Financial
Reporting for the fiscal year ended September 30, 2012 and has been for 27 consecutive years. The
audited financial statements for fiscal year ended September 30, 2013, are attached hereto as APPENDIX
B — "COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR
ENDED SEPTEMBER 30, 2013." The City has not requested, and the auditor has not provided, any
review or update of such financial statements in connection with their inclusion in this Official Statement.
Budgetary Process
The City Council adopts an annual budget with appropriations for all City funds prior to the
beginning of the fiscal year, which begins on October I of each year. The City Council has the legal
authority to amend the budget at any time during the fiscal year. The City maintains budgetary controls to
ensure compliance with legal provisions embodied in the appropriated budget approved by the City
Council. The level of budgetary control (that is, the level at which expenditures cannot legally exceed the
appropriated amount) for the City's operating budget is the department level within each fund, and for the
capital improvement budget it is each individual capital improvement project within each fund. A
Department Head, with the Director of Finance"s approval, may transfer appropriations (with no dollar
limitation) within like categories (operating and capital expenditures) of the same department. Transfers
of appropriations for salaries and benefits require additional approval of the City Manager or his designee.
All other appropriation changes require the approval of the City Council.
All appropriations lapse at the end of the fiscal year unless specific carryovers are approved by
the City Council.
The forecasted General Fund expenditures in fiscal year 2013-14 total $200,063,000, which
represents a 3.1% increase when compared to fiscal year 2012-13 expenditures.
On July 21, 2014, the City released its proposed fiscal year 2014-15 City Budget. In the proposed
fiscal year 2014-15 City Budget, the General Fund expenditures are projected at $208,865,000. This
represents a 4.4% increase from 2013-14 projected expenditures. General Fund revenues are estimated at
$207,032,000 in the proposed fiscal year 2014-15 City Budget, which represents a 2.8% increase when
compared to fiscal year 2013-14 forecasted revenues. The proposed fiscal year 2014-15 expenditures will
also be supported by $2,000,000 from the Senior Center Fund Balance Reserve and $333,500 from the
Capital Improvement Reserve for critical_. one-time projects resulting in a balanced budget for fiscal year
2014-15.
The City Council conducted a public hearing approving the adoption of the fiscal year 2014-15
budget on , 2014.
20
Item 13. - 92 IJB -602-
The following table shows the City's budget and actual results for General Fund revenues and
expenditures for fiscal year 2012-13, budget and projections for fiscal year 2013-14 and the budget for
fiscal year 2014-15.
City of Huntington Beach
General Fund Budget Summary
Fiscal Years 2012-13 through 2014-15
(in thousands)
FY 12-13 FY 12-13 FY 13-14 FY 13-14 FY 14-15
Budget Actual Budget Projected(`) Budget
REVENUES
Property"faxes $ 71.812 $ 73.423 $ 78,329 $ 78.724 $ 79,982
Sales Taxes 27,209 27,199 27.668 27.668 28.775
Utility Taxes 20,773 20.764 20.746 20,746 21,480
Other Taxes 14,568 14,568 15.384 15.384 15.926
License and Permits 8,982 8,983 7.579 7.739 8.998
Fines, Forfeitures and Penalties 4.058 4,058 3,849 4,284 4,540
Use of Moncy and Property 15,280 14.981 15,464 15.952 16A97
Intergovernmental 4.795 5.453 2,924 3,075 3,073
Charges for Current Services. 26,695 26.374 24,698 25,294 25,550
Other 21530 2.074 1.587 1.623 1.298
Total Revenues $196,702 $197,877 $198,228 $200,489 $206,119
EXPENDITURES
Current
Citv Council 292 260 249 247 259
City Manager(l) 1,429 1,341 2,155 1,872 2,114
City Treasurer 133 132 138 138 150
City Attorney 2,219 2,221 2.287 2.287 2,379
Citv Clerk 944 797 764 735 927
Finance 5.171 4,825 5,297 4.993 5.436
Human Resources 4.798 5.442 5,282 5.281 5,326
Planning&Building 6,948 6,155 &207 7.041 6,811
Fire 34.925 35.497 41.358 41.851 43.764
Infonnation Services 6.173 6,096 6,481 6,344 6,621
Police 60,713 59,274 64,489 65,173 67.270
Economic Development 1.922 1,556 - - -
Community Services 14,186 13,050 9,039 8,804 9,176
Library Services 4,310 3,547 3,860 3,685 4,048
Public Works 20.867 20.209 21.765 21.710 21,873
Non-Departmental 19,900 19.671 24,634 22,207 21,519
Debt Service:
Principal 5.157 4.751 56 56 574
Interest -- 191 1 1 -
Total Expenditures 190,087 185,015 196,062 192,425 198,247
Excess of Revenues
Over Expenditures 6,615 12.862 2,166 8.064 7,872
OTHER FINANCING SOURCES(USES)
Transfers In 1,103 913 913 913 913
Transfers Out (9,092) (9,034) (6,208) (7,638) (10.618)
Total Other Financing Sources(Uses) (7,989) (8,121) (5,295) (6,725) (9,705)
EXTRAORDINARY ITEM:
Dissolution of Redevelopment Agency (4.669) (4,669) - -Net Changc in Fund Balances (61043) 72 (3,129) 1,339 (1,833)
Fund Balance—Beginning of Year 54,435 54.435 54,507 54,507 55,846
Fund Balance—End of Year $ 48,392 $ 54,507 $ 51,378 $ 55,846 $ 54,013
Merged with the City Managers Department beginning fiscal year 2013-14.
`') Projected amounts are as of the bight-Month Budget Status Report.
Source:City of Huntington Beach Finance Department.
21
1113 -603- Item 13. - 93
City Financial Management Policies
The City Council has adopted a comprehensive set of financial management policies to provide
for: (i) establishing targeted General Fund reserves; (ii) the prudent investment of City funds; and (iii)
establishing parameters for issuing and managing debt supported by the General Fund, Enterprise Funds
and any other related funding entity of the City.
Economic Uncertainties Reserve Policy. In September 2010, the City Council revised its
Economic Uncertainties Reserve Policy. The previous policy required a minimum Economic
Uncertainties Reserve of seven percent (7%) of the annual General Fund budget at adoption, the revised
policy establishes the goal of achieving an Economic Uncertainties Reserve Commitment equal to the
value of the two months of General Fund expenditures adopted budget amount. As of September 30,
2013. the City has an Economic Uncertainties Reserve balance of $24,011,000. Since this date, there
have been no changes to the reserve. The reserve balance represents 17.6% of the fiscal year 2013-14
General Fluid budget.
Appropriations and use of these funds will be reserved for emergency situations including, but
not limited to the following:
• An unplanned, major event such as catastrophic disaster requiring expenditures over 5% of
the General Fund adopted budget
• Budgeted revenue taken by another government entity
• Drop in projected/actual revenue of more than 5% of the General Fund adopted revenue
budget
Once established, appropriations from these reserves can only be made by formal City Council action.
Should the Economic Uncertainties Reserve commitment be used, and its level falls below the minimum
amount of two months of General Fund expenditures adopted budget, the goal is to replenish the fund
within three fiscal years.
The City has not appropriated funds fi-om the Economic Uncertainties Reserve.
Investment Policy. The investment of funds of the City (except pension and retirement funds) is
made in accordance with the City's fiscal year 2013-14 Investment Policv, as approved on February 3,
2014 (the `'Investment Policy"), and Section 53601 et seq. of the California Government Code. The
Investment Policy is subject to revision at any time and is reviewed at least annually to ensure compliance
with the stated objectives of safety, liquidity, yield, and current laws and financial trends. All amounts
held under the Indenture are invested at the direction of the City in Permitted Investments, as defined in
the Indenture, and are subject to certain limitations contained therein. See APPENDIX C — "CITY _
INVESTMENT POLICY" and APPENDIX D — "SUMMARY OF CERTAIN PROVISIONS OF THE
PRINCIPAL LEGAL DOCUMENTS—INDENTURE—Investments."
Dissolution of Redevelopment Agency and Potential Impact on the City
The State adopted legislation to dissolve all redevelopment agencies in the State (the
Dissolution Act'). The dissolution was effective on February 1, 2012. The City, is responsible for paying
annual debt service on the 2010 Series A Lease Revenue Refunding Bonds relating to the Emerald Cove
affordable senior housing project. However, prior to dissolution, the former Huntington Beach
Redevelopment Agency had agreed to reimburse the City for annual debt service on a portion of the 2010
22
Item 13. - 94 IJB -604-
Series A Lease Revenue Refunding Bonds. This amount is between $404,000 to $406,000 per year, for a
period of 9 years, and was to be paid from amounts deposited into the former Agency's Low and
Moderate Income Housing Fund ("LMIHF").
The former Agency's LMIHF was the subject of a Due Diligence Review ("DDR") conducted
pursuant to the RDA Dissolution Act. The purpose of the LMIHF DDR was to determine the amount of
LMIHF on hand on February 1, 2012 that was deemed unencumbered and thus available for distribution
to other taxing agencies. On January 17, 2013, the California Department of Finance ("DOF") notified the
Successor Agency to the Huntington Beach Redevelopment Agency ("Successor Agency") that DOF had
determined that LMIHF in the amount of$4,860,535 was available for distribution to the taxing agencies
and directed the Successor Agency to remit that amount to the Orange County Auditor-Controller. The
Successor Agency remitted $1,210,901 on January 22. 2013 but retained the balance in the amount of.
$3,649,634 on the basis that those funds were pledged to repay the 2010 Series A Lease Revenue _
Refunding Bonds relating to the Emerald Cove affordable senior housing project described above. The
Successor Agency's intention was to apply those retained funds to the annual payments that the former
Redevelopment Agency had previously paid.
The RDA Dissolution Act originally empowered DOF to request that the State Board of
Equalization ("SBOE") withhold sales and use tax distributions to the City of Huntington Beach and
instead distribute those funds to the taxing agencies until the $3.649,634 retained by the Successor
Agency has been recovered. The Dissolution Act similarly empowers the Orange County Auditor-
Controller to withhold property tax distributions from the City and distribute those finds to the taxing
agencies.
The Successor Agency, the Huntington Beach Housing Authority and the City filed a petition for
writ of mandate in the Superior Court of Sacramento County on March 15, 2013 challenging DOF's
determination that the LMIHF funds described above must be distributed to the taxing agencies and
seeking a declaration that the sales and use tax and property tax withholdings authorized by the RDA
Dissolution Act are in violation of the California Constitution. On January 29, 2014, the Superior Court
issued a ruling on the writ of mandate against the position of the Successor Agency (except with respect
to the sales tax withholding issue). The Successor Agency has since remitted the funds to the Orange
County Auditor-Controller. However,the City has authorized an appeal of the Superior Court's ruling.
23
LIB -605- Item 13. - 95
Current Investments
The assets of the City's investment portfolio, as of June 30, 2014. are shown in the following
table:
Investment Portfolio of the City
(As of June 30,2014)
%of Days to
Type Par Value Market Value Book Value Portfolio Maturity
Federal Agency Issues—Coupon $136,875.862.07 $136,502,458.62 $136.853.694.03 69.69% 1,242
Local Agency Inv.Fund(LAW) 25,256,829.55 25.256.829,55 25,256,829.55 12.86 1
Corporate Bonds 33,960,000.00 34.1306,037.20 34,276,132.67 17.45 646
Total cash and investments $196,092,691.62 $196.065.325.37 $196,386,656.25 100.00% 979
Source:City of Iluntington Beach.
Reliance on State Budget
Approximately 52.8% (consisting of the sales tax, property tax and the motor vehicle license fee)
of the City's projected General Fund revenues for fiscal year 2013-14 consisted of payments collected by
the State and passed-through to local governments or collected by the County and allocated to local
governments by State law. Approximately 52.5% of the City's General Fund revenues included in the
budget for fiscal year 2014-15 are expected to come from such sources. There can be no assurance that
current or future State budget difficulties will not adversely affect the City's revenues or its ability to
make payments under the Lease Agreement. See"RISK FACTORS—State Budgets."
Principal Sources of General Fund Revenues
The following table shows the City's General Fund tax revenues by source for the most recent
five fiscal years:
City of Huntington Beach
Tax Revenues by Source
(in thousands)
Actual Actual Actual Projected Budget
Source 2010-11 2011-12h1 2012-13 2013-14 2014-15
Property Taxes $ 67,842 $ 67,880 $ 73,423 $ 78,724 $ 79,982
Sales and Use Taxes 22,617 26,517 27,199 27,668 28,775
Utility Taxes 19,135 20,152 20,764 20,746 21,480
Other Taxes t' 13,368 12,930 14,568 15,384 15,926
Total Tax Revenues $122,962 $12T839 $135,954 $142,522 $146,163
° Includes Transient Occupancy Taxes,Franchise Taxes and other taxes.
(2) Fiscal year 2011-12 budget does not include Sunset Beach annexation.
Source:City of Huntington Beach Finance Department.
Property taxes were the single largest revenue source to the General Fund in fiscal year 2013-14,
representing approximately 39.1% of projected revenues, followed by sales taxes representing
approximately 13.7%. These sources represented an aggregate of approximately 52.8% of the projected
General Fund revenues for fiscal year 2013-14 and represent an aggregate of approximately 52.5% of
General Fund revenues in the City's fiscal year 2014-15 budget. For a discussion of potential State
24
Item 13. - 96 HB -606-
Budget impacts on General Fund revenues, see "—State Budgets." For a discussion of sales tax revenues
and property taxes, see"SALES TAXES"and "PROPERTY TAXES" below.
PROPERTY TAXES
Ad Valorem Property Taxes
Tax Levies, Collections and Delinquencies. Property taxes are levied by the County for each
fiscal year on taxable real and personal property which is situated in the County. Property taxes collected
in advance are recorded as deferred revenue and recognized as revenue in the year they become available.
The County levies, bills and collects property taxes for the City. Property taxes paid to the City by the
County within 60 days after the end of the fiscal year are ``available" and are, therefore, recognized as
revenue.
For assessment and collection purposes, property is classified either as "secured" or"unsecured"
and is listed accordingly on separate parts of the assessment roll. The "secured roll" is that part of the
assessment roll containing State/assessed public utilities property and property the taxes on which are a
lien on real property sufficient, in the opinion of the County Assessor, to secure payment of the taxes.
Other property is assessed on the"unsecured roll."'
Secured and unsecured property taxes are levied based on the assessed value as of January 1, the
lien date, of the preceding fiscal year. Secured property tax is levied on October 1 and due in two
installments, on November I and March 1. Collection dates are December 10 and April 10 which are also
the delinquent dates. At that time, delinquent accounts are assessed a. penalty of 10%. Accounts that
remain unpaid on June 30 are charged all additional 1.5 % per month. Such property may thereafter be
redeemed by payment of a penalty of 1.5% per month to the time of redemption, plus costs and a
redemption fee. If taxes are unpaid for a period of five years or more, the property is deeded to the State
and then is subject to sale by the County Treasurer. Although the County maintains a Teeter Plan, which
is an alternative method for the distribution of secured property taxes to local agencies, the City has
elected not to be included in the County's Teeter Plan.
Unsecured property tax is levied on July 1 and due on July 31, and has a collection date of August
31 which is also the delinquent date. A 10% penalty attaches to delinquent unsecured taxes. If unsecured
taxes are unpaid at 5:00 p.m. on October 31, an additional penalty of 1.5% attaches to them on the first
day of each month until paid. The taxing authority has four ways of collecting delinquent unsecured
personal property taxes: (I)bringing a civil action against the taxpayer; (2)filing a certificate in the office
of the County Clerk specifying certain facts in order to obtain a lien on certain property of the taxpayer;
(3) filing a certificate of delinquency for record in the County Clerk and County Recorder's office in
order to obtain a lien on certain property of the taxpayer; and (4) seizing and selling personal property,
improvements, or possessory interests belonging or assessed to the assessee.
Assessed Valuation. All property is assessed using full cash value as defined by Article XIIIA of
the State Constitution. State law provides exemptions from ad valorefn property taxation for certain
classes of property such as churches, colleges, nonprofit hospitals and charitable institutions.
Future assessed valuation growth allowed under Article XI IA (new construction, certain changes
of ownership, 2% inflation)will be allocated on the basis of"sites" among the jurisdictions that serve the
tax rate area within which the growth occurs. Local agencies and schools will share the growth of"base"
revenues from the tax rate area. Each year's growth allocation becomes part of each agency's allocation
in the following year. The availability of revenue from growth in tax bases to such entities may be
25
uB -6071- Item 13. - 97
affected by the establishment of redevelopment agencies which, under certain circumstances, may be
entitled to revenues resulting from the increase in certain property values.
The passage of Assembly Bill 454 in 1987 changed the manner in which unitary and operating
non-unitary property is assessed by the State Board of Equalization. The legislation deleted the formula
for the allocation of assessed value attributed to such property and imposed a State-mandated local
program requiring the assignment of the assessment value of all unitary and operating non-unitary
property in each county of each State assessee other than a regulated railway company. The legislation
established formulas for the computation of applicable county-wide rates for such property and for the
allocation of property tax revenues attributable to such property among taxing jurisdictions in the county
be¢inning in fiscal year 1988-89. This legislation requires each county to issue each State assessee, other
than a regulated railway company, a single tax bill for all unitary and operating non-unitary property.
Assessnienl appeals. Property tax values determined by the County Assessor may be subject to
appeal by property owners. Assessment appeals are annually filed with the Assessment Appeals Board for
a hearing and resolution. The resolution of an appeal may result in a reduction to the County Assessor's
original taxable value and a tax refund to the applicant/property owner.
Each assessment appeal could result in a reduction of the taxable value of the real property,
personal property or possessory interest of the property which is the subject of the appeal. Alternatively,
an appeal may be withdrawn by the applicant or the Assessment Appeals Board may deny or modify the
appeal at a hearing or by stipulation.
Eff,ct gf'Delinquelreies a71c]Foreclosw-es on Properry Tax Collections. As described above, once
an installment of property tax becomes delinquent, penalties are assessed commencing on the applicable
delinquency date until the delinquent installments) and all assessed penalties are paid. In the event of
foreclosure and sale of property, by a. mortgage holder, all past due property taxes, penalties and interest
are required to be paid before the property can be transferred to a new owner.
The level of default and foreclosure activity has affected certain homeowners nationwide. Within
the State, the greatest impacts to date are in regions of the Central Valley, the Inland Empire, and other
areas in the State where the large numbers of new mortgages were originated in more affordable areas.
The increased level of default and foreclosure activity has resulted in downward pressure on home prices
in the affected areas.
Set forth in the tables below are assessed valuation for secured and unsecured property within the
City of Huntington Beach and tax levies and collections (as of the close of each fiscal year) for the five
most recent fiscal years and the current fiscal year.
26
Item 13. - 98 1111 -6 8-
Gross Assessed Value of All Taxable Property
(in thousands)
Percent
Fiscal Year Secured Unsecured Total Increase
2009-10 $25,325,120 $1,086,770 $26,411,990 1.2%
2010-11 25,584,186 1,090,869 26.675,055 1.0
2011-12 25,553,372 1,170,004 26.723,376 0.2
2012-13 26,988,540 1,056,938 28,045,479 5.0
2013-14 28,059,691 1.106,038 29,165,729 4.0
2014-15 29,979,376 989,809 30,787,185 5.6
Excludes redevelopment project area incremental assessed valuation.
Source:City of Huntington Beach Finance Department County of Orange Auditor Controller.
General Fund Property Tax Levies and Collections
Secured Taxes
(in thousands)
Total Delinquency Delinquency
Fiscal Year Total Levy Collections f I Amount Percent
2006-07 $39,174 $37,816 $1,278 3.3%
2007-08 42,269 41,114 1.734 4.1
2009-09 42,569 42,087 11,582 3.7
2009-10 43,892 38,872 1,038 2.4
2010-11 44,014 43,572 746 1.7
2011-12 44,304 43,562 660 1.5
2012-13 47,162 46,577 565 1.2
2013-14 49,808 481,452 545 1.1
o� Includes delinquent tax collections. Although the County maintains a Teeter Plan, NNhich is an alternative method for the
distribution of secured property taxes to local agencies.the City has elected not to be included in the Countyi s Teeter Plan.
Source:City of Huntington Beach Finance Department.
In 1978, the voters of the State passed Proposition 8, a constitutional amendment to Article XIIIA
that allows a temporary reduction in assessed value when real property suffers a decline in value. A
decline in value occurs when the current market value of real property is less than the current assessed
(taxable)factored base year value as of the lien date, January 1.
See also "CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND
APPROPRIATIONS—Article XIIIA of the California Constitution."
Pr-ineiPul TuxPavers. The following table sets forth the principal secured property taxpayers in
the City, as of fiscal year 2013-14,the most current information available.
27
xB -609- Item 13. - 99
Principal Secured Property Taxpayers
Fiscal Year 2013-14
2013-14 % of
Property Owner Primary Land Use Assessed Valuation Total
1. Oxy USA,Inc. Cross-Reference $ 567.890,404 1.89%
2. Bella Terra Associates,LLC Commercial 231,946,372 0.77
3. McDonnel Douglas Corporation* Industrial 213,258,897 0.71
4. Mayer Financial, LLC Cross-Reference 191,541,866 0.64
5. DCOR,LLC Cross-Reference 145,382,373 0.48
6. United Dominion Realty, LP Residential 137,025,369 0.46
7. CIM Huntington, LLC Commercial 100,394,693 0.33
8. Pacific Sands,LLC Residential 87,629.290 0.29
9. DCO Pacific City,LLC* Commercial 67,651,500 0.23
10. Harbour Lights, LP* Residential 67.344,069 0.22
Total Top Ten $ I,810,064,833 6.03%
All other Properties 28,207,851,866 93.97%
City Total $30,017,916,699 100.00%
Source:NdL Coren&Cone.
*Pending appeals on parcels as of March 18,2014
Motor Vehicle In-Lieu Tax
Vehicle license fees are assessed in the amount of 2% of a vehicle's depreciation market value for
the privilege of operating a vehicle on California's public highways. A program to offset (or reduce) a
portion of the vehicle license fees ("VLF'') paid by vehicle owners was established by Chapter 322,
Statutes of 1998. Beginning January 1, 1999, a permanent offset of 25% of the VLF paid by vehicle
owners became operative. Various pieces of legislation increased the amount of the offset in subsequent
years to the existing statutory level of 67.5% of 2% (resulting in the current effective rate of 0.65%). This
level of offset was estimated to provide tax relief of$3.95 billion in the fiscal year 2003-04. Beginning in
fiscal year 2004-05. the State-local agencies agreement permanently reduced the VLF rate to 0.65% and
eliminated the VLF offset program.
In connection with the offset of the VLF,the Legislature authorized appropriations from the State
general fund to"baekfill"the offset so that the local governments, which receive all of the vehicle license
fee revenues, would not experience any loss of revenues. The legislation that established the VLF offset
program also provided that if there were insufficient general fund moneys to fully baekfill the VLF offset,
the percentage offset would be reduced proportionately (i.e., the license fee payable by drivers would be
increased) to assure that local governments would not be disadvantaged. In June 2003, the State Director
of Finance ordered the suspension of VLF offsets due to a determination that insufficient general fund
moneys would be available for this purpose, and,beginning in October 2003, VLF paid by vehicle owners
were restored to the 1998 level. However, the offset suspension was rescinded by the Governor on
November 17, 2003, and offset payments to local governments resumed. Local governments received
baekfill payments totaling $3.80 billion in fiscal year 2002-03. Baekfilll payments totaling $2.65 billion
were expected to be paid to local governments in fiscal year 2003-04. The State-local agreement also
provided for the repayment in August 2006 of approximately $12 billion that was not received by local
governments during the time period between tine suspension of the offsets and the implementation of
higher fees. This repayment obligation was codified by Proposition 1A, which was approved by voters in
the November 2004 general election and was repaid early by the State in August 2005. For a description
of Proposition ]A, see "CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES,
REVENUES AND APPROPRIATIONS— Proposition IA."
28
Item 13. - 100 1B -610-
The following table sets forth the Motor Vehicle In-Lieu Tax received by the City for the last
three fiscal years, the projected amount for the current fiscal year and the budgeted amount for fiscal year
2014-15.
City,of Huntington Beach
In-Lieu Payments
Actual Actual Actual Projected Budget
2010-11 2011-12 2012-13 2013-14") 2014-15
In-Lieu ofVLF $15,010,062 $15,079,411 $15,766,091 $16,625,000 S16,862,394
Prgjected amounts are as of the Eight-Month Budget Status Report.
Source:City'Of Huntington Beach Finance Department.
SALES TAXES
A sales tax is imposed on retail sales or consumption of personal property. Sales tax revenues
represented approximately 13.7% of the City's total General Fund revenues in fiscal year 2012-13 and
represent an aggregate of approximately 13.7% and 13.9%, respectively of projected General Fund
revenues for fiscal year 2013-14 and in the fiscal year 2014-15 budget.
Triple Flip. On March 2, 2004, voters approved a bond initiative formally known as the
"California Economic Recovery Act." This act authorized the issuance of $15 billion of economic .
recovery bonds to finance ongoing State budget deficits, which are payable from a fund established by the
redirection of tax revenues known as the "Triple Flip." Currently, the State has issued approximately
$14.07 billion of economic recovery bonds. Under the "Triple Flip," one-quarter of local governments'
1% share of the sales tax imposed on taxable transactions within their jurisdiction was redirected to the
State. In an effort to eliminate the adverse impact of the sales tax revenue redirection on local
government, State legislation provided for certain property taxes to be redirected to local government.
Because these property tax monies were previously earmarked for schools, the legislation provided for
schools to receive other State general fund revenues. It is expected that the swap of sales taxes for
property taxes will terminate once the economic recovery bonds are repaid, some years in the future.
Sales Tax Rates. The City's sales tax revenue represents the City's share of the sales and use tax,
imposed on taxable transactions occurring within the City's boundaries. Sales and use taxes are imposed
under the Bradley-Burns Uniform Local Sales and Use Tax Law.
The following table shows components of the City's current 8.00% sales and use tax rate.
City of Huntington Beach
Sales Tax Rate
As of July 1,2014
Jurisdiction Rate
State tit 6.50%
City portion of State 1.00
Orange County Transportation Authority 0.50
Total 8.00%
Effective January I.2013 to December 31.2016,the State temporarily increased its sales tax by 0.25"/o.
Source:Statc of California,Board of Equalization.
29
l�B -6 11- Item 13. - 101
OTHER TAXES
Utility Taxes
The City levies utility users tax on users for the consumption of various utilities in the City
including water, telephone. natural gas, electric, and cable television services. The City levies a 5% tax
for electricity, gas, and water services. In November 2010, in furtherance of a telecommunications
modernization ordinance adopted in consideration of the application of State law to certain features of its
then existing ordinance, the City introduced a successful ballot measure and the electorate of the City
voted to reduce the utility users tax rate for telecommunications and video services from 5% to 4.9%,
effectively immediately. Revenue from this source can be volatile, as it reflects not only changes in
utility rates, but also business activities and changes in technology. Electricity and natural gas sales are
sensitive to weather (warmer winters and cooler summers reduce demand). Revenues generated from
utility users tax represented approximately 10.4% of the City's total General Fund revenues on the fiscal
year 2012-13 and represent an aggregate of approximately 10.3% and 10.4%, respectively, of the
projected General Fund revenues for fiscal year 2013-14 and in the fiscal year 2014-15 budget.
Other Taxes
In addition, the City receives the following local taxes:
Franchise Taxes. The City levies a franchise tax on its gas. electric, cable television and trash
collection franchises based on franchise agreements between the City and the franchise agency.
Transient Occupancy Taa-es. The City levies a 10% transient occupancy tax on hotel and motel
bills. Revenues generated from transient occupancy taxes represented approximately 3.8% of the City's
total General Fund revenues on the fiscal year 2012-13 and represent an aggregate of approximately 4.2%
and 4.3%, respectively, of the projected General Fund revenues for fiscal year 2013-14 and in the fiscal
year 2014-15 budget.
OTHER REVENUES
The following table illustrates other revenue sources:
City of Huntington Beach
Other Revenue Sources
(in thousands)
Actual Actual Actual Projected Budget
Source 2010-11 2011-12 2012-13 2013-14(') 2014-15
Licenses and Permits $ 6,593 S 7,731 S 8,983 S 7,739 $ 8,998
Fines and Forfeitures 4,334 4,252 41058 4,284 4,540
Use of Money and Property 14,267 15,976 14,981 15,952 16,497
Intergovernmental 5,448 5,934 5,453 3,075 3,073
Charges for Current Services 23,543 25,404 26,374 25,294 25,550
Other Revenue 2,253 1,928 2,074 1,623 1,298
Total Other Revenues $56,438 S61,225 $61,923 $57,967 $59,956
Projected amounts are as of the Eight-Month Budget Status Report.
Source:City of Huntington Beach Finance Department.
Licenses and Permits.These revenues consist primarily of building construction permit fees.
30
Item 13. - 102 HB - 12-
Fines, Forleitures and Penalties. These revenues include parking citations and other fines for
municipal code violations.
Use of Money and Property. These revenues consist primarily of investment earnings and
lease/concession income.
Intergovernmenal. These revenues consist primarily of reimbursements from Federal, State, and
County sources.
Charges for Services. The City charges fees for plan checking, building inspection and a variety
of other municipal services.
Other Revenues. These revenues consist of passport processing fees, sales of surplus city
equipment, restitution and settlement payments as well as other miscellaneous and reimbursement
revenues such as reimbursement for property damage.
31
HB _613_ Item 13. - 103
The following two tables summarize the General Fund Balance Sheet and Statement of Revenues,
Expenditures and Changes in Fund Balance of the City's General Fund for the fiscal years 2008-09
through 2012-13.
City of Huntington Beach
General Fund Balance Sheet
Fiscal Years 2008-09 through 2012-13
(in thousands)
Fiscal Year Ended September 30,
2009 2010 2011 2012 2013
Assets:
Cash and Investments $22,069 $28,155 $47,339 $52.081 $49,864
Taxes Receivable 23,839 25,758 24,771 29,549 31,449
Other Receivables,Net 4,663 4,278 5,331 5,805 6,128
Advances to Other Funds 1,004 675 341 -- --
Land Held for Resale -- -- 5,978 -- --
Prepaids 15,111 12,502 4.540 4,637 4,040
Total Assets $66,686 $71.368 $88,300 $92,072 $91,481
Liabilities and Fund Balances:
Liabilities
Accounts Payable $3,709 $4,150 $4,238 $4,206 $4,467
Accrued Payroll 3.637 4.709 5,526 4,846 61494
Deposits Payable 1,230 1,194 1,469 1,511 11.304
Deferred Revenue 12,899 141.285 15,519 19,612 21.446
Claims Payable 6,123 5.678 6,992 7,462 3,263
Total Liabilities $27,598 $30,016 $33,744 $37,637 $361.974
Fund Balances tt)
Reserved -- -- -- -- --
Unreserved:
Designated -- -- -- -- --
Undesignated -- -- -- -- --
Nonspendable(2) 4,834 4,605 10,841 4,633 4,040
Restricted t'I 1,921 1,452 1,304 1,387 1,878
Committed(4) 20,600 30,493 -- -- 24,011
Assigned t5) 11,733 4,802 42,411 48.415 24,578
Total Fund Balance 39,088 41,352 54,556 54,435 54,507
Total Liabilities and Fund Balances $ 66,686 $71.368 $88 300 $92,072 $91,481
In fiscal year 2009-10,the City implemented CASB 54, `Fund Balance Reporting and Governmental Fund Tjy)e Definitions. This
statement eliminated the previous fund balance classifications(reserved,unreserved-designated,and unreserved-undesignated),which were
replaced with new find balance categories(nonspendable,restricted,committed.assigned,and unassigned).
`2' Nonspendable:includes amounts that are not in spendable form,such as inventories and prepaids,and other items that by definition are not
in spendable form.
0 Restricted:includes amounts that can be spent only for the specific purposes stipulated by constitution,external resource providers,or
through enabling legislation.
«' Committed:includes amounts that can be used only for the specific purposes determined by a formal action of the City Council. The City
Council has authority to establish.modify_or rescind a fund balance commitment.
Assigned:includes amounts that are intended to be used by the City for specific purposes but do not meet the criteria to be classified as
restricted or committed. The City Administrator or designee has the authority to establish,modify,or rescind a fund balance assignment.
Source: City of Huntington Beach Comprehensive Annual Financial Report
32
Item 13. - 104 HB -614-
City of Huntington Beach
General Fund
Statement of Revenues,Expenditures and Changes in Fund Balance
Fiscal Years 2008-09 through 2012-13
(in thousands)
Fiscal Year Ended September 30,
2009 2040 2011 2012 2043
REVENUES:
Property Taxes $67,227 S 66,886 S 67,842 $67.880 $73,423
Sales Taxes 20.306 20.795 22,617 26,517 27,199
Utility Taxes 20.616 19,757 191.135 20,152 20,764
Other Taxes 12,085 11.629 13,368 12.930 14,568
Licenses and permits 5,846 6,109 6,593 7,731 8.983
Fines, Forfeitures and Penalties 4,144 3.965 4,334 4.252 4,058
From Use of Money and Property 13.895 13,826 14,267 15.976 14.981
From Other Agencies 4,716 4.219 5,448 51.934 5,453
Charges for Current Service 2L342 22.724 23,543 25.404 26,374
Other 1.552 2.433 2,253 1,928 1074
Total Revenues $171,729 $172,343 $179,400 $188,704 $197,877
EXPENDITURES:
Current:
City Council S 295 $ 301 $ 300 $ 310 $ 260
City Administrator 1,839 1,652 1,493 1,490 1,341
City Treasurer 1,308 1.532 1,274 141 132
City Attorney 2,736 2,657 2,142 2.294 2,221
City Clerk 1.084 868 798 689 797
Finance 4,456 4,286 3.423 4,573 4,825
Human Resources 4.729 51209 6,043 5.193 5,442
Planning&Building 7,'191 6330 5.826 6,119 6.155
Fire 33,072 32398 34.317 34,652 35.497
information Services 7.339 6,782 5,879 5,857 6,096
Police 58,988 57.521 5&948 58.933 59,274
Fconomic Development 1,426 1,520 1,723 1.551 1,556
Community Services 14.039 13.328 11736 13.392 11050
Library Services 4,168 4.066 3.480 3.492 3.547
Public Works 19.573 17,388 16,169 20,692 20.209
1y on-Departmental 16,683 14.443 14,360 15,446 19,671
Debt Service:
Principal 520 386 1,566 1.633 4,751
Interest 158 48 340 256 191
Total Expenditures $179,604 S170,715 $170,717 $176,713 $185,015
Excess of Revenues Over(Under)
(Under)Expenditures (7,875) 1,628 8,683 11,991 12,862
OTHER FINANCING SOURCES(USES)
Transfers In 9,619 &452 137199 1,063 913
Transfers Out (7,099) (7,816) (8,678) (7,197) (9M34)
Total Other Financing Sources 2.520 636 4.521 (6.134) (8,121)
EXTRAORDINARY ITEM:
Dissolution of Redevelopment Agency -- -- -- (5,978) (4,669)
Net Change in Fund Balances (5,355) 2,264 13,204 (121) 72
Fund Balance-Beginning of Year 44,443 39,088 41,352 54,556 54,435
Fund Balance-End of Year $39,088 $41,352 $54,556 $54,435 $54,507
Source:City of Huntington Beach Comprehensive Annual Financial Report.
33
I-1B -615- Item 13. - 105
OTHER FINANCIAL INFORMATION
Labor Relations
City employees are represented by eiglit labor union associations, the principal one being
Municipal Employees Association which represents approximately 38% of all City employees. Currently
99% of all permanent City employees are covered by negotiated agreements.Negotiated agreements have
the following expiration dates:
Negotiated Employee Agreements
Contract Number of
Bargaining Unit Expiration Date Employees
Management Employees Organization 1 1/01/2015 106
Municipal Employees Association 9/30/2015 377
Police Officer's Association 9/30/2015 229
Police Management Association Expired 9/30/2013 12
Firefighters' Association 9/30/2015 118
Fire Management Association Expired 9/30/2013 6
Marine Safety Officers' Association Expired 9/30/2013 13
Surf City Lifeguard Employees' Association Expired 6/30/2014 126
SOUrce:City of Huntington Beach Finance Department.
The expired contracts are currently under active negotiations. The City has never had an
employee work stoppage.
Risk Management
The City is exposed to various risks of losses related to torts: theft of, damage to and destruction
of assets; errors and omissions; injuries to employees, and natural disasters. Tile City records all of these
claims as expenditures in the General Fund. The liability for these claims is recorded as part of long-term
obligations in the government-wide financial statements. The City records the amount of claims payable
at year-end that is due and payable at year-end in the fund financial statements. The full amount of claims
is reported as a liability in the government-wide financial statements. Liabilities include amounts
incurred.but not reported.
Claims of up to $1,000,000 are paid from the General Fund. The City is also a participant in the
Big Independent Cities Excess Pool Joint Powers Authority (BICEP), which shares payments for claims
between $1,000.000 and $2,000,000. It also provides general liability insurance of$25,600,000 above the
City's retention of $1,000,000. BICEP was created by a joint powers agreement between the City of
Huntington Beach and five other- local entities for the purpose of providing joint insurance coverage and
related risk management services for member cities. BICEP allows member entities to finance claims
payment pool for certain liability claims in excess of $1,000,000 to a limit of $27.000,000. BICEP's
governing board has one representative from each city(either a member of the City Council or designate).
Current members must approve any changes to the board. Each participating City pays ail insurance
premium to BICEP that is used to fund the operating and debt service requirements. Payments for claims
beyond what is covered by BICEP, from $27,000.000 to $37,000,000, are paid by excess insurance
coverage. There were no liability claims in the last three years that exceeded the coverage limit.
The City of San Bernardino, a member of BICEP, filed for bankruptcy on August 1. 2012. While
there continues to be uncertainty with the San Bernardino bankruptcy, the city continues to operate and it
34
Item 13. - 106 H13 -616-
is anticipated that they will emerge a viable entity albeit under a new court established financial structure.
In any event,there is currently no impact on the City's equity, position in BICEP.
Workers' compensation claims of up to $1,000,000 per claim are paid from the General Fund.
The BICEP is a member of CSAC-Excess Insurance Authority, for excess workers' compensation
coverage. Payments for claims from $1,000,000 to statutory limits are covered by CSAC-Excess
Insurance Authority, an excess insurance coverage.
All finds of the City participate in the program and make payments to these funds based on
estimated cost information.
Claims activity and liabilities relating to the current and prior year are(in thousands):
Workers Liability
Compensation Insurance Total
Balance September 30,2011 $7,015 $10,120 $17,135
Additions 9,262 2,836 12,098
Reductions (5,393) (4,968) (10,361)
Net Increase(Decrease) 3,869 (2,132) 1,737
Balance September 30,2012 10,884 7,988 18,872
Additions 10,367 1.020 11,387
Reductions (5,068) (2,203) (7,271)
Net Increase(Decrease) 5,299 (1,183) 4,116
Balance September 30,2013 $16,183 $6,805 $22,988
Source:City of Huntington Beach Finance Department.
On April 4, 2011, City Council approved the implementation of a pilot Alternative Dispute
Resolution process for workers compensation claims made by active safety employees that are members
of the City's Firefighters' Association and the Police Officer's Association. The process will also apply
to retirees who claim a presumptive injury within five years of retirement. The process is expected to
reduce overall claims costs to the City through decreased litigation and expeditious resolution of
Workers' Compensation claims.
Employee Retirement Plan - CaIPERS
General. The City contributes to the California Public Employees' Retirement System
(CaIPERS), an agent, which is a multiple-employer public employee defined benefit pension plan.
CaIPERS provides retirement and disability benefits, annual cost-of living adjustments,and death benefits
to plan members and beneficiaries. Ca1PERS acts as a common investment and administrative agent for
participating public entities within California. Benefit provisions and all other requirements are
established by state statute and city ordinance. Copies of CAPERS annual financial report may be
obtained from their executive office: 400 P Street, Sacramento, CA, 95814 or on their website:
www.calpers.ca.gov.
The City makes two types of contributions for covered employees. The first contribution
represents the amount the City is required to make (the employer rate). The second represents an amount,
which is made by the employee, but is reimbursed to the employee by the City (the member rate). The
member rate is set by contract and normally remains unchanged. The employer rate is an actuarially
established rate, is set by CalPERS,and chana-es from year to year.
35
11B -617- Item 13. - 107
The employer rates for the fiscal years ending June 30, 2014 and 2015 year-end and as projected
for the Fiscal Year ending September 30,2016 are as follows:
Local Miscellaneous Plan
Fiscal Year October 1 to June 30 July 1 to September 30
2013-14 21.395%* 21.938%
2014-15 21.93 8% 23.600%
2015-161 23.600% 25.300%
Local Safety Plan
Fiscal Year October 1 to June 30 July 1 to September 30
2013-14 38.841%* 39.051%
2014-15 39.051% 41.200%
2015-16 i 41.200% 43.400%
t CaIPERS projected.
The City opted to use the no phase-in CalPERS employer contribution rates
The member rates are as follows:
Local Miscellaneous 8.000%
Local Safety 9.000%
The City's projected fiscal year 2013-14 annual pension cost of $27,107,501 was equal to the
City's required and actual contributions. The required contribution was determined as part of the June 30,
2012, actuarial valuations provided by CalPERS in October 2013 (the "2012 CaIPERS Report"), using
the entry age normal actuarial cost method.
Actuarial Methods and Assumptions. On April 17, 2013, the CalPERS Board of Administration
approved a recommendation to change the CalPERS amortization and smoothing policies. Beginning with
the June 30, 2013 valuations that will set the 2015-16 rates, CalPERS will employ an amortization and
rate smoothing policy that will pay for all gains and losses over a fixed 30-year period with the increases
or decreases in the rate spread directly over a 5-yeas period. See"Projected Rates" below.
Not reflected in the "Projected Rates" section is the impact of assumption changes that CalPERS
expects will also, impact future rates. A review of the preferred asset allocation mix for the CalPERS
investment portfolio will be performed in late 2013, which could influence future discount rates. In
addition, Ca.IPERS will review economic and demographic assumptions, including mortality rate
improvements that are likely to increase employer contribution rates in future years.
Public Employees' Pension Reform Act of 2013 (PEPRA). On January 1, 2013, the Public
Employees' Pension Reform Act of 2013 (PEPRA) took effect, requiring that a public employer's
contribution to a defined benefit plan, in combination with employee contributions to that defined benefit
plan, shall not be less than the normal cost rate. Beginning July 1. 2013, this means that some plans with
surplus will be paying more than they otherwise would.
36
Item 13. - 108 1-113 -61 8-
In advance of PEPRA, the City began negotiating with all eight of its collective bargaining units
for retirement benefit concessions and has reached agreement with four. The City and the Huntington
Beach Firefighters' Association (HBFA) have agreed that HBFA members will pay an increased share of
the employee-paid contribution to CalPERS of 7.00%1. to be increased to 9.00% effective the pay period
that includes October 1, 2014.
The City and the Police Officers' Association (POA) have agreed that POA members will
continue to pay the employee-paid contribution to CalPERS of 4.25%. Effective the pay period of April
261. 2014,the employee-paid contribution rate increased to 8.00%.
The City and the Management Employees' Organization (MEO) have agreed that MEO members
will pay an increased share of the employee-paid contribution to CalPERS of 6.75%. Effective the pay
period following July 7, 2014, the approval date of the POA Memorandum of Understanding, the
employee-paid contribution rate increased to 9.00%.
The City and the Municipal Employees" Association (MEA)have agreed that MEA members will
pay the full share of the employee-paid contribution to CalPERS of 8.00%.
Negotiations with the Fire Management Association, Police Management Association, Marine
Safety Officers' Association, and Surf City Lifeguard Employee Association are ongoing.
Funding Status. Initial unfiuided liabilities are amortized over a closed period that depends on the
plan's date of entry into CalPERS. Subsequent plan amendments are amortized as a level percent of pay
over a closed 20-year period. On an annual basis. the net pension obligation is the cumulative difference
between the annual pension cost and the actuarially required contributions made to the plan. Gains and
losses that occur in the operation of the plan are amortized over a rolling 30 year period with the
exception of special gains and losses in fiscal years 2008-09, 2009-10 and 2010-11. Each of these years
special gains or losses will be isolated and amortized over fixed and declining 30 year periods (as
opposed to the current rolling 30 year amortization). If the plan's accrued liability exceeds the actuarial
value of the assets, then the amortization payment on the total unfunded liability may not be lower than
the payment calculated over a 30-year amortization period.
Local Miscellaneous Local Safety
Annual
Annual Pension Cost
Fiscal Year Pension Cost Percent of Net Pension (in Percentage of Net Pension
Ended 9I30 in Thousands APC Funded Obligation thousands) APC Funded Obligation
2009 $4,765 l 00% -- S 10,763 100% --
2010 5,380 100 -- 11,826 100 --
2011 8,163 100 -- 15,200 100 --
2012 8,542 100 -- 15,806 100 --
2013 9,381 100 -- 16,154 100 --
Source:Cit}of Huntin.-ton Beach Finance Department and 2012 CalPERS Report.
37
H B - 1 g- Item 13. - 109
r+
CD
W
-' Below is the three-year trend of funding progress(dollar amounts in thousands):
O
Schedule of Funding Progress
Retirement Plan-Normal
(in thousands)
Entry Age
Normal Excess
Actuarial Excess Funded Funded Assets as a
Actuarial Accrued Actuarial Assets Funded Ratio Ratio Percentage
Valuation Liability Value of (Unfunded Ratio (Market (Market Covered of Covered
Date/Plan (AAL) Assets Liability) (Actuarial) Value) Value) Payroll Payroll
6/30/2010
Safety $500,725 $384,956 $(1151,769) 76.9% $300,850 60.1% $41,015 (282.3%)
Miscellaneous 382,671 334,778 (47.893) 87.5 263,039 68.7 47,576 (100.6)
'7. Total $883,396 $719,734 $(163,662) 81.5% $563,889 63.8% $88,591 (184.7%)
6/30/2011
Safety $531,801 $402,867 $(128,934) 75.8% $358,742 67.5 $39,337 (327.8%)
t Miscellaneous 415,178 347,820 (67,358) 83.8 309,610 74.6 42,063 (160.1)
Total $946,979 $750,687 $(196,292) 79.3% $668,352 70.5% $81,400 (241.1%)
6/30/2012
Safety $552,536 $420,519 $(132,017) 76.1% $350,648 63.5 $39,241 (336.4%)
Miscellaneous 431.175 357,911 (73,264) 83.0 298,603 69.3 43,228 (169.5)
Total $983,711 $778,430 $(205,281) 79.1% $649,251 66.0% $82,469 (248.9%)
Source:City of Huntington Beach Finance Departmeat and 2012 CeIPEKS Report.
38
Projected Rates. On April 17, 2013, the CalPERS Board of Administration approved a
recommendation to change the Ca1PERS amortization and smoothing policies. Beginning with the June
30, 2013 valuations that will set the 2015-16 rates, CalPERS will employ an amortization and rate
smoothing policy that will pay for all gains and losses over a fixed 30-year period with the Increases or
decreases in the rate spread directly over a 5-year period. The table below shows projected employer
contribution rates (before cost sharing) for the next five fiscal years, assuming CaIPERS earns 12% for
fiscal year 2012-13 and 7.50% every fiscal year thereafter, and assuming that all other actuarial
assumptions will be realized and that no further changes to assumptions, contributions, benefits, or
funding will occur between now and the beginning of the fiscal year 2015-16. Consequently, these
projections do not take into account potential rate increases from likely future assumption changes, nor
do they take into account the positive impact PEPRA is expected to gradually have on the normal cost.
Projected Future Employer Contribution Rates
June 30
Fiscal Year Miscellaneous Plan Safety Plan
2014-15 21.938% 39.051%
2015-16 23.6 41.2
2016-17 25.3 43.4
2017-18 27.0 45.6
2018-19 28.7 47.8
2019-20 30.4 50.0
Source:Citv of Huntington Beach 1'inance Department and 2012 CaIPERS Report. Projected fixture employer contribution rates are shown
based on CalPERS June 30 fiscal year end.
Analysis of Future Investmew Return Scenarios. In July 2013, the investment return for fiscal
year 2012-13 was announced to be 12.5%. Note that this return is before administrative expenses and
also does not reflect final investment return information for real estate and private equities. The final
return information for these two asset classes is expected to be available later in October. For purposes
of projecting future employer rates. CalPERS assumed a 12%investment return for fiscal year 2012-13.
The investment return realized during a fiscal year first affects the contribution rate for the fiscal
year 2 years later. Specifically, the investment return for 2012-13 will first be reflected in the June 30,
2013 actuarial valuation that will be used to set the 2015-16 employer contribution rates, the 2013-14
investment return will first be reflected in the June 30, 2014 actuarial valuation that will be used to set
the 2016-17 employer contribution rates and so forth.
Based on a 12% Investment return for fiscal year 2012-13 and the April 17, 2013 CalPERS
Board-approved amortization and rate smoothing method change, and assuming that all other actuarial
assumptions will be realized, and that no further changes to assumptions, contributions, benefits, or
funding will occur between now and the beginning of the fiscal year 2015-16, the effect on the 2015-16
Employer Rate is as follows: (Note that this estimated rate does not reflect additional assumption
changes as discussed in the "Subsequent Events" section.)
As part of the 2012 CalPERS Report, a sensitivity analysis was performed to determine the
effects of various investment returns during fiscal years 2013-14, 2014-15 and 2015-16 on the 2016-17,
2017-18 and 2018-19 employer rates. Once again, the projected rate increases assume that all other
actuarial assumptions will be realized and that no further changes to assumptions, contributions,benefits,
or funding will occur.
39
1-111 -621- Item 13. - 111
Volatility Ratios. As noted in the 2012 CalPERS Report, the actuarial calculations are based on
a number of assumptions about very long-term demographic and economic behavior. Unless these
assumptions (terminations, deaths, disabilities, retirements, salary growth, and investment return) are
exactly realized each year, there will be differences on a year-to-year basis. The year-to-year differences
between actual experience and the assumptions are called actuarial gains and losses and serve to lower or
raise the employer's rates from one year to the next. Therefore, the rates will inevitably fluctuate,
especially due to the ups and downs of investment returns.
Asset Volatility Ratio (4VR). Plans that have higher asset to payroll ratios produce more volatile
employer rates due to investment return. For example, a plan with an asset to payroll ratio of 8 may
experience twice the contribution volatility due to investment return volatility, than a plan with an asset
to payroll ratio of 4. As part of the 2012 CalPERS Report, CalPERS has provided the asset volatility
ratio, a measure of each plan's current rate volatility, as shown in the table below. It should be noted that
this ratio is a measure of the Current situation. It Increases over time but generally tends to stabilize as
the plan matures.
Liability Volatility Ratio. Plans that have higher liability to payroll ratios produce more volatile
employer rates due to investment return and changes in liability. For example, a plan with a liability to
payroll ratio of 8 is expected to have twice the contribution volatility of a plan with a liability to payroll
ratio of 4. The liability volatility ratio is also included In the table below. It should be noted that this
ratio indicates a longer-term potential for contribution volatility and the asset volatility ratio, described
above,will tend to move closer to this ratio as the plan matures.
The following table illustrates rate volatility as of June 30,2012,
Miscellaneous Plan Safety Plan
1. Market Value of Assets without Receivables $296,540,700 $349,687.1269
2. Payroll 43,227,848 39,240,590
3. Asset Volatility Ratio(AVR= 1./2.) 6.9 89
4. Accrued Liability 431,175,037 552,535,708
5. Liability Volatility Ratio(4. /2.) 10.0 14.1
Source:City of Huntington Beach Finance l)epannient and 2012 CaIPERS Report.
SuRerfunded Status. Prior to enactment of the Public Employees' Pension Reform Act(PEPRA)
that became effective January 1, 2013, a plan in Superfunded status (actuarial value of assets exceeding
present value of benefits) would normally pay a zero employer contribution rate while also being
permitted to use its superfunded assets to pay its employees' normal member contributions.
However. Section 7522.52(a) of PEPRA states, "In any, fiscal year a public employer's
contribution to a defined benefit plan, in combination with employee contributions to that defined benefit
plan, shall not be less than the total normal cost rate..." This means that not only must employers pay
their employer normal cost regardless of plan surplus, but also, employers may no longer use
superfunded assets to pay employee normal member contributions.
Internal Revenue Code Section 415. The limitations on benefits imposed by Internal Revenue
Code Section 415 are taken into account in this valuation. Each year the impact of any changes in this
limitation since the prior valuation is included and amortized as part of the actuarial gain or loss base.
This results in lower contributions for those employers contributing to the Replacement Benefit Fund
and protects CaIPERS from prefunding expected benefits in excess of limits Imposed by federal tax law.
40
Item 13. - 112 14B -622-
Internal Revenue Code Section 401(a)(17). The limitations on compensation imposed by
Internal Revenue Code Section 401(a)(]7)are taken into account in this valuation. Each year,the impact
of any changes in the compensation limitation since the prior valuation is included and amortized as part
of the actuarial gain or loss base.
PEPRA Assumptions. The Public Employees' Pension Reform Act of 2013 (PEPRA) mandated
new benefit formulas and new member contributions for new members (as defined by PEPRA) hired
after January 1, 2013. For noel-pooled plans, these new members will first be reflected in the June 30,
2013 non-pooled plan valuations. New members in pooled plans will first be reflected in the new
Miscellaneous and Safety risk pools created by the CAPERS Board in November 2012 in response to the
passage of PEPRA, also beginning with the June 30, 2013 valuation. Different assumptions for these
new PEPRA members will be disclosed in the 2013 valuation.
The `'One Equals Five Plan" (CalPERS). The Fiscal Year 2013-14 Adopted Budget
implemented a unique "One Equals Five Plan'' for reducing the City's $278 million unfunded liability
for its CaIPERS pension plans. Based on an analysis conducted by the City's independent actuary, each
additional $1 million contributed to the City's plans will benefit the City five times over resulting in $5
million in taxpayer savings over a 25 year period. Hence, as part of the Fiscal Year 2013-14 Adopted
Budget. staff proposed a revision to the City Council's Financial Policies that allows for a certain
amount of additional General Fund revenue received above budgeted expectations to be deposited
directly into a"One Equals Five" fund for direct payment to CalPERS at the end of each year,to make a
siollificant dent in reducing the City's unfunded CAPERS liabilities. This unique proposal will yield
millions of dollars of savings annually to taxpayers and improve the funded status of the plans, thereby
promoting the financial sustainability of the plans themselves. These contributions would be in addition
to the already required CalPERS contribution rates that are deposited into the plans on a bi-weekly basis.
This plan.. in conjunction with the City's "25 to 10" Retiree Medical and "16 to 10" Supplemental
Pension plans formulated to aggressively pay down the City's unfunded liabilities, have been awarded
both the Golden Hub of Innovation award, for the Budgeting and Finance Category, from the
Association of California Cities - Orange County (ACC-OC) and the prestigious Innovation award from
the California Society of Municipal Finance Officers(CSMFO).
"One Equals Five" Plan
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41
1413 -623- Item 13. - 113
Retirement Plan- Supplemental
The City provides a supplemental retirement plan (the "Supplemental Retirement Plan") for all
employees hired prior to 1997 (exact dates are different for various associations). The plan is a single-
employer defined benefit plan. It is a defined benefit plan and will pay the retiree an additional amount
to his or her CalPERS amount for life. The Supplemental Retirement Plan is a.closed plan. Effective in
1998. new City employees are ineligible to participate in the plan (exact dates are different for various
associations). The City's contracts with employee bargaining associations, which establish the plan.
These associations must agree to any changes to the plan. The amount will cease upon the employee's
death. The amount that is computed as a factor of an employee's normal retirement allowance is
computed at retirement and remains constant for his or her life. Of the [1,001] active employees reported
on the September 30, 2013 valuation report (the most recent actuarial report), only 267 were eligible for
plan benefits.No separately prepared financial statements are prepared for this plan and it is not included
in the financial report of any other pension plan. Prior to fiscal year 2008-09, the City had prefunded
these benefits and recorded the amounts in a fiduciary fund. In fiscal year 2008-09. the City established
the Supplemental Employee Retirement Plan and Trust, and transferred $24,918,000 to an irrevocable
trust from the prefunded amounts. The plan and trust are still reported as a fiduciary fiend pension trust.
Below is the Supplemental Retirement Plan participant data for the September 30, 2013
valuation date:
Retirees and beneficiaries receiving benefits 676
Active Plan Members 267
Total Plan Participants 943
Source:City of Huntington Beach Finance Department.
The City annually transfers amounts from the various City funds to a pension trust fund. The
City is required under the Supplemental Employee Retirement Plan and Trust to contribute the
actuarially determined rate of 5.1% of total payroll for all permanent employees for the year ended
September 30,2014. Administrative costs of this plan are financed through investment earnings.
The City's annual pension cost and net pension obligation for this plan fiscal year 2012-13 were
(in thousands):
Annual required contribution $4,607
Interest on net pension obligation 213
Adjustment to annual required contribution (385)
Annual pension cost 4,43.5
Contributions made (4,607)
Decrease in net pension obligation (172)
Net Pension Obligation—Beginning of Year 3,613
Net Pension Obligation—End of Year(`) S3,441
(�l The cumulative difference between the annual pension cost and the actuarially required contributions made to the plan.
Source:City of Huntington Beach Fiscal Year 2012-13 Consolidated Annual Financial Report
The annual required contribution was determined as part of an independent actuarial valuation as
of September 30, 2011,using the Entry Age Normal Actuarial Cost Method, which is a projected benefit
full-cost method which takes into account those benefits that are expected to be eared in the future as
well as those already accrued. The actuarial assumptions used were:
42
Item 13. - 114 uB -624-
Rate of return on present and future assets—5.5%per antrum
• Projected salary increases for covered employees due to inflation — aggregate increases of
1, 5%per antrum
Projected salary increases due to merit—0%
• Inflation rate—3.0%
• Post employment benefit increases—0%
Amortization of unfunded liability—level percentage of pay ending in 2027 (closed)
• Actuarial value of assets—market value
Below is the required five-year trend information (dollar amounts in thousands):
Annual Percentage of Net Pension
Fiscal Year Pension Cost APC Funded Obligation
2008-09 $3,348 104% $4,312
2009-10 3,831 104 4,176
2010-11 3,812 104 4,031
2011-12 4,482 109 3,613
2012-13 4,435 104 3,441
Source:City of Huntington Beach Finance Department.
Below is other required trend information (dollar amounts in thousands):
Fiscal Year Annual Percentage
Ending Required of ARC
September 30 Contribution Contributed
2006 $3,022 130.48%
2007 2.850 156.63
2008 3.419 106.08
2009 3,476 100.00
2010 3,967 100.00
2011 3,957 100.00
2012 4,646 105.47
2013 4.607 100.00
Source:City of Huntington Beach Finance Department.
43
1.1 B -62 5- Item 13. - 115
Below is the five-year trend of funding progress(dollar amounts in thousands):
Schedule of Funding Progress
Retirement Plan-Supplemental
(in thousands)
Entry Age UAAL as
Normal Actuarial Unfunded a %of
Actuarial Valuation Accrued Value of AAL Funded Covered Covered
Date Liability Assets (UAAL) Ratio Payroll(" Payroll
9/30/2006 Update $43,066 $16,821 (26,245) 39.1% $40,563 -64.7%
9/30/2007 Actual 51,028 20,452 (30,576) 40.1 43,51& -70.3
9/30/2008 Update 52,777 22,722 (30,055) 43.1 44,822 -66.1
911 30/2009 Actual 59,576 24,980 (34,596) 419 44,978 -76.9
9/30/2010 Update 61,448 28,467 (32,981) 46.3 42,827 -77.0
9/30/2011 Actual* 62,926 32,146 (30,780) 51.1 34,098 -90.3
9/30/2011 Revised 64,382 27,639 (36,743) 42.9 34,098 -107.8
9/30/2013 Actual 57,865 36,302 (21,563) 62.7 27,173 -79.4
°' Covered payroll amounts reflect eligible payroll only.
The City changed actuarial firms during Fiscal Year 201 1-12. As a result, amounts for June 30,2011 were revised due to changes in the
actuarial assumptions used.
Source:City of Huntington Beach Finance Department.
The schedule of funding progress above presents ►nultiyea.r trend information about whether the
actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued
liability for benefits.
Since the City is required to adopt GASB 27 for the supplemental pension plan, the difference
betvveen the Annual Required Contribution (ARC) and the amount of pension cost funded for the years
in which there was an actuarial study must be recorded as a liability in the government-wide financial
statements. As of September 30, 2013, the amount of this 'liability is $3,441,000. Benefits are recognized
when due and payable under plan provisions.
City's Retirement Supplement Plan Contributions
(in thousands)
Unfunded
Annual Percentage of Net Pension Actuarial
Fiscal Year Pension Cost ARC Funded Obligation f`l Liability
2008-09 $3,348 104% $4,312 $34,596
2009-10 3,831 104 4,176 32,981
2010-11 3,812 104 4,031 30,780
2011-12 4,482 109 3,613 36,743
2012-13 4,435 104 3,441 21,563
The cumulative difference between the annual pension cost and the actuarially required contributions made to the plan.
Source:City of Huntington Beach Finance Department.
The "16 to 10 Plan" (Supplemental Pension). The City also administers a Supplemental
Pension Plan for all employees hired prior to 1997. As of September 30, 2011, the most recent actuarial
valuation available at the time of plan creation, 643 retirees and beneficiaries received benefits and 319
active employees were eligible for the plan at retirement. The plan is 42.9 percent funded with an
unfunded liability of$36.7 million. As part of the Fiscal Year 2013-14 Adopted Budget, the Finance
44
Item 13. - 116 14B - 26-
Department recommended the payment of an additional $698,000 annually to eliminate this liability in
10 years, versus the original amortization of 16 years. The"16 to 10 Plan"is projected to save taxpayers
approximately $7.4 million over the long tern.
16 to I tb"Plait
(Retie Supplemental)
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Post-Employment Medical Insurance
The City agreed, via contract, with each employee association to provide past-employment
medical insurance to retirees. These Other Post Employment Benefits (OPEB) are based on years of
service and are available to all retirees who meet all three of the following criteria:
• At the time of retirement the employee is employed by the City
At the time of retirement the employee has a minimum of ten years of service credit or is
granted a.service connected disability retirement
Following official separation from the City, CaIPERS grants a retirement allowance
The City's obligation to provide the benefits to a retiree ceases when either of the following
occurs:
During any period the retiree is eligible to receive health insurance at the expense of another
employer
• The retiree becomes eligible to enroll automatically or voluntarily in Medicare
If an employee is terminated prior to retirement from the City, no postemployment benefits are
provided.
The maximum subsidy a retiree is entitled to is $344 per month after 25 years of service. If a
retiree dies, the benefits that would be payable for his or her insurance are provided to the spouse or
family for 18 months. Benefits for insurance premiums are payable based on the years of service credit
for the retiree. The retiree may use the subsidy for any of the medical insurance plans that the City's
active employees may enroll.
The City utilizes the California Employers' Retiree Benefit Trust (CERBT) for the post-
employment medical insurance benefit. Benefits paid from the CERBT were $827,000 for the fiscal
45
uB -62 7- Item 13. - 117
year ending September 30. 2011 Based on the June 30, 2013 valuation report(the most recent valuation
report), a total of$833,000 of estimated benefits will be paid from the CERBT for fiscal year ending
September 30, 2014. The assets of the CERBT are in an irrevocable trust administered by CalPERS.
Copies of CaIPERS annual financial report may be obtained from their executed office: 400 P Street,
Sacramento, CA 95814 or on their website: www.calpers.ca.gov. The City's policy is to make 100% of
each year's ARC. Actuarial assumptions for the June 30, 2011 valuation were:
• Entry age normal - 30 year amortization of unfunded liabilities
• Discount rate - 6.25%. The discount rate for valuations prior to 2011 was 7.75%. For the
most recent valuation. the City elected to utilize the most conservative of the three available
asset allocation strategies.
• All other retirement assumptions equivalent to CAPERS assumptions used for the City's
nonnal retirement plan (CalPERS 1997-2007 Experience Study)
Below are the required disclosures for this plan(in thousands):
Actuarial Accrued liability S17,400
Normal Cost 927
Assets 11,541
Funded Status 66.3%
Source:Cith'of Huntington Beach Finance Department.
The City's actual contributions, annually required contribution (ARC), Net OPEB
obligation/asset(NOO/NOA), and Annual OPEB Cost(AOC) as of September 30, 2013, were computed
as follows(in thousands):
Employer Contribution
Direct Contributions—City Health Plan Contributions S 2,259
Implicit Subsidy 424
Total Employer Contributions $ 2,683
Development of Annual OPEB Cost(AOC)
Amortization of Actuarially Accrued Liability $ 663
Normal Cost 898
Total ARC S 1,561
Interest on NOA (597)
Adjustment to the ARC 520
Total AOC $ 1,484
Development of Net OPEB Asset(NOA)
Net OPEB Asset(NOA),beginning of year $ (9,359)
Annual OPEB Cost(AOC) 1,484
Employer Contribution (2,683)
Net OPEB Asset(NOA),end of year S(10.558)
Source:City of Huntington Beach Finance Department.
The City's actual contributions of$2,683,000 for fiscal year ending September 30, 2013, are
greater than the annual required contribution. The annual OPEB cost is reported as expenses in the non-
departmental governmental activities program.
46
Item 13. - 118 THB -628-
Five-year trend information is disclosed below (in thousands):
Annual OPEB
Cost(AOC) Net OPEB
(Employer Actual Percentage of Obligation
Fiscal Year Contribution) Contribution AOC Contributed (Asset)
9/30i2009 $1,564 $1,715 109.7% ($ 8,378)
9/30/2010 1,320 1,603 121.4 ($ 8,661)
9/30/2011 1,428 1,559 109.2 ($ 8,792)
9/130/2012 1,438 2,005 139.4 ($ 9,359)
9/30/2013 1,448 2,683 180.8 ($10,558)
Source:City of Hnntington Beach Finance Department.
As of June 30, 2013, the most recent actuarial valuation date, the plan was 66.3% funded. The
actuarial accrued liability for benefits was $17.4 million, the actuarial value of assets was approximately
$11.5 million, resulting in an unfunded accrued liability (UAAL) of approximately $5.8 million, and the
market value of assets was approximately $13.1 million, resulting in an unfunded accrued liability
(market value) of approximately $4.3 million. The covered payroll (annual payroll of active employees
covered by the plan)was $88.1 million, and the ratio of the UAAL to the covered payroll was 6.6%.
Other Post Employment Benefits—Medical Retirement
Schedule of Funding Progress
(in Thousands)
Unfunded UAAL as a
Actuarial Actuarial Actuarial %of
Actuarial Valuation Value of Accrued Accrued Funded Covered Covered
Date Assets Liability Liability Ratio Payroll Payroll
9/30/2009 Actual $8,727 $19,474 $(10,747) 44.8°% $881,923 -12.1%
9/30/2010 Update 9,157 20,608 (1 1,451) 44.4 90,465 -12.7
6/30/2011 Actual 9,639 22,447 (12,808) 42.9 821,443 -15.5
6/30/2011 Actual* 9,639 22,447 (12.808) 42.9 82,443 -15.5
6/30/2011 Revised 9,626 20,179 (10,553) 47.7 82,443 -12.8
6/30/2013 Actual 11,541 17,400 (5,859) 66.3 88,103 -6.6
'Elie City changed actuarial firms during Fiscal Year 2011-12. As a result, arnounts for.tune 30,2011 were revised due to
changes in the actuarial assumptions used.
Source:City of Huntington Beach Finance Department.
The medical trend rate represents the long-term expected growth of medical benefits paid by the
plan, due to non-age-related factors such as ,eneral medical inflation, utilization, new technology, and
the like. The following table sets forth the trend assumption used for the valuation:
47
KB -629- Item 13. - 119
PEMCHA
Year Medical Minimum
2012 10.5% 5.0%
2013 10.0 5.0
2014 9.5 5.0
2015 9.0 5.0
2016 8.5 5.0
2017 8.0 5.0
2018 7.5 5.0
2019 7.0 5.0
2020 6.5 5.0
2021 6.0 5.0
2022 5.5 5.0
2023+ 5.0 5.0
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and
assumptions about the probability of occurrence of events far into the future. Examples include
assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined
regarding the funded status of the plan and the annual required contributions of the City are subject to
continual revision as actual results are compared with past expectations and new estimates are made
about the future. The schedule of funding progress above, presents multiyear trend information about
whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial
liabilities for benefits.
Projections of benefits for financial reporting purposes are based on the substantive plan (the
plan as understood by the City and plan members) and include the types of benefits provided at the time
of each valuation. The actuarial methods and assumptions used include techniques that are designed to
reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets,
consistent with the long-term perspective of the calculations.
The "16 to 10 Plan" (SulyVemental Pensionl. The City also administers a. Supplemental
Pension Plan for all employees hired prior to 1997. As of September 30, 2011, the most recent actuarial
valuation available at the time of plan creation, 643 retirees and beneficiaries received benefits and 319
active employees were eligible for the plan at retirement. The plan is 42.9 percent funded with an
unfunded liability of$36.7 million. As part of the FY 2013-14 Adopted Budget,the Finance Department
recommended the payment of an additional $698,000 annually to eliminate this liability in 10 years,
versus the original amortization of 16 years. The "16 to 10 Plan" is projected to save taxpayers
approximately $7.4 million over the long term.
48
Item 13. - 120 1-1B -630-
"16 to i 0"P aft
(Retiree Supplemental')
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Public Agency Retirement Systems (PARS)Notes Payable
In May 2010, the City Council approved a retirement incentive program to eligible employees,
under the condition the program meets the fiscal, managerial, and operational goals of the City to help
mitigate declining General Fund revenues and institute long-term structural changes to avert future
budget shortfalls and ensure that the City remains financially sound. A total of 103 people participated
and were approved by the Council for the retirement incentive program through the Public Agency
Retirement Systems (PARS) Supplemental Retirement Program (SRP). The City initially funded the
cost of this program through an annuity that required a one-tinge payment of$82,000 in September 2010
and $1,587,000 fixed annual payments. During the fiscal year ended September 20,2013, the City made
a lump-sum accelerated payment to reduce the City's liability for this benefit. In accordance with GASB
Statement No. 47, Accounting for Termination Benefits, a liability of the accrual cost for this benefit has
been recognized in the amount of$ 7,231,000 in September 2010 and the balance as of September 30,
2013 is $56,000.
Short-Term Obligations
The City currently has no outstanding short-term obligations.
Long-Term Obligations.
General obligation Debt. The City has no long-term general obligation bonded indebtedness
outstanding and has never defaulted on any of its bonded indebtedness previously issued. The City has
no authorized but unissued debt.
Lease Obligations. The City has made use of various lease arrangements with the Huntington
Beach Public Financing Authority to finance capital projects through the issuance of certificates of
participation and lease revenue bonds.
On September 28, 2011, the Authority issued $36,275,000 aggregate principal amount of its
Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2011 Series A (Capital
I rnprovement Refinancing Project) (the "Series 2011A Bonds") under the Indenture. Tile Series 2011A
Bonds were issued to (a) refinance the costs of the acquisition, construction, installation and equipping
of certain public capital improvements, including the refunding of(i) the outstanding Huntington Beach
49
fTB -631- Item 13. - 121
Public Financing Authority Lease Revenue Bonds. 2001 Series A (Capital Improvement Financing
Project), and (if) the outstanding Huntington Beach Public Financing Authority Lease Revenue Bonds,
2001 Series B (Capital Improvement Refinancing Project), (b) fund a reserve fund for the Series 201 IA
Bonds, and (e) pay costs of issuance of the Series 2011 A Bonds.
The following table is a summary of the City's long-term General Fund-secured obligations as
of September 1,2013.
Summary of Long-Term Obligations
Total Fiscal
Original Outstanding Year 2014
Issue Principal Payments
2004 Judgment Obligation Bonds S12,500,000 $ 3,474,000 $1.021,000
2010A Lease Revenue Bonds 14.745,000 11,910,000 1,239,000
2011A Lease Revenue Refunding Bonds 36,275,000 31,195.000 4.302,000
Total Long Obligations $51,020,000 $43,105,000 $6,562,000
Source:Cite of`Nuntington Beach Finance Department.
Overlapping Debt
Set forth below is a direct and overlapping debt report (the "Debt Report") prepared by
California Municipal Statistics, Inc. and effective September 30, 2013. The Debt Report is included for
general information purposes only. The City has not reviewed the Debt Report for completeness or
accuracy and makes no representation in connection therewith.
The Debt Report generally includes_long-term obligations sold in the public credit markets by
public agencies whose boundaries overlap the boundaries of the City in whole or in part. Such long-term
obligations generally are not payable from revenues of the City (except as indicated) nor are they
necessarily obligations secured by land within the City. In many cases, long-term obligations issued by a
public agency are payable only from the general fund or other revenues of such public agency.
The contents of the Debt Report are as follows: (I)the first column indicates the public agencies
which have outstanding debt as of the date of the Debt Report and whose territory overlaps the City; (2)
the second column shows the respective percentage of the assessed valuation of the overlapping public
agencies identified in column 1 which is represented by property located in the City; and (3) the third
column is an apportionment of the dollar amount of each public agency's outstanding debt (which
amount is not shown in the table) to property in the City, as detennined by multiplying the total
outstanding debt of each agency by the percentage of the City's assessed valuation represented in
column 2.
50
Item 13. - 122 t B -63)22-
CITY OF I UNTINGTON BEACH
Statement of Direct and Overlapping Bonded Debt
as of September 30,2013
2012-13 Assessed Valuation$28.322,339.435(after deducting$1,744,092.986)of incremental redevelopment valuation.
Debt Repaid with Property Taxes(Tax and Assessment Debt):
Percent Debt Applicable
Overlapping Tax and Assessment Debt: Applicable(') to City
Metropolitan Water District 1.4920% $ 2,359,065
Coast Community College District 29.3850 185.834.765
Huntington Beach Union High School District 72.9840 150,985,649
Huntington Beach Citv School District 99.8380 22.008,251
Westminster School District 26.1200 18.822.958
Los Alamitos Unified School District School Facilities District No. 1 1.1480 1,159.367
City of Huntington Beach Community Facilities District No.2003-1 100.0000 39,630,000
TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $420.800,055
Ratios to 2012-2013 Assessed Valuation
Total Overlapping Tax and Assessment Debt 1.40009/o
Direct and Overlapping General Fund Debt:
Orange County°General Fund Obligations $ 11,998,272
Orange County Pension Obligations 20.420,226
Orange County Board of Education Certificates of Participation 1.108,316
MWDOC Facilities Corporation 654,733
North Orange County Regional Occupation Program Certificates of Participation 9A93
IIUntington Beach Union High School District Certificates of Participation 43,732,808
Los Alamitos Unified School District Certificates of Participation 470,406
Fountain Valley School Districts Certificates of Participation 2.347.737
Huntington Beach City School District Certificates of Participation 16,297,875
Ocean View School District Certificates of Participation 5.192.410
Westminster School District Certificates of Participation 6,089,878
City of Huntington Judgment Obligation Bonds 3,474,000
City of Huntington Beach General Fund Obligations: 41105.000�`t
Total Gross Direct and Overlapping General Fund Debt $154,900,854
Less Self Supporting Debt of MWDOC Water Facilities Corporation (654,733)
Total Net Direct and Overlapping General Fund Obligation Debt $154,246,121
Total Direct Debt $ 46.579.000
Total Gross Overlapping Debt 545.876,909
Total Net Oyerlaping Debt 545,222,176
Gross Combined Total 592,455,909
Net Combined Total Debt $591.801,176
Ratios to Adjusted Assessed Valuation:
Combined Direct Debt($46.579,000)..................................................... 0.15%
Gross Combined Total Debt................................................................... 1.970i0
Net Combined Total Debt....................................................................... 1.97%
" Percentage of overlapping agency's assessed valuation located within boundaries of the City.
"r Excludes tax and revenue anticipation notes,enterprise revenue.mortgage revenue and tax allocation bonds and non-bonded capital lease obligations.
Source:California Municipal Statistics and City oflfuntington Beach Finance Department.
51
I-1B -6-313- Item 13. - 123
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES,REVENUES AND
APPROPRIATIONS
Article XIIIA of the California Constitution
On June 6, 1978, California voters approved an amendment (commonly known as both
Proposition 13 and the Jarvis-Gann Initiative) to the California Constitution. This amendment, which
added Article XIIIA to the California Constitution, among other things affects the valuation of real
property for the purpose of taxation in that it defines the full cash property value to mean "the county
assessor's valuation of real property as shown on the 1975-76 tax bill under "full cash value," or
thereafter, the appraised value of real property newly constructed, or when a change in ownership has
occurred after the 1975 assessment." The full cash value may be adjusted annually to reflect inflation at a.
rate not to exceed 2% per year, or a reduction in the consumer price index or comparable local data at a
rate not to exceed 2% per year, or reduced in the event of declining property value caused by damage,
destruction or other factors including a general economic dow11tur7n. The amendment further limits the
amount of any acl valorem tax on real property to one percent of the full cash value except that additional
taxes may be levied to pay debt service on indebtedness approved by the voters prior to July 1, 1978, and
bonded indebtedness for the acquisition or improvement of real property approved on or after July 1,
1978 by two-thirds of the votes cast by the voters voting on the proposition.
Legislation enacted by the California Legislature to implement Article XIIIA provides that all
taxable property is shown at full assessed value as described above. In conformity with this procedure, all
taxable property,value included in this Official Statement(except as noted) is shown at 100% of assessed
value and all general tax rates reflect the $1 per $100 of taxable value. Tax rates for voter approved
bonded indebtedness and pension liability are also applied to 100%of assessed value.
The voters of the State subsequently approved various measures which further amended Article
XIIIA. One such amendment generally provides that the purchase or transfer of(i) real property between
spouses or (ii) the principal residence and the first $1,000,000 of the Full Cash Value of other real
property between parents and children, do not constitute a "purchase" or "change of ownership"
triggering reappraisal under Article XIIIA. Other amendments permitted the State Legislature to allow
persons over the age of 55 who meet certain criteria or "severely disabled homeowners" who sell their
residence and buy or build another of equal or lesser value within two years in the same county, to
transfer the old residence's assessed value to the new residence. Other amendments permit the State
Legislature to allow persons who are either 55 years of age or older, or who are "severely disabled," to
transfer the old residence's assessed value to their new residence located in either the same or a different
county and acquired or newly constructed within two years of the sale of their old residence.
In the November 1990 election,the voters approved an amendment of Article XIIIA to permit the
State Legislature to exclude from the definition of "new construction" certain additions and
improvements, including seismic retrofitting improvements and improvements utilizing earthquake
hazard miticyation technologies constructed or installed in existing buildings after November 6, 1990.
Article XIIIA has also been amended to provide that there would be no increase in the Full Cash
Value base in the event of reconstruction of the property damaged or destroyed in a disaster.
Section 51 of the Revenue and Taxation Code permits county assessors who have reduced the
assessed valuation of a property as a result of natural disasters, economic downturns or other factors, to
subsequently "recapture" such value (up to the pre-decline value of the property) at an annual rate higher
than 2%, depending on the assessor's measure of the restoration of value of the damaged property.
52
Item 13. - 124 1IB -634-
Section 4 of Article XIIIA also provides that cities, counties and special districts cannot, without
a two-thirds vote of the qualified electors, impose special taxes, which has been interpreted to include
special fees in excess of the cost of providing the services or facility for which the fee is charged, or fees
levied for general revenue purposes.
Both the California State Supreme Court and the United States Supreme Court have upheld the
validity of Article XIIIA.
Article XIIIB of the California Constitution
On November 6, 1979, California voters approved Proposition 4, the Gann Initiative, which
added Article XIIIB to the California Constitution. In June 1990, Article XIIIB was amended by the
voters through their approval of Proposition I11. Article XIIIB of the California Constitution limits the
annual appropriations of the State and any city, county, school district, authority or other political
subdivision of the State to the level of appropriations for the prior fiscal year, as adjusted annually for
changes in the cost of living, population and services rendered by the governmental entity. The "base
year" for establishing such appropriation limit is fiscal year 1978-79. Increases in appropriations by a
governmental entity are also permitted (I) if financial responsibility for providing services is transferred
to the governmental entity, or (2) for emergencies so long as the appropriations limits for the three years
following the emergency are reduced to prevent any aggregate increase above the Constitutional limit.
Decreases are required where responsibility for providing services is transferred from the government
entity.
Appropriations subject to Article XIIIB include generally any authorization to expend during the
fiscal year the proceeds of taxes levied by the State or other entity of local government, exclusive of
certain State subventions, refunds of taxes, benefit payments from retirement, unemployment insurance
and disability insurance funds. Appropriations subject to limitation pursuant to Article XIIIB do not
include debt service on indebtedness existing or legally authorized as of January, 1, 1979, on bonded
indebtedness thereafter approved according to law by a vote of the electors of the issuing entity voting in
an election for such purpose, appropriations required to comply with mandates of courts or the Federal
government, appropriations for qualified outlay projects, and appropriations by the State of revenues
derived from any increase in gasoline taxes and motor vehicle weight fees above January 1, 1990 levels.
"Proceeds of taxes" include, but are not limited to, all tax revenues and the proceeds to any entity of
government frown (1) regulatory licenses, user charges, and user fees to the extent such proceeds exceed
the cost of providing the service or regulation, (2) the investment of tax revenues and (3) certain State
subventions received by local governments. As amended by Proposition 11 1, the appropriations limit is
tested over consecutive two-year periods. Any excess of the aggregate"proceeds of taxes"received by the
City over such two-year period above the combined appropriations limits for those two years is to be
returned to taxpayers by reductions in tax rates or fee schedules over the subsequent two years.
As amended in June 1990, the appropriations limit for the City in each year is based on the limit
for the prior year. adjusted annually for changes in the costs of living and changes in population, and
adjusted, where applicable, for transfer of financial responsibility ofproviding services to or from another
unit of government. The change in the cost of living is, at the City's option, either (1) the percentage
change in California per capita personal income, or (2) the percentage change in the local assessment roll
for the jurisdiction due to the addition of nonresidential new construction. The measurement of change in
population is a blended average of statewide overall population growth, and change in attendance at local
school and community college("K-14")districts.
53
HB -635- Item 13. - 125
Article XI11B permit any government entity to change the appropriations limit by vote of the
electorate in conformity with statutory and Constitutional voting requirements, but any such voter-
approved change can only be effective for a maximum of four years.
The City's appropriations limit was $692,527,871 for fiscal year 2012-13 and $733,663,584 for
fiscal year 2013-14 which is well below the total City budget amounts for both years. Therefore, the City
did not have a need to calculate the appropriations subject to limitation.
Proposition 218
On November 5, 1996, the voters of the State approved Proposition 218, a constitutional
initiative, entitled the "Right to Vote on Taxes Act" ("Proposition 218"). Proposition 218 added Articles
XIII C and XIII D to the California Constitution and contained a number of interrelated provisions
affecting the ability of local governments, including the City, to levy and collect both existing and future
taxes, assessments,fees and charges. The City is unable to predict whether and to what extent Proposition
218 may be held to be constitutional or how its terms will be interpreted and applied by the courts.
Proposition 218 could substantially restrict the City's ability to raise future revenues and could subject
certain existing sources of revernue to reduction or repeal, and increase the City's costs to hold elections,
calculate fees and assessments, notify the public and defend its fees and assessments in court. However,
the City does not presently believe that the potential financial impact on the City as a result of the
provisions of Proposition 218 will adversely affect the City's ability to pay its debt obligations and
perform its other obligations payable from the General Fund as and when due.
Article XIII C requires that all new local taxes be submitted to the electorate before they become
effective. Taxes for general governmental purposes of the City require a majority vote and taxes for
Specific purposes. even if deposited in the City's General Fund, require a two-thirds vote. Further, any
general purpose tax that the City imposed, extended or increased without voter approval after December
31, 1994 may continue to be imposed only if approved by a majority vote in an election held within two
years of November 5, 1996. The City has not enacted, imposed, extended or increased any tax without
voter approval since .January 1, 1995. These voter approval requirements of Proposition 218 reduce the
flexibility of the City to raise revenues through General Fund taxes, and no assurance can be given that
the City will be able to impose, extend or increase such taxes in the future to meet increased expenditure
requirements.
Article XIII C also expressly extends to voters the power to reduce or repeal local taxes,
assessments, fees and charges through the initiative process, regardless of the date such taxes
assessments, fees or charges were imposed. This extension of the initiative power is not limited by the
terms of Proposition 218 to fees imposed after November 6, 1996 and absent other legal authority could
result in retroactive reduction in any existing taxes, assessments or fees and charges. SB 919 provides that
the initiative powers extended to voters under Article XIII C likely excludes actions construed as
impairment of contracts under the contract clause of the United States Constitution. SB 919 provides that
the initiative power provided for in Proposition 218 "shall not be construed to mean that any owner or
beneficial owner of a municipal security, purchased before or after November 6, 1998, assumes the risk
of, or in any way consents to, any action by initiative measure that constitutes an impairment of
contractual rights" protected by the United States Constitution. However, no assurance can be given that
the voters of the City will not, in the future, approve an initiative which reduces or repeals local taxes,
assessments, fees or charges that currently are deposited into the City's General Fund.Further, "fees" and
"charges" are not defined in Article XIII C or SB 919, and it is unclear whether these terms are intended
to have the same meanings for purposes of Article X111 C as they do in Article XIl l D. Accordingly, the
scope of the initiative power under Article XI11 C could include all sources of General Fund monies not
received from or imposed by the federal or State government or derived from investment income.
54
Item 13. - 126 HB -636-
The initiative power granted under Article XII1 C of Proposition 218, by its terms, applies to all
local taxes, assessments,fees and charges. The City is unable to predict whether the courts will ultimately
interpret the initiative provision to be limited to property, related local taxes, assessments, fees and
charges.No assurance can be given that the voters of the City will not, in the fixture, approve an initiative
which reduces or repeals local taxes, assessments, fees or charges which are deposited into the City's
General Fund. The City believes that in the event that the initiative power was exercised so that all local
taxes, assessments, fees and charges which may be subject to the provisions of Proposition 218 are
reduced or substantially reduced, the financial condition of the City, including its General Fund, would be
materially adversely affected. As a result, there can be no assurance that the City would be able to make
Base Rental Payments under the Lease Agreement as and when due or any of its other obligations payable
from the General Fund.
Article X111 D of Proposition 218 adds several new requirements to make it more difficult for
local agencies to levy and maintain "assessments"for municipal services and programs. "Assessment" is
defined in Proposition 218 and SB 919 as any levy or charge upon real property for a special benefit
conferred upon the real property. This includes maintenance assessments imposed in City service areas
and in special districts. In most instances, in the event that the City is unable to collect assessment
revenues relating to specific programs as a consequence of Proposition 218, the City will curtail such
services rather than use amounts in the General Fund to finance such programs. Accordingly, the City
anticipates that any impact Proposition 218 may have on existing or future taxes, fees, and assessments
will not adversely affect the ability of the City to make Base Rental Payments under the Lease Agreement
as and when due and, accordingly, the ability of the Authority to make payments of principal of and
interest on the Series 201 ]A and Series 2014A Bonds. However, no assurance can be given that the City
may or will be able to reduce or eliminate such services in the event the assessments that presently
finance them are reduced or repealed.
Article X111 D also adds several provisions, including notice requirements and restrictions on use,
affecting"fees" and "charges" which are defined as "any levy other than an ad valorew tax, a special tax,
or an assessment, imposed by a local government upon a parcel or upon a person as an incident of
property ownership, including a user fee or charge for a property related service." The annual amount of
revenues that are received by the City and deposited into its General Fund which may be considered to be
property related fees and charges under Article X111 D of Proposition 218 is not substantial. Accordingly,
presently the City does not anticipate that any impact Proposition 218 may have on future fees and
charges will not adversely affect the ability of the City to make Base Rental Payments under the Lease
Agreement as and when due and, accordingly, the ability of the Authority to make payments of principal
of and interest on the Series 2011A and Series 2014A Bonds. However, no assurance can be given that
the City may or will be able to reduce or eliminate such services in the event the fees and charges that
presently finance them are reduced or repealed.
Additional implementing legislation respecting Proposition 218 may be introduced in the State
legislature from time to time that would supplement and add provisions to California statutory law. No
assurance may be given as to the terns of such legislation or its potential impact on the City.
Proposition 1A of 2004
The California Constitution and existing statutes give the legislature authority over property
taxes, sales taxes and the vehicle license fee (the "VLF"). The legislature has authority to change tax
rates, the items subject to taxation and the distribution of tax revenues among local governments, schools.
and community college districts. The State has used this authority for many purposes, including
increasing funding for local services, reducing State costs, reducing taxation, addressing concerns
regarding funding for particular local governments, and restructuring local finance.
55
1413 -637- Item 13. - 127
The California Constitution generally requires the State to reimburse the local governments when
the State "mandates" a new local program or higher level of service. Due to the ongoing financial
difficulties of the State, it has not provided in recent years reimbursements for many mandated costs. In
other cases, the State has "suspended"mandates, eliminating both responsibility of the local governments
for complying with the mandate and the need for State reimbursements.
The 2004 Budget Act, related legislation and the enactment of Proposition 1 A of 2004 (described
below)dramatically changed the State-local fiscal relationship. These constitutional and statutory changes
implemented an agreement negotiated between the Governor and local government officials (the "State-
local agreement")in connection with the 2004 Budget Act.
One change related to the reduction of the VLF rate from 2%to 0.65% of the market value of the
vehicle. In order to protect local governments, which had previously received all VLF revenues, the 1.35
percent reduction in VLF revenue to cities and counties from this rate change was backfilled by an
increase in the amount of property tax revenues they receive. This worked to the benefit of local
governments, because the backfill amount annually increases in proportion to the growth in secured roll
property tax revenues, which has historically grown at a higher rate than VLF revenues. Proposition 1 A of
2004 requires the State to provide local governments with equal replacement revenues.
On November 3, 2004 the voters of the State approved Proposition IA ("Proposition IA of
2004"). Proposition IA of 2004 amended the State Constitution to, among other things, reduce the
Legislature's authority over local government revenue sources by placing restrictions on the State's
access to local governments' property, sales, and VLF revenues as of November 3, 2004. Pursuant to
Proposition 1 A of 2004, the State is able to borrow up to 8% of local property tax revenues but only if the
Governor proclairns such action is necessary, due to a severe State fiscal hardship and two-thirds of both
houses of the State Legislature approve the borrowing. Any amounts borrowed are required to be repaid
within three years. Proposition IA of 2004 also permits the State to borrow from local property tax
revenues for no more than two fiscal years within a period of 10 fiscal years, and only if previous
borrowings have been repaid. In addition, the State cannot reduce the local sales tax rate or restrict the
authority of the local governments to impose or change the distribution of the Statewide local sales tax.
Proposition IA of 2004 generally prohibits the State from mandating activities on cities, counties, or
special districts without providing the funding needed to comply with the mandates, and if the State does
not provide funding for the activity that has been determined to be mandated, the requirement on cities,
counties, or special districts to abide by the mandate is suspended. Proposition I A of 2004 also expanded
the definition of what constitutes a mandate to encompass State action that transfers to cities, counties,
and special districts financial responsibility for a required program for which the State previously had
partial or complete responsibility. The State mandate provisions of Proposition IA of 2004 do not apply
to schools or community colleges or to mandates relating to employee rights.
Recently Approved Initiatives
At the State general election on November 2, 2010, three initiative measures that will affect State
and local fiscal affairs in the future were approved by the voters.
Proposition 22 eliminates the State's ability to borrow or shift local revenues and certain State
revenues that fund transportation programs. It restricts the State's authority over a broad range of tax
revenues, including property taxes allocated to cities (including the City), counties, special districts and
redevelopment agencies, the Vehicle License Fee, State excise taxes on gasoline and diesel fuel, the State
sales tax on diesel fuel, and the former State sales tax on gasoline. It also makes a number of significant
other changes, including restricting the State's ability to use motor vehicle fuel tax revenues to pay debt
service on voter-approved transportation bonds.
56
Item 13. - 128 1113 -6 38-
Proposition 25 reduces the legislative vote requirement for passage of the annual State budget and
certain related trailer bills from two-thirds to a simple majority. The reduced vote requirement does not
apply to measures that increase State tax revenues, which will continue to require a two-thirds vote. It
also requires members of the legislature to permanently forfeit their pay and reimbursement for travel and
living expenses for each day after June 15 that a budget is not passed. It does not change the ability of the
Governor to eliminate or reduce any appropriation using a line-item veto.
Proposition 26 imposes a two-thirds voter approval requirement for the imposition of certain fees
and charges by the State. It would also impose a majority voter approval requirement on local
governments with respect to fees and charges for general purposes, and a two-thirds voter approval
requirement with respect to fees and charges for special purposes. The initiative, according to its
supporters, is intended to prevent the circumvention of tax limitations imposed by the voters pursuant to
Proposition 13, approved in 1978, and other measures through the use of non-tax fees and charges.
Proposition 26 expressly excludes from its scope "a charge imposed for a specific goverment service or
product provided directly to the payor that is not provided to those not charged, and which does not
exceed the reasonable cost to the [State/local govermnent] of providing the service or product to the
payor." The City believes that the initiative is not intended to and would not apply to fees for utility
services charged by local governments such as the City; however, the City is unable to predict whether
Proposition 26 will be interpreted by the courts to apply to the provision of utility services by local
governments such as the City.
Future Initiatives
Article XI11A, Article XIIIB, Proposition 218 and Proposition 1 A were each adopted as measures
that qualified for the ballot pursuant to the State's initiative process. From time to time, other initiative
measures could be adopted, which may place further limitations on the ability of the State, the City or
local districts to increase revenues or to increase appropriations which may affect the City's revenues or
its ability to expend its revenues.
RISK FACTORS
This section provides a general overview of certain risk factors which should be considered, in
addition to the other matters set fbrih in this Official Statement, in evaluating an investment in the Series
201A BoncLs. This section is not rrreant to be a comprehensive or definitive discussion of the risks
associated with an investment in the Series 2014.4 Bonds, and the order in it-hich this information is
presented does not necessarily reflect the relative importance of various risks. Potential investors in the
Series 2014A Bonds are advised to consider the following factors, among others, and to review this entire
Official Statement to obtain information essential to the making of an informed investment decision. Ally
one or snore of fire risk factors discussed below, atnong others, could lead to a decrease in the market
value and,%r in the rnarketahility of the Series 20144 Bonds. There can be no assurance that other risk
factors not discussed herein will not become material in the future.
Limited Obligation
The Series 2014A Bonds are not City debt and are limited obligations of the Authority. Neither
the full faith and credit of the Authority nor the City is pledged for the payment of the interest on or
principal of the Series 2014A Bonds nor for the payment of Base Rental Payments. The Authority has no
taxing power. The obligation of the City to pay Base Rental Payments when due is an obligation payable
from amounts in the General Fund of the City. The obligation of the City to snake Base Rental Payments
under the Lease Agreement does not constitute an obligation of the City for which the City is obligated to
levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation.
57
HB -639- Item 13. - 129
Neither the Series 2014A Bonds nor the obligation of the City to make Base Rental Payments under the
Lease A�eement constitute a debt or indebtedness of the Authority, the City, the State or any of its
political subdivisions, within the meaning of any constitutional or statutory debt limitation or restrictions.
Base Rental Payments Are Not Debt
The obligation of the City to make the Base Rental Payments under the Lease Agreement does
not constitute an obligation of the City for which the City is obligated to levy or pledge any form of
taxation or for which the City has levied or pledged any form of taxation.Neither the Series 2014A Bonds
nor the obligation of the City, to make Base Rental Payments constitute a debt of the City, the State of .
California or any political subdivision thereof (other than the Authority) within the meaning of any
constitutional or statutory debt limitation or restriction.
The Series 2014A Bonds are not general obligations of the Authority, but are limited obligations
payable solely from and secured by a pledge of Lease Revenues and amounts held in the funds and
accounts created under the Indenture, consisting primarily of Base Rental Payments. The Authority has no
taxing power.
Although the Lease Agreement does not create a pledge, lien or encumbrance upon the funds of
the City, the City, is obligated under the Lease Agreement to pay the Base Rental Payments from any
source of legally available fiends and the City has covenanted in the Lease Agreement that, for so long as
the Property is available for its use, it will make the necessary annual appropriations within its budget for
the Base Rental Payments. Tire City is currently liable and may become liable on other obligations
payable from general revenues, some of which may have a priority over the Base Rental Payments, or
which the City, in its discretion, may determine to pay prior to the Base Rental Payments.
The City has the capacity to enter into other obligations payable from the City's General Fund,
without the consent of or prior notice to the Owners of the Series 2014A Bonds. To the extent that
additional obligations are incurred by the City, the fiords available to make Base Rental Payments may be
decreased. In the event the City's revenue sources are less than its total obligations,the City could choose
to fund other municipal services before making Base Rental Payments. The same result could occur if,
because of State constitutional limits on expenditures, the City is not permitted to appropriate and spend
all of its available revenues. The City's appropriations. however, have never exceeded the limitations on
appropriations under Article XIIIB of the California. Constitution. For information on the City's current
limitations on appropriations, see "CONSTITUTIONAL AND STATUTORY LIMITATIONS ON
TAXES, REVENUES AND APPROPRIATIONS—Article XII113 of the California Constitution."
Valid and Binding Covenant to Budget and Appropriate
Pursuant to the Lease Agreement, the City covenants to take such action as may be necessary to
include Base Rental Payments due in its annual budgets and to make necessary appropriations for all such
payments. Such covenants are deemed to be duties imposed by law, and it is the duty of the public
officials of the City to take such action and do such things as are required by law in the performance of
the official duty of such officials to enable the City to carry out and perform such covenants. A court,
however, in its discretion may decline to enforce such covenants. Upon issuance of the Series 2014A
Bonds, Bond Counsel will render its opinion (substantially in the form of APPENDIX E—"PROPOSED
FORM OF BOND COUNSEL OPINION")to the effect that, subject to the limitations and qualifications
described therein, the Lease Agreement constitutes a valid and binding obligation of the City. As to the
Authority's practical realization of remedies upon default by the City, see"—Limitations on Remedies."
58
Item 13. - 130 HB -640-
Abatement
In the event of loss or substantial interference in the use and possession by the City of all or any
portion of the Property caused by material damage, title defect, destruction to or condemnation of the
Property, Base Rental Payments will be subject to abatement. In the event that such component of the
Property, if damaged or destroyed by an insured casualty, could not be replaced during the period of time
that proceeds of the City's rental interruption insurance will be available in lieu of Base Rental Payments,
or in the event that casualty insurance proceeds or condemnation proceeds are insufficient to provide for
complete repair or replacement of such component of the Property or prepayment of the Series 2014A
Bonds, there could be insufficient funds to make payments to Owners in full. Reduction in Base Rental
Payments due to abatement as provided in the Lease Agreement does not constitute a default thereunder.
It is not possible to predict the circumstances under which such an abatement of rental may occur.
In addition, there is no statute, case or other law specifying how such an abatement of rental should be
measured. For example, it is not clear whether fair rental value is established as of commencement of the
Lease Agreement or at the time of the abatement. If the latter, it may be that the value of the Property is
substantially higher or lower than its value at the time of issuance of the Series 2014A Bonds.
Abatement, therefore, could have an uncertain and material adverse effect on the security for and payment
of the Series 2014A Bonds. Depending oil its severity, an earthquake could result in abatement of Base
Rental Pavments under the Lease Agreement. See"— Earthquakes."
Risk of Uninsured Loss
The City covenants under the Lease Agreement to maintain insurance on the Property. See
"SECURITY FOR THE BONDS — Insurance." These insurance policies do not cover all types of risk,
and the insurance required under the Lease Agreement may be maintained in whole or in part in the form
of self-insurance, provided that such self-insurance complies with the terms thereof. The Property could
be damaged or destroyed due to earthquake or other casualty for which the Property is uninsured.
Additionally, the Property could be the subject of an eininent domain proceeding. Under these
circumstances an abatement of Base Rental Payments could occur and could continue indefinitely. There
can be no assurance that the providers of the City's liability and rental interruption insurance will in all
events be able or willing to make payments under the respective policies for such loss should a claim be
made under such policies. Further, there can be no assurances that amounts received as proceeds from
insurance or from condemnation of the Property will be sufficient to redeem the Series 2014A Bonds.
Under the Lease Agreement the City may obtain casualty insurance which provides for a
deductible up to $100,000. Should the City be required to meet such deductible expenses,the availability
of General Fund revenues to make Base Rental Payments may be correspondingly affected.
The City is not obligated under the Lease Agreement to procure and maintain, or cause to be
procured and maintained, earthquake insurance on the Property. The City currently carries earthquake
insurance on the Property although the Lease Agreement does not require it to do so. The City plans to
continue to purchase earthquake insurance on the Property so long as such insurance can be obtained on
the open market at reasonable rates. Depending on its severity, an earthquake could result in abatement
of Base Rental Payments under the Lease Agreement. See"—Abatement."
Eminent Domain
If the Property is taken permanently under the power of eminent domain or sold to a government
threatening to exercise the power of eminent domain, the term of the Lease Agreement will cease as of
the day possession is taken. If less than all of the Property is taken permanently, or if the Property or any
59
HB _641- Item 13. - 131
part thereof is taken temporarily, under the power of eminent domain, (a) the Lease Agreement will
continue in full force and effect and will not be terminated by virtue of such taking, and (b)there will be a
partial abatement of Base Rental Payments as a result of the application of net proceeds of any eminent
domain award to the prepayment of the Base Rental Payments, in an amount to be agreed upon by the
City and the Authority such that the resulting Base Rental Payments represent fair consideration for the
use and occupancy of the remaining usable portion of the Property.
Hazardous Substances
Owners and lessees of real property, including the Property, may be required by state and federal
laws to remedy conditions relating to release or threatened releases of hazardous substances on such
property. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980,
sometimes referred to as "CERCLA" or the "Superfund Act," is the most well known and widely
applicable of these laws, but California laws with regard to hazardous substances are also similarly
stringent. Under many of these laws, the owner or lessee is obligated to remedy a hazardous substance
condition of the property whether or not the owner or lessee had anything to do with creating or handling
the hazardous substance.
Further it is possible that the beneficial use of the Property may be limited in the future resulting
from the current existence on the Property of a substance currently classified as hazardous but which has
not been released or the release of which is not presently threatened, or may arise in the future resulting
from the current existence on the Property of a substance not presently classified as hazardous but which
may in the future be so classified. Further, such liabilities may arise not simply from the existence of a
hazardous substance but froin the method in which it is handled. All of these possibilities could
significantly limit the beneficial use of the Property.
The City is unaware of the existence of hazardous substances on the Property site which would
materially interfere with the beneficial use thereof.
Earthquakes
Generally, within the State, some level of seismic activity occurs on a regular basis. During the
past 150 years, the Southern California area has experienced several major and numerous minor
earthquakes. The most recent major earthquake in the Southern California area was the Northridge
earthquake, which occurred on January 17, 1994. The Northridge earthquake, with all epicenter
approximately 50 miles north of the City, measured 6.5 on the Richter scale. A recent report issued by a
working group of scientists and engineers, known as the Working Group on California Earthquake
Probabilities, sponsored in part by the U.S. Geological Survey, has projected that California has more
than a 99% chance of having a magnitude 6.7 or larger earthquake within the next 30 years, according to
scientists using a new model to determine the probability of big quakes. The likelihood of a major quake
of magnitude 7.5 or greater in the next 30 years is projected at 46% and such a quake is most likely to
occur in the southern half of the state.
The City has been affected by earthquakes, in most instances attributed to the Newport-
Inglewood fault, which has been responsible for several sizable temblors including the 1933 Long Beach
quake. The City is not legally obligated under the Lease Agreement to maintain, or cause to be
maintained, earthquake insurance on the Property and no assurance is made that any earthquake insurance
will be maintained. if there were to be an occurrence of severe seismic activity in the City, there could be
substantial damage to and interference with the City's right to use and occupy all or a portion of the
Property, which could result in Base Rental Payments being subject to abatement. Additionally, severe
60
Item 13. - 132 HB -64-2-
seismic activity in the City could impact the City's General Fund expenditures. See "CERTAIN RISK
FACTORS— Abatement"above.
Tsunami and Seiche
Similarly, the City is susceptible to tsunami and seiche hazards. A tsunami is a sea wave
generated by a submarine earthquake, landslide or volcanic eruption. A seiche is another form of
earthquake- or landslide-induced wave or oscillation that can be generated in an enclosed body of water
such as a lagoon or harbor. The entire City is less than 100 feet above sea level, and about 75 percent is
less than 25 feet above sea level. From the coast, the first 2 miles of inland homes and terrain east of the
Bolsa Chica wetlands and the Pacific Ocean range in elevation between 0 to 5 feet above sea level.
Homes in the upscale Huntington Harbour sector are at 5 to 10 feet above sea level. And at the inland
border with Fountain Valley, the elevation is about 15 feet. As such, the City is located in an area that is
susceptible to tsunami run up and seiche hazards. Although the City, believes that no active or inactive
fault lines pass through the City, if there were to be an occurrence of severe seismic activity at the City,
there could be a negative impact on the property at the City which could have an adverse effect on the
City's ability to make Base Rental Payments under the Lease Agreement as and when due and,
accordingly, the ability of the Authority to make payments of principal of and interest on the Series
2014A Bonds.
Bankruptcy
In addition to the limitation on remedies contained in the Indenture, the rights and remedies
provided in the Indenture and the Lease Agreement may be limited by and are subject to the provisions of
federal bankruptcy laws and to other laws or equitable principles that may affect the enforcement of
creditors' rights. The City is a unit of State government and therefore is not subject to the involuntary
procedures of the United States Bankruptcy Code (the "Bankruptcy Code"). However, pursuant to
Chapter 9 of the Bankruptcy Code, the City may seek voluntary protection from its creditors for purposes
of adjusting its debts. In the event the City were to become a debtor under the Bankruptcy Code, the City
would be entitled to all of the protective provisions of the Bankruptcy Code as applicable in a Chapter 9
proceeding. Among the adverse effects of such a bankruptcy might be: (1)the application of the automatic
stay provisions of the Bankruptcy Code, which, until relief is granted, would prevent collection of
payments from the City or the commencement of any judicial or other action for the purpose of
recovering or collecting a claim against the City; (ii) the avoidance of preferential transfers occurring
during the relevant period prior to the filing of a bankruptcy petition; (iii) the existence of unsecured or
court-approved secured debt which may have a priority of payment superior to that of Owners of Series
2014A Bonds; and (iv) the possibility of the adoption of a plan for the adjustment of the City's debt (a
"Plan'") without the consent of the Trustee or all of the Owners of Series 2014A Bonds, which Plan may
restructure, delay, compromise or reduce the amount of any claim of the Owners if the Bankruptcy Court
finds that the Plan is fair and equitable.
In addition, the City could either reject the Lease Agreement or assume the Lease Agreement
despite any provision of the Lease Agreement which makes the bankruptcy or insolvency of the City an
event of default thereunder. In the event the City rejects the Lease Agreement, the Trustee, on behalf of
the Owners of the Series 2014A Bonds, would have a pre-petition claim that may be limited under the
Bankruptcy Code and treated in a manner under a Plan over the objections of the Trustee or Owners of
the Series 2014A Bonds. Moreover, such rejection would terminate the Lease Agreement and the City's
obligations to make payments thereunder.
The Authority is a public agency and, like the City, is not subject to the involuntary procedures of
the Bankruptcy Code. The Authority may also seek voluntary protection under Chapter 9 of the
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HB -643_ Item 13. - 133
Bankruptcy Code. In the event the Authority were to become a debtor under the Bankruptcy Code, the
Authority would be entitled to all of the protective provisions of the Bankruptcy Code as applicable in a
Chapter 9 proceeding. Such a bankruptcy could adversely affect the payments under the Indenture.
Among the adverse effects might be: (i) the application of the automatic stay provisions of the
Bankruptcy Code, which, until relief is granted, would prevent collection of payments from the Authority
or the commencement of any judicial or other action for the purpose of recovering or collecting a claim
against the Authority; (6)the avoidance of preferential transfers occurring during the relevant period prior
to the filing of a bankruptcy petition; (iii) the existence of unsecured or court-approved secured debt
which may have priority of payment superior to that of the Owners of the Series 2014A Bonds; and (iv)
the possibility of the adoption of a plan for the adjustment of the Authority's debt without the consent of
the Trustee or all of the Owners of the Series 2014A Bonds, which plan may restructure, delay,
compromise or reduce the amount of any claim of the Owners if the Bankruptcy Court finds that the Plan
is fair and equitable. However, the bankruptcy of the Authority, and not the City, should not affect the
Trustee's rights under the Lease Agreement. The Authority could still challenge the assignment, and the
Trustee and/or the Owners of the Series 2014A Bonds could be required to litigate these issues in order to
protect their interests.
Limitations on Remedies
The rights of the Owners of Series 2014A Bonds are subject to the limitations on legal remedies
against cities in the State, including applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the enforcement of creditors' rights generally, now or hereafter in effect, and to the
application of general principles of equity, including concepts of materiality, reasonableness, good faith
and fair dealing and the possible unavailability of specific performance or injunctive relief. regardless of
whether considered in a proceeding in equity or at law.
Under Chapter 9 of the Bankruptcy Code (Title 11, United States Code), which governs the
bankruptcy proceedings for public agencies such as the City, there are no involuntary petitions in
bankruptcy. If the City were to file a petition under Chapter 9 of the Bankruptcy Code, the Owners of
Series 2014A Bonds, the Trustee and the Authority could be prohibited from taking any steps to enforce
their rights under the Lease Agreement, and from taking any steps to collect amounts due from the City
under the Lease Agreement.
All legal opinions with respect to the enforcement of the Lease Agreement and the Indenture will
be expressly subject to a qualification that such agreements may be limited by bankruptcy, reorganization,
insolvency, moratorium or other similar laws affecting creditors' rights generally and by applicable
principles of equity if equitable remedies are sought.
No Liability of Authority to the Owners
Except as expressly provided in the Indenture, the Authority will not have any obligation or
liability to the Owners of the Series 2014A Bonds with respect to the payment when due of the Base
Rental Payments by the City, or with respect to the performance by the City of other agreements and
covenants required to be performed by it contained in the Lease Agreement or the Indenture, or with
respect to the performance by the Trustee of any right or obligation required to be performed by it
contained in the Indenture.
Risk of Tax Audit
In December 1999, as a part of a larger reorganization of the Internal Revenue Service (the
"IRS"), the IRS commenced operation of its Tax Exempt and Government Entities Division (the "TE/GE
62
Item 13. - 134 HB -644-
Division"), as the successor to its Employee Plans and Exempt Organizations division. The new TE/GE
Division has a subdivision that is specifically devoted to tax-exempt bond compliance. Public statements
by IRS officials indicate that the number of tax-exempt bond examinations (which would include the
issuance of securities such as the Bonds) is expected to increase significantly under the new TE/GE
Division. There is no assurance that if an IRS examination of the Series 2014A Bonds was undertaken
that it would not adversely affect the market value of the Series 2014A Bonds. See"TAX MATTERS."
The City has not been contacted by the IRS regarding the examination of any of its bond
transactions.
State Budget
Approximately 46.96% (consisting of the sales tax, property tax and the motor vehicle license
fee) of the City's fiscal year 2012-13 General Fund budget consisted of payments collected by the State
and passed-through to local governments or collected by and allocated to local governments by State law.
Approximately 52.8% of the City's projected General Fund revenues for fiscal year 2013-14 consisted of
such payments collected by the State. The financial condition of the State has an impact on the level of
these revenues. In past years the State has reduced revenues to cities and counties to help solve the State's
budget problems.
The following information concerning the State of California's budgets has been obtained front
publicly available information which the Authority and the City believe to be reliable; however, neither
the Authority nor the City can take responsibility as to the accuracy or corrrpleteness thereof and have not
independently verified such information. Information about the State Budget is regularly available at
various State-inaintained web.sites. Test of the budget rncry be found at the Department of Finance
website, 141Mdof ca.gov, under the heading "California Budget. "An impartial analysis of the budget is
posted by the State Legislative Analyst's Office at irww.lao.ca.gov. In addition, various State official
statements, inar'v of which contain a suinniary of the current and past State budgets, may be found at the
website of the State Treasurer, tii,rvw.tieasra,er.ca.gov. The iriforination referred to is prepared by the
respective State agency maintaining each website and not by the Authority, the City or the Underwriter,
and the none of the Authority, the City or the Underwriter can take responsibility for the continued
accuracy of the irrternet addresses or for the accuracy or timeliness of information posted there, and such
information is not incorporated herein by these references.
The State's fiscal year begins on July 1 and ends on June 30. The annual budget is proposed by
the Governor by January 10 of each year for the next fiscal year(the "Governor's Budget"). Under State
law, the annual proposed Governor's Budget cannot provide for projected expenditures in excess of
projected revenues and balances available from prior fiscal years. Following the submission of the
Governor's Budget,the Legislature takes up the proposal.
Under the State Constitution, money may be drawn from the Treasury only through an
appropriation made by law. The primary source of the annual expenditure authorizations is the Budget
Act as approved by the Legislature and signed by the Governor. The Budget Act must be approved by a
two-thirds majority vote of each house of the Legislature. The Governor may reduce or eliminate specific
line items in the Budget Act or any other appropriations bill without vetoing the entire bill. Such
individual line-item vetoes are subject to override by a two-thirds majority vote of each house of the
Legislature.
Appropriations also may be included in legislation other than the Budget Act. Continuing
appropriations, available without regard to fiscal year; may also be provided by statute or the State
63
xB -645- Item 13. - 135
Constitution. Funds necessary to meet an appropriation need not be in the State treasury at the time such
appropriation is enacted; revenues may be appropriated in anticipation of their receipt.
2013-14 State Budget. Governor Brown sighed the final 2013-14 State Budget (the "2013-14
Budget"') into law on June 27, 2013. The centerpiece of the 2013-14 Budget is the restructuring of the
State's funding formula for K-12 schools through the implementation of the "Local Control Funding
Formula." The 2013-14 Budget allocates $2.1 billion to commence transitioning the State to the new
formula. allocating proportionately more money to school districts with high levels of low-income
students, those with limited English proficiency and foster children. Overall, the 2013-14 Budget boosts
K-12 and community college funding to $55.3 billion while giving the University of California. and
California State University systems an additional $125 million each. The 2013-14 Budget also restores
$63 million to the State court system that was subject to significant budget cuts in recent years and moves
forward with the State-based approach to the optional expansion of care allowed under the Federal
healthcare reform which will significantly increase health care coverage in the State. The 2013-14
Budget provides county welfare departments up to $120 million in additional General Fund monies to
accommodate new workload associated with implementing the Affordable Care Act. In fiscal year 2015-
16, the State will implement a new budgeting methodology, developed in consultation with counties, and
based on a zero-base review of all Medi-Cal related county administrative activities. Under Federal
health care reform, county costs and responsibilities for indigent health care are expected to decrease as
uninsured individuals obtain health care coverage. The State, In turn, will bear increased responsibility
for providing care to these newly eligible individuals through the Medi-Cal expansion.
Proposition 30. The passage of the Governor's November Tax Initiative ("Proposition 30")
placed on the November, 2012 ballot results in an increase in the State sales tax by a quarter-cent for four
years and, for seven years, raising taxes on individuals after their first $250,000 in income and on couples
after their first $500,000 in earnings. These increased tax rates will affect approximately 1 percent of
California personal income tax filers and in effect starting in the 2012 tax year, ending at the conclusion
of the 2018 tax year. The LAO estimates that, as a result of Proposition 30, additional state tax revenues
of about $6 billion annually from 2012-13 through 2016-17 will be received by the State with lesser
amounts of additional revenue available in fiscal years 201 1-12, 2017-18, and 2018-19. Proposition 30
also places into the State Constitution certain requirements related to the transfer of certain State program
responsibilities to local governments. mostly counties, including incarcerating certain adult offenders,
supervising parolees, and providing substance abuse treatment services.
California Public Employees' Pension Reform Act. On September 12, 2012, Governor Brown
signed Assembly Bill 340, creating the Public Employees' Pension Reform Act ("PEPRA"). Among
other things, PEPRA creates a new benefit tier for new employees/hnembers entering public agency
employment and public retirement system membership for the first time on or after January 1, 2013. The
new tier has a single general member benefit formula and three safety member benefit formulas that must
be implemented by all public agency employers unless the formula in existence on December 31, 2012
has both a lower normal cost and a lower benefit factor at normal retirement age. PEPRA requires that all
new employees/members, hired on or after January 1, 2013, pay at least 50% of the normal cost
contribution. The normal cost contribution is the contribution set by the retirement system's actuary to
cover the cost of a current year of service.
Governor's Proposed 2014-15 State Budget. The Governor's proposed 2014-15 State Budget
(the "Proposed 2014-15 Budget") was released on January 9, 2014 and includes: (i) spending of$154.9
billion from all funds, including $106.8 billion from the General Fund: (ii) a proposed reduction in the
State's long-term debt by more than $1 I billion in 2014-15, fully eliminating such long-term debt by
2017-18; (iii) proposed repayment of approximately $6 billion in deferred payments to K-12 schools; (iv)
a contribution of$1.6 billion to a "rainy day fund" to protect against future economic downturns; (v) an
64
Item 13. - 136 I113 -646-
increase in K-12 school funding levels of$3,410 per student through fiscal year 2017-18, including an
increase of more than $2,188 per student in fiscal year 2014-15 over fiscal 2011-12 levels; and (vi) $670
million in new General Fund spending to fund the expansion of Medi-Cal benefits, including mental
health. substance use disorder, adult dental, and specialized nutrition services. In addition, the Proposed
2014-15 Budget projects $217.8 billion in retirement-related unfunded liabilities. Combined with the
other liabilities,the total long term State liabilities stand at$354.5 billion.
While the State is projecting a budget surplus in the current fiscal year, for several years during
the course of the recent recession, the State faced a structural deficit that resulted in substantial annual
deficits and reductions in expenditures and the State continues to face certain financial challenges and
unfunded long-term liabilities of more than $200 billion, which could result in future reductions or
deferrals in amounts payable to the City. The State's financial condition and budget policies affect local
public agencies throughout California. To the extent that the State budget process results in reduced
revenues to the City, the City will be required to make adjustments to its budget. State budget policies
can also impact conditions in the local economy and could have an adverse effect on the local economy
and the City's major revenue sources.
The Proposed 2014-15 Budget includes $27.5 million in 2014-15 for cities for "front line law"
enforcement activities and $100 million to cities and counties for preservation of local streets and roads.
The LAO's Overview of the Proposed 2014-15 Budget(the "LAO Overview"), released January
l 3, 2014, generally praised the Proposed 2014-15 Budget including the Governor's focus on deferrals and
other means of lowering the State's "wall of debt." The LAO Overview includes a revenue forecast of
$6.4 billion in higher revenues for the State in Fiscal Years 2012-13 and 2013-14 combined, offset by $5
billion in increased expenditures, almost entirely due to greater required spending for schools and
community colleges. Combined with a projected $3.2 billion operating surplus for the State in Fiscal
Year 2014-15, the LAO projects that, absent any changes to current laws and policies, the State would
end Fiscal Year 2014-15 with a $5.6 billion reserve. The LAO Overview assumes continued economic
growth in future years and that State General Fund revenues will grow faster than expenditures through
2017-18, when the State's projected operating surpluses reach $9.6 Billion. The LAO notes that the
State's temporary personal income tax rate increases under Proposition 30 expire at the end of 2018,
resulting in a more gradual ramping down of these revenues over the last two fiscal years of the LAO
forecast.
Despite the large surplus projected by the LAO over the forecast period, the LAO also notes that
the fiscal recovery is dependent on a number of assumptions including continuing economic growth and
steady growth in stock prices. The LAO cautions that(1) an economic downturn within the next few years
could result in a return to operating deficits, (ii) volatility of capital gains could depress annual revenues,
and (iii) the LAO forecast assumes the State repays liabilities with payment schedules set in current law.
Other liabilities, including certain items on the Governor's "wall of debt" and the State's retirement
liabilities (particularly those related to the California State Teachers' Retirement System), remain unpaid
under the LAO forecast. If additional payments are made in the future to repay these liabilities or to
provide inflation adjustments to universities, the courts, State employees, and other programs, the
operating surpluses in the LAO forecast would fall significantly below the LAO's projections.
The LAO also notes that the 2013-14 State Budget assumed that Fiscal Year 2012-13 would end
with a $254 million reserve, however the LAO's General Fund revenue forecast for Fiscal Year 2012-13
projects $1.65 billion in higher revenues for Fiscal year 2012-13, principally due to personal income tax
collections. The LAO's higher revenue forecast results in $1.75 billion in additional General Fund
expenditures under the Proposition 98 minimum guarantee. The LAO recognizes that the 2013-14 State
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1113 -647- Item 13. - 137
Budget assumed the State would end Fiscal Year 2013-14 with a reserve of$1.1 billion, while the LAO
estimates that reserve to be $2.4 billion.
Future State Budgets. The City cannot predict what actions will be taken in this or any future
fiscal year by the State Legislature or the Governor to deal with the State's current or future budget
deficits, changing State revenues and expenditures, or what the effect of national and state economic
conditions on future State budgets will be. Moreover, the State Legislature or Governor could take
additional actions which could affect the State's receipts, expenditures and borrowings during the current
fiscal year, and thereby influence the City's financial situation. Future State budgets will be affected by
national and State economic conditions and other factors, including the current economic downturn, over
which the City has no control.
Further information about the State budget is available from the Public Finance Division of the
State Treasurer's Office. In addition, information about the State budget is regularly available at various
State-maintained websites, including www.dofea.gov (Department of Finance), www.lao.ca.gov (Office
of the Legislative Analyst) and www.treasurer.ca.gov (State Treasurer). The above-mentioned websites
are included herein for informational purposes only. The Authority and the City make no representations
concerning, and do not take any responsibility for, the accuracy or timeliness of information posted on
such websites or the continued maintenance of such websites by the respective entities.
Loss of Tax Exemption
As discussed under the caption "TAX MATTERS," in order to maintain the exclusion from gross
income for federal income tax purposes of the interest on the Series 2014A Bonds, the City has
covenanted in the Lease Agreement not to take any action, or fail to take any action, if such action or
failure to take such action would adversely affect the exclusion from gross income of interest on the
Series 2014A Bonds under Section 103 of the Internal Revenue Code of 1986, as amended. Interest on the
Series 2014A Bonds could become includable in gross income for purposes of Federal income taxation
retroactive to the date the Series 2014A Bonds were issued, as a result of acts or omissions of the City in
violation of the Code. Should such an event of taxability occur, the Series 2014A Bonds are not subject to
early redemption and will remain outstanding to maturity or until prepaid under the optional redemption
provisions of the indenture.
Limited Secondary Market
As stated herein, investment in the Series 2014A Bonds poses certain economic risks which may
not be appropriate for certain investors, and only persons with substantial financial resources who
understand the risk of investment in the Series 2014A Bonds should consider such investment. There can
be no guarantee that there will be a secondary market for purchase or sale of the Series 2014A Bonds or,
if a secondary market exists, that the Series 2014A Bonds can or could be sold for any particular price.
Changes in Law
There can be no assurance that the electorate of the State will not at some future time adopt
additional initiatives or that the Legislature will not enact legislation that will amend the laws or the
Constitution of the State resulting in a reduction of the General Fund revenues of the City and
consequently, having an adverse effect on the security for the Series 2014A Bonds. See
"CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS."
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Item 13. - 138 I-1B -648-
TAX MATTERS
In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the Authority ("Bond
Counsel"), based upon an analysis of existing laws, regulations, rulings and court decisions, and
assuming, among other matters, the accuracy of certain representations and compliance with certain
covenants, interest on the Series 2014A Bonds is excluded from gross income for federal income tax
purposes under Section 103 of the internal Revenue Code of 1986 (the "Code") and is exempt from State
of California personal income taxes. Bond Counsel is of the further opinion that interest on the Series
2014A Bonds is not a specific preference item for purposes of the federal individual or corporate
alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted
current earnings when calculating corporate alternative minimum taxable income. A complete copy of
the proposed form of opinion of Bond Counsel is set forth in Appendix E hereto.
To the extent the issue price of any maturity of the Series 2014A Bonds is less than the amount to
be paid at maturity of such Series 2014A Bonds (excluding amounts stated to be interest and payable at
least annually over the term of such Series 2014A Bonds), the difference constitutes "original issue
discount," the accrual of which, to the extent properly allocable to each Beneficial Owner thereof, is
treated as interest on the Series 2014A Bonds which is excluded from gross income for federal income tax
purposes and State of California personal income taxes. For this purpose, the issue price of a particular
maturity of the Series 2014A Bonds is the first price at which a substantial amount of such maturity of the
Series 2014A Bonds is sold to the public (excluding bond houses, brokers, or similar persons or
organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue
discount with respect to any maturity of the Series 2014A Bonds accrues daily over the term to maturity
of such Series 2014A Bonds on the basis of a constant interest rate compounded semiannually (with
straight-line interpolations between compounding dates). The accruing original issue discount is added to
the adjusted basis of such Series 2014A Bonds to determine taxable gain or loss upon disposition
(including sale, redemption, or payment on maturity)of such Series 2014A Bonds. Beneficial Owners of
the Series 2014A Bonds should consult their own tax advisors with respect to the tax consequences of
ownership of Series 2014A Bonds with original issue discount, including the treatment of Beneficial
Owners who do not purchase such Series 2014A Bonds in the original offering to the public at the first
price at which a substantial amount of such Series 2014A Bonds is sold to the public.
Series 2014A Bonds purchased, whether at original issuance or otherwise, for an amount higher
than their principal amount payable at maturity (or, in some cases, at their earlier call date) ("Premium
Bonds") will be treated as having amortizable bond premium. No deduction is allowable for the
amortizable bond premium in the case of bonds, like the Premium Bonds, the interest on which is
excluded from gross income for federal income tax purposes. However, the amount of tax-exempt
interest received. and a Beneficial Owner's basis in a Premium Bond, will be reduced by the amount of
amortizable bond premium properly allocable to such Beneficial Owner. Beneficial Owners of Premium
Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond
premium in their particular circumstances.
The Code imposes various restrictions, conditions and requirements relating to the exclusion from
gross income for federal income tax purposes of interest on obligations such as the Series 2014A Bonds.
The Authority and the City have made certain representations and covenanted to comply with certain
restrictions, conditions and requirements designed to ensure that interest on the Series 2014A Bonds will
not be included in federal Gross income. inaccuracy of these representations or failure to comply with
these covenants may result in interest on the Series 2014A Bonds being included in gross income for
federal income tax Purposes, possibly from the date of original issuance of the Series 2014A Bonds. The
opinion of Bond Counsel assumes the accuracy of these representations and compliance with these
covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions
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FIB -649- Item 13. - 139
taken (or not taken), or events occurring (or not occurring), or any other matters coming to Bond
Counsel's attention after the date of issuance of the Series 2014A Bonds may adversely affect the value
of, or the tax status of interest on, the Series 2014A Bonds. Accordingly, the opinion of Bond Counsel is
not intended to, and may not, be relied upon in connection with any such actions, events or matters.
Although Bond Counsel is of the opinion that interest on the Series 2014A Bonds is excluded
from gross income for federal income tax purposes and is exempt from State of California personal
income taxes, the ownership or disposition of or the accrual or receipt of interest on, the Series 2014A
Bonds may otherwise affect a Beneficial Owner's federal, state or local tax liability. The nature and
extent of these other tax consequences depends upon the particular tax status of the Beneficial Owner or
the Beneficial Owner's other items of income or deduction. Bond Counsel expresses no opinion
regarding any such other tax consequences.
Future legislative proposals, if enacted into law, clarification of the Code or court decisions may
cause interest on the Series 2014A Bonds to be subject, directly or indirectly, to federal income taxation
or to be subject to or exempted from state income taxation, or otherwise prevent Beneficial Owners from
realizing the full current benefit of the tax status of such interest. The introduction or enactment of any
such future legislative proposals, clarification of the Code or court decisions may also affect the market
price for, or marketability of, the Series 2014A Bonds. Prospective purchasers of the Series 2014A
Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax
legislation, regulations or litigation, as to which Bond Counsel expresses no opinion.
The opinion of Bond Counsel is based on current legal authority, covers certain matters not
directly addressed by such authorities, and represents Bond Counsel's judgment as to the proper treatment
of the Series 2014A Bonds for federal income tax purposes. It is not binding on the Internal Revenue
Service ("IRS") or the courts. Furthermore, Bond Counsel cannot give and has not given any opinion or
assurance about the future activities of the Authority or the City, or about the effect of future changes in
the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. The
Authority and the City have covenanted, however, to comply with the requirements of the Code.
Bond Counsel's engagement with respect to the Series 2014A Bonds ends with the issuance of
the Series 2014A Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the
Authority, the City or the Beneficial Owners regarding the tax-exempt status of the Series 2014A Bonds
in the event of an audit examination by the IRS. Under current procedures, parties other than the
Authority, the City and their appointed counsel, including the Beneficial Owners, would have little, if
any, right to participate in the audit examination process. Moreover, because achieving judicial review in
connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review
of IRS positions with which the Authority and the City legitimately disagrees, may not be practicable.
Any action of the IRS, including but not limited to selection of the Series 2014A Bonds for audit, or the
course or result of such audit, or an audit of bonds presenting similar tax issues may affect the market
price for, or the marketability of, the Series 2014A Bonds, and may cause the Authority, the City or the
Beneficial Owners to incur significant expense.
CERTAIN LEGAL MATTERS
Legal matters incident to the authorization, issuance, sale and delivery by the Authority of the
Series 2014A Bonds are subject to the approval as to their validity of Orrick, Herrington & Sutcliffe LLP,
as Bond Counsel to the Authority. Bond Counsel, as such, undertakes no responsibility for the accuracy.
completeness or fairness of this Official Statement. Certain legal matters will be passed upon for the City
and the Authority by the City Attorney, and by Orrick, Herrington & Sutcliffe LLP, as Disclosure
Counsel. Certain legal matters will be passed on for the Underwriter by Stradlin; Yocca Carlson &
68
Item 13. - 140 FIB -650-
Rauth, a Professional Corporation, Newport Beach, California. Certain compensation of Bond Counsel
and Disclosure Counsel is contingent upon the issuance and delivery of the Series 2014A Bonds.
FINANCIAL STATEMENTS
The City's financial statements for the fiscal year ended September 30, 2013, included in
APPENDIX B — "COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE
FISCAL YEAR ENDED SEPTEMBER 30, 2013," have been audited by Vavrinek, Trine, Day and Co.,
LLP, Certified Public Accountants & Consultants, Newport. Beach, California, as stated in their reports
appearing in such appendix. Vavrinek, Trine, Day and Co., LLP has not undertaken to update its reports
or to take any action intended or likely to elicit information concerning the accuracy, completeness or
fairness of the statements made in this Official Statement, and no opinion is expressed by Vavrinek,
Trine, Day and Co., LLP with respect to any event subsequent to its report.
LITIGATION
To the best knowledge of the Authority and the City, except as otherwise disclosed in this
Official Statement, there is no pending or threatened litigation concerning the validity of the Series 2014A
Bonds or the pledge of the Lease Revenues or challenging any action taken by the Authority or the City in
connection with the authorization of the Indenture or the Lease Agreement, or any other document
relating to the Series 2014A Bonds to which the Authority or the City is or is to be become a party or the
performance by the Authority or the City of any of their obligations under any of the foregoing. Further,
to the best knowledge of the City, except as otherwise disclosed in this Official Statement, there is no
litigation, proceeding, action, suit, or investigation pending, with service of process having been
accomplished, or threatened in writing against the City, which in any manner, questions the right of the
City to pay the Base Rental Payments under the Lease Agreement.
RATINGS
Fitch Ratings, Inc. ("Fitch") and Standard and Poor's Ratings Services, a Standard & Poor's
Financial Services LLC business ("S&P) have assigned their ratings of"_" and " ," respectively, to
the Series 2014A Bonds. Such ratin�(Ys reflect only the views of such organizations and any desired
explanation of the significance of such ratings should be obtained from the rating agency furnishing the
same, at the following addresses: Fitch Ratings, Inc., 33 Whitehall Street, New York,New York 10007„
and Standard & Poor's Ratings Services, 55 Water Street, New York, New York 10041. Generally, a
rating agency bases its rating on the information and materials furnished to it and on investigations,
studies and assumptions of its own. There is no assurance such ratings will continue for any given period
of time or that such ratings will not be revised downward or withdrawn entirely by the rating agencies, if
in the judgment of the rating agencies, circumstances so warrant. Any such downward revision or
withdrawal of such ratings may have an adverse effect on the market price of the Series 2014A Bonds.
UNDERWRITING
The Series 2014A Bonds are being purchased by Merrill Lynch, Pierce, Fenner & Smith
Incorporated (the "Underwriter"). The Underwriter has agreed to purchase the Series 2014A Bonds at a
price of $ , which amount represents the principal amount of the Series 2014A Bonds of .
$ , less $ , representing the Underwriter's discount, plus $ , representing original
issue premium. The contract of purchase pursuant to which the Series 2014A Bonds are being purchased
by the Underwriter provides that the Underwriter will purchase all of the Series 2014A Bonds if any are
purchased. The obligation of the Underwriter to make such purchase is subject to certain terms and
conditions set forth in such contract of purchase. The Underwriter may offer and sell the Series 2014A
69
HB _651- Item 13. - 141
Bonds to certain dealers and others at prices different from the prices stated on the inside cover page of
this Official Statement. The offering prices may be changed from time to time by the Underwriter.
The Underwriter and its respective affiliates are full service financial institutions engaged in
various activities, which may include securities trading, commercial and investment banking, financial
advisory, investment management, principal investment, hedging, financing and brokerage services. The
Underwriter and its respective affiliates have, from time to time, performed, and may in the future
perform, various investment banking services for the City and/or the Authority, for which they received
or will receive customary fees and expenses.
In the ordinary course of their various business activities, the Underwriter and its respective
affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or
related derivative securities, which may include credit default swaps) and financial instruments(including
bank loans) for their own account and for the accounts of their customers and may at any tune hold long
and short positions in such securities and instruments. Such investment and securities activities may
involve securities and instruments of the City and/or the Authority.
The Underwriter and its respective affiliates may also communicate independent investment
recommendations, market color or trading ideas and/or publish or express independent research views in
respect of such assets, securities or instruments and may at any time hold. or recommend to clients that
they should acquire, long and/or short positions in such assets, securities and instruments.
FINANCIAL ADVISOR
Public Financial Management, Inc., Los Angeles, California, has served as Financial Advisor in
connection with the authorization and delivery of the Series 2014A Bonds. The Financial Advisor is not
obligated to undertake, and has not undertaken to make, an independent verification or to assume
responsibility for the accuracy, completeness or fairness of the information contained in the Official
Statement. Public Financial Management, Inc. is an independent advisory firm and is not engaged in the
business of underwriting,trading or distributing municipal or other public securities.
CONTINUING DISCLOSURE
The ultimate security for the payments of principal and interest on the Bonds comes from the
Base Rental Payments to be made by the City and, therefore, the City, as an obligated person within the
meaning of the Rule. has agreed to undertake the disclosure responsibilities required by the Rule. The
Authority has not undertaken to provide any continuing disclosure required by the Rule.
The City has covenanted to provide, or cause to be provided, to the Municipal Securities
Rulemaking Board's EMMA System, for purposes of the Rule, certain annual financial information and
operating data of the type set forth herein including, but not limited to, its audited financial statements
and, in a timely manner, notice of certain enumerated events. These covenants have been made in order
to assist the Underwriter in complying with the Rule. The City will execute a continuing disclosure
certificate (the "Continuing Disclosure Certificate") for the benefit of the owners of the Series 2014A
Bonds. See APPENDIX F — "FORM OF CONTINUING DISCLOSURE CERTIFICATE" for a
description of the Continuing Disclosure Certificate. A failure by the City to provide any information
required thereunder will not constitute an Event of Default under the Indenture or the Lease Agreement.
Within the last five years, none of the City or its community facilities districts has failed to timely comply
with their respective prior continuing disclosure obligations under the Rule in all material respects.
Notwithstanding the foregoing, in 2009, the City filed Comprehensive Annual Financial Reports for
several of its community facilities districts one week late.
70
Item 13. - 142 Hll -652-
ADDITIONAL INFORMATION
Summaries and explanations of the Series 2014A Bonds and documents contained in this Official
Statement do not purport to be complete, and reference is made to such documents for full and complete
statements of their provisions.
The preparation and distribution of this Official Statement have been authorized by the Authority
and the City.
HUNTINGTON BEACH PUBLIC
FINANCING AUTHORITY
By
Chair of the Board of Directors
CITY OF HUNTINGTON BEACH
By
Director of Finance
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HB -653- Item 13. - 143
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72
Item 13. - 144 xB -654-
APPENDIX A
GENERAL,ECONOMIC AND DEMOGRAPHIC INFORMATION
RELATING TO THE CITY
General Information
Founded in the late 1880's, Huntington Beach (the "City")was incorporated as a chartered city in
1909 and became a charter city in 1937. The City encompasses 31.6 square miles (26.4 square miles is
land, 5.2 square miles is water) in the coastal area of Orange County, California (the "County"), adjacent
to the Cities of Costa Mesa, Fountain Valley, Newport Beach, Seal Beach and Westminster. The City is
approximately 40 miles southeast of Los Angeles and 90 miles northwest of San Diego. As January 1,
2014, the population was estimated at 195,999, according to the State of California's Department of
Finance.
The City is a full service city. Its major departments include the City Manager's office, Finance,
Building and Planning, Library Services, Public Works, Community Services, Economic Development,
Information Services and Police and Fire. The City has approximately 973 employees and a total budget
of approximately $313,800,000.
Internationally known as Surf City, the City boasts eight miles of scenic, accessible beachfront,
the largest stretch of uninterrupted beachfront on the West Coast. Tourism remains a vital part of the
economy, as over 11 million visitors flock to the City during the summer, o❑ weekends and for special
events. The City's parks and recreation features one of the largest recreational piers in the world, public
parks, riding stables and equestrian trails, a marina, and a wildlife preserve, and an eight-mile biking,
inline skating,jogging, and walking trail along the ocean.The crown jewel of the City's recreation system
is the wide expanse of beautiful and spacious beaches, where large crowds gather to watch professional
sporting events as the U.S. Open of Surfing, AVP Pro Beach Volleyball and Van's World Championship
of Skateboarding.
The Huntington Beach Art Center and the Huntington Beach Playhouse provide a wide variety of
fine arts, and the excellent library system and numerous museums provide a strong cultural foundation.
The educational system, with five city high schools and 35 elementary schools, is excellent. The City is
home to Golden West Community College and nearby UC Irvine and Cal State Long Beach and
Fullerton.
Government Organization
The City has a council/manager form of government. The City Council is comprised of seven
members elected bi-annually at large to four-year terms and the Mayor is selected by the Council
Members to a one-year term. The City Council appoints the City Manager who is responsible for the day-
to-day administration of City business and the coordination of all departments of the City. As of.Lune 30,
2014,the City had 973 full-time employees.
The members of the City Council, the expiration dates of their terms and key administrative
personnel are set forth in the charts below.
A-1
1413 -65s- Item 13. - 145
CITY COUNCIL
Council Member Term Expires
Matthew Harper,Mayor November 2014
Joe Shaw,Mavor Pro Tein November 2014
Connie Boardman, Wember November 2014
Joe Carchio.Member November 2014
Jill Hardy,Member November 2016
Jim Katapodis November 2016
Dave Sullivan, Member November 2016
KEY ADMINISTRATIVE PERSONNEL
Fred Wilson City Manager
Ken Domer Assistant City Manager
Joan L. Flynn City Clerk
Jennifer McGrath, Esq. City Attorney
Alisa Cutchen City Treasurer
Joyce Zacks Deputy City Treasurer
Lori Ann Farrell Director of Finance
Carol Molina-Espinoza Budget Manager
Dahle Bulosan Accounting Manager
Sunny Han Senior Administrative Analyst
Governmental Services
Public Safety and Welfare - Law enforcement and fire protection services are provided by the
City. The Humtington Beach Police Department currently employs 193 sworn officers. The Huntington
Beach Fire Department employs 129 sworn fire fighters operating out of eight fire stations and maintains
a Hazardous Materials Response Unit operating as a part of a county wide response team. Other services
provided by the City include emergency medical aid, traffic safety maintenance, and building safety
regulation and inspection.
Public Services - Water service is provided to City residents through the City's municipal water
department.
Public Works/Planning - Additional services include parkway and median maintenance and
improvements, refuse management, sewer and storm drain maintenance, zoning and development
administration, environmental review, code enforcement and street tree maintenance.
Leisure and Community Services - The City operates the Huntington Beach Library which
includes the central library and four branches. The City's Community Services Department provides
citizens with a variety of park and recreational and marine safety (life( uard) services on a year round
basis. Facilities include the Huntington Beach Art Center, fifty-six park sites, 8.5 miles of public beach, a
public golf course, an Equestrian Center and two senior centers.
Community Information
Public school education is available through four elementary school districts and one high school
district. There are 26 elementary schools, 4 middle schools and 5 high schools. Students are also served
A-2
Item 13. - 146 HB -656-
by 10 parochial and private schools. Area colleges and universities include Orange Coast College,
Goldenwest College, Long Beach State University and the University of California at Irvine.
Health Care services available within the immediate area are provided by Huntington Beach
Hospital in Huntington Beach, Hoag Memorial Hospital in Newport Beach and Fountain Valley Regional
Hospital.
Area attractions include Disneyland, Knott's Beny Farm. the Aquarium of the Pacific and Wild
Rivers Aquatic Park. Locally, the City's public beaches routinely serve as the site of the Men's and
Women's Professional Beach Volleyball Tour and the International Surfing and World Cup event. Other
attractions include the Bolsa Chica Ecological Reserve, a restored wetlands area known for winter bird
watching, and the International Surf Museum.
Transportation
The City is 12 miles from the .John Wayne/Orange County Airport (SNA), 18 miles from the
Long Beach Airport (LGB), 38 miles from Los Angeles International (LAX) and 48 miles from the
Ontario International Airport(ONT).
Greyhound Lines serves the City with stops in Santa Ana and Irvine. In Orange County, the
Orange County Transportation Authority (OCTA) provides convenient service and connections to bus
lines serving the greater Los Angeles(Metropolitan Transit Authority)and San Diego areas.
The City is accessible by train. The nearest train depots are in Santa Ana, Anaheim and Irvine.
Population
The following table provides a comparison of population growth for the City and the County between
2005 and 2014.
Populational
City of Huntington Beach and Orange County
2005-2014
City of Orange
Year Huntington Beach County
2005 200,023 3,045,682
2006 201,346 3,071,222
2007 201.315 3,088,594
2008 201,127 3,106,872
2009 202,230 3,134,276
2010 189,977 3,008,356
2011 190,355 3,028,846
2012 192.653 3,047,875
2013 193.836 3,085,269
2014 195.999 3.113,991
The population estimates provided for 2002-2009 incorporate 2000 Census numbers as benchmarks. Population estimates for 2010-2014
incorporate 2010 Census numbers as benchmarks. The City is not otherwise aware of any diminution in its population or that of the
County.
Source_ State of California Department of Finance.
A-3
NB -657- Item 13. - 147
Personal Income
"Effective Buying Income" is defined as personal income less personal tax and nontax payments,
a number often referred to as "disposable" or "after-tax" income. Personal income is the aggregate of
wages and salaries, other labor-related income (such as employer contributions to private pension funds),
proprietor's income, rental income (which includes imputed rental income of owner-occupants of non-
farm dwellings), dividends paid by corporations, interest income from all sources, and transfer payments
(such as pensions and welfare assistance). Deducted from this total are personal taxes (federal, state and
local), nontax payments (tines, fees, penalties, etc.) and personal contributions to social insurance.
According to U.S. government definitions, the resultant figure is commonly known as "disposable _
personal income.'"
CITY OF H'UNTINGTON BEACH,STATE OF CALIFORNIA AND UNITED STATES
MEDIAN HOUSEHOLD EFFECTIVE BUYING INCOME
City of
Huntington State of
Year Beach Orange County California United States
2009 -l'1 49,736 43,251
2010 57.849 47,177 43,368
2011 57,607 47,062 41,253
2012 60,597 57.181 47,307 41,358
2013 61,837 59.589 48,340 43,715
�)Not available.
Source: The Nielsen Company for 2010-2012.
A-4
Item 13. - 148 11B -658-
Employment and Industry-
The following table sets forth labor force, employment and unemployment for the period from
2009 to 2013, in the City, the County, the State and the United States:
CITY OF HUNTINGTON BEACH LABOR MARKET
Labor Force, Employment and Unemployment
Annual Average(in thousands)
Civilian Labor Civilian Unemployment
Year and Area Force Employment Unemployment Rate(%)
2009
City of Huntington Beach 121 112 8.8 7.30//o
Orange County 1,589 1,448 141 8.9
California 18,216 16,151 2,064 11.3
United States 154,142 139,877 14,265 9.3
2010
City of Huntington Beach 121 114 9.4 7.8%
Orange County 1,592 1,442 151 9.5
California 18,331 16.063 2,267 12.4
United States 153,889 139.064 14,825 9.6
2011
City of Huntington Beach 122 1 l 3 8.7 7.8010
Orange County 1,600 1,460 140 8.8
California 18,405 16,237 2,167 11.8
United States 153,617 139,869 11,460 8.9
2012
City of Huntington Beach 123 117 7.6 6.0%
Orange County 1,619 1,496 123 7.6
California 18,519 16.590 1,929 10.4
United States 154,975 142,469 12,506 8.1
2013
City of Huntington Beach 123 117 62 5.14'o
Orange County 1,611 1,511 100 6.2
California 18,597 16,933 1,664 8.9
United States 155.389 143,929 11,460 7.4
Source: California Fmployment Development Department;United States Department of Labor Bureau of Labor Statistics.
A-5
1-4B -659- Item 13. - 149
The principal private employers operating within the City and their respective number of
employees as of June 30, 2013, are as follows:
CITY OF HUNTINGTON BEACH
Principal Private Employers
Number of
Name of Employer Employees
Boeing 51178
Cambro MFG Co. 1,137
Quicksilver 955
Ensign United States Drilling 925
Hyatt Regency Huntington Beach 641
C&D Aerospace 555
Huntington Beach Hospital 527
Wal-Mart 462
Rainbow disposal 408
Huntington Beach Healthcare 381
Total of top 10 11.169
All others 108,431
Total employment(public and private) 1191600
Source:City of Huntington Beach.
Commercial Activity
The following charts summarize the volume of retail sales and taxable transactions for the City
for 2008 through 2012.
CITY OF HUNTINGTON BEACH
Total Taxable Transactions
(in Thousands)
2008-2012
Total Taxable Issued
Retail Sales Retail Sales Transactions Sales
Year (5000's) Permits (5000,S) Permits
2008 1,916,823 3,105 2,5631,546 7,127
2009 1,673,149 4,274 2,247,735 6,582
2010 1,723,952 4.563 2,366,485 6,487
2011 2,012,833 4,071 2,584,793 3,968
2012 2,411,563 4,870 3,020,710 7,030
Source: State Board of Equalization_"Taxable Sales in California."
A-6
Item 13. - 150 11B -660-
A five-year history of taxable transactions by type of business for the City are shown in the tables
below.
CITY OF HUNTINGTON BEACH
Taxable Transactions by Type of Business
(in Thousands)
2005-2009
Retail Stores 2007 2008 2009
Apparel Stores $ 110.443 $ 97,593 $ 95,231
General Merchandise Stores 214.686 216,311 163,612
Food Stores 122,625 121,443 143,136
Eating/Drinking Places 320,143 320,626 308.763
Home Furnishings/Appliances 102,428 90,650 77,385
Building Materials 218,725 158,741 126,341
Motor vehicles and parts 456,067 368,764 330,708
Service Stations 213,160 243,676 188,793
Other Retail Stores 337,972 299,018 239,179
Total Retail Stores $1096,249 $1,916,823 $1,673,149
All Other Outlets 534.950 646,723 574,586
Total All Outlets $2,631,199 $2.563,546 $2,247,735
Source: State Board of Equalization,"Taxable Sales in California."
CITY OF HUNTINGTON BEACH
Taxable Transactions by Type of Business
(in Thousands)
2010-2012
Retail and Food Services 2010 2011 2012
Motor Vehicles and Parts Dealers $346,856 $389,813 $460,925
Home Furnishings and Appliance Stores 75,187 231,257
Bldg.Material &Garden Equip.&Supplies 129,879 133,578 138,923
Food&Beverage Stores 143,990 150A26 165,057
Gasoline Stations 214,714 262,853 263,446
Clothing and Clothing Accessories Stores 96,280 1.00,918 119,832
General Merchandise Stores 169,056 170.312 251,287
Food Services and Drinking Places 311.094 330,543 357,963
Otlier Retail Group 236,987 243.133 654,131
Total Retail and Food Services $1.724,043 $2,012,833 $2,411,563
All Other Outlets 642,533 571,960 609,157
Total All Outlets $2,366A85 $2,584,793 $3,020,710
Sales omitted because their publication would result in the disclosure of confidential inforniation.
Source: State Board of Equalization."Taxable Sales in California."
A-7
IJB -661- Item 13. - 151
APPENDIX B
COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY
FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2013
B-1
Item 13. - 152 �B -662-
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CITY OF HUNTINGTON BEACH, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED SEPTEMBER 30, 2013
Prepared by the Finance Department
Item 13. - 154 Tl -664-
THIS E INTENTIONALLY LEFT BLANK
HB -665- Item 13. - 155
INTRODUCTORY SECTION
Item 13. - 156 uB -666-
THIS PAGE INTENTIONALLY LEFT BLANK
HB -667- Item 13. - 157
City of Huntington Beach
Comprehensive Annual Financial Report
Year Ended September 30, 2013
TABLE OF CONTENTS
INTRODUCTORY SECTION
Table of Contents........................................................................................................................................
-��
Letterof Transmittal .................................................................................................................................... m-xu
CityOfficials................................................................................................................................................xni
OrganizationalChart...................................................................................................................................xiv
Certificate of Achievement in Excellence in Financial Reporting................................................................. xv
FINANCIAL SECTION
IndependentAuditor's Report...................................................................................................................... 1-3
Management's Discussion and Analysis (Required Supplementary Information) ....................................... 5-19
Basic Financial Statements:
Government-wide Financial Statements:
Statementof Net position................................................................................................................... 23
Statementof Activities ....................................................................................................................... 24
Fund Financial Statements:
Balance Sheet— Governmental Funds.............................................................................................. 25
Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net position......... 26
Statement of Revenues, Expenditures and Changes in Fund Balances—Governmental Funds ...... 27
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances
of Governmental Funds to the Statement of Activities.................................................................... 28
Statement of Net position — Proprietary Funds .................................................................................. 29
Statement of Revenues, Expenses and Changes in Fund Net position— Proprietary Funds ............ 30
Statement of Cash Flows— Proprietary Funds................................................................................... 31
Statement of Fiduciary Fund Net position.......................................................................................... 32
Statement of Changes in Fiduciary Fund Net position —Trust Funds................................................ 32
Notes to Financial Statements.............................................................................................................. 35-109
Required Supplemental Information:
BudgetaryInformation........................................................................................................................ 112
Schedule of Revenues, Expenditures and Changes in Fund Balance— Budget
AndActual— General Fund............................................................................................................. 113
Schedule of Revenues, Expenditures and Changes in Fund Balance— Budget
And Actual —Grants Special Revenue Fund................................................................................... 114
Schedule of Funding Progress (Normal Retirement Plan, Supplemental Retirement Plan,
And Other Postemployment Benefits)................... .......... ........................ ...................._............_ 115-116
Schedule of Employer Contributions (Supplemental Retirement Plan).............................................. 116
i
Item 13. - 158 HB -668-
FINANCIAL SECTION (Continued)
Supplementary Information:
Combining and Individual Fund Statements and Schedules:
Combining Balance Sheet—Other Governmental Funds..... .......... ........... .............................. .... 121-124
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances
OtherGovernmental Funds ...................... ............................................................................. ....... 125-128
Schedule ofRevenues, Expenditures, and Changes in Fund Balances—
Budget and Actual —Other Governmental Funds ........................................ .................................. 129-13O
Schedule ofRevenues, Expendituresand Changes in Fund Balance—
And Actual — LM|HAF Capital Projects Fund ................................................................................_ 137
Combining Statement of Fiduciary Fund Assets and Liabilities.......... ............................................... 142
Combining Statement of Changes in Fiduciary Assets and Liabilities............................ .................. 143-144
STATISTICAL SECTION
Net poebonbvConnponent— LaetTenFleCa|Yearo ------------------------- 147-148
Changes in Net position — Last Ten Fiscal Years.... .......................................... .........— .......................... 147-15O
Fund Balances—Governmental Funds — Last Ten Fiscal Years .............................................. ................. 151
Changes in Fund Balances— Last Ten Fiscal Years....................................... .......... ...... ........... ---' 153-154
Assessed and Actual Valuation of All Taxable Property (Excluding Redevelopment Agency)
LastTen Fiscal Years ..... ....................................... .......... .........--- ............ — ..................... — ..... 155
Property Tax Rates—All Direct and Overlapping Government Tax Rate 84-081
LargeetAneainChv — LaotTenFioCa| Yeano--------------------------- 155
Property Tax Levies and Collections — Last Ten Fiscal Years ........ —.............. — ...................... ...... ....... 156
Top Ten Property Tax Payers —CunentYearandTenYeavaAoo------------------. 157
Ratios of Outstanding Debt by Type— Last Ten Fiscal Years..................... ...................... ...... ..... .....— 158
Legal Debt Margin— Last Ten Fiscal Years........... ........... —.......... .....___......... --- ........... ... ...... 158
Statement of Direct and Overlapping Bonded Debt ---------------------------- 159
FM0jpa| Private Enno|oyere—CurrentYearand Nine Years Ago...................... ........... —....................... 160
Full-Time Actual and Budgeted City Employees bv Program/Function— Last Ten Fiscal Years................. 1OO
Operating Indicators bv Function/Activity— Last Eight Fiscal Yeans ... — ...... ... ... .............. ........ ....___ 1O1
Capital Assets Statistics by Function/Activity.......................... .......................... ---- .......— ............ � 1O1
..
o
Tfpm 13. 159
CITY OF HUNTINGTON BEACH
March 28, 2014
To the Honorable Mayor and City Council:
In accordance with the requirements of the City Charter, and the City of Huntington
Beach's ongoing commitment to transparent financial reporting, I am pleased to present
the Comprehensive Annual Financial Report (CAFR) for the fiscal year ended September
30, 2013.
As required by the City Charter, and to ensure the reliability of the information contained
herein, the City of Huntington Beach contracted with the independent auditing firm of
Vavrinek, Trine, Day & Co., LLP. The goal of the audit was to provide reasonable
assurance that the City's financial statements are free from material misstatement. After
examining, on a test basis, the accounting principles used, as well as significant
estimates made by management, Vavrinek, Trine, Day & Co., LLP granted the City an
unmodified (clean) opinion for the fiscal year ended September 30, 2013. The auditor's
opinion can be found in the Financial Section of this report. Management assumes full
responsibility for the completeness and accuracy of the information presented in this
document. This transmittal letter is designed to complement and should be read in
conjunction with the Management's Discussion and Analysis Section of the report.
Profile of the City of Huntington Beach
The City of Huntington Beach, with a population of 193,616, is located on the Orange
County coast, 35 miles south of Los Angeles and 90 miles north of San Diego. The City
is internationally known as "Surf City" due to its abundance of beaches, history of surf
culture, and sunny and warm Mediterranean climate - all of which lends to its famous
casual lifestyle. Featuring over ten miles of coastline, Huntington Beach plays host to
over 16 million visitors annually. Listed among the nation's safest cities for decades,
Huntington Beach has often been ranked among the "Top Ten Safest Cities by City
Crime Rankings" by the Federal Bureau of Investigation. The City boasts an annual
median household income of $77,642, and about half of its residents, or 49 percent,
have college degrees, rendering it the "Second Best City to Live In" within Orange
County according to the Orange County Register.
Founded in the late 1880's, Huntington Beach was incorporated as a Charter City in
1909. Huntington Beach has a Council/Manager form of government wherein seven City
Council members are elected to four-year terms, and the Mayor is filled on a rotating
basis from the incumbent Council members. The City Attorney, City Clerk and City
Treasurer positions are also elected and serve four-year terms.
iii
Item 13. - 160 11B -670-
On August 22, 2011, the unincorporated County oceanfront community of Sunset Beach
was officially annexed by the City of Huntington Beach. Sunset Beach is a small
beachfront community with approximately 1,000 residents and 1.5 square miles of land.
Beachfront properties with high property values make this community a valuable addition
to the City. Sunset Beach features one of the widest and most pristine beaches in
Southern California and is home to the historic Sunset Beach Arts Festival.
Demographically, the City benefits from higher education levels, median incomes and
home values as compared with the State. A thriving beach community, ranked "Best
Beach in Orange County," Huntington Beach is also home to numerous national events
such as the U.S. Open of Surfing which attracts 400,000 visitors annually, the Surf City
Marathon; AVP Pro Beach Volleyball; and the Annual Paintball Tournament. The City's
most iconic event, however, is its Fourth of July Fireworks Show and Parade ranked
"Best Parade in Orange County" by the Orange County Register's Annual Reader
Survey, with 500,000 attendees annually. The City also hosts the Annual Concours
d'Elegance Car Show attracting 5,000 visitors.
The City of Huntington Beach is one of the leading commercial and industrial centers in
Southern California. As the fourth largest city in Orange County, and the 16th largest in
California, more than 115,100 people are currently employed by over 5,400 businesses
and governmental entities in the City. With an unemployment rate of 6.3 percent, well
below the national and state levels, the City's employment base is well positioned to
maintain a stable local economy and tax base.
The Huntington Beach business community is extremely diversified with no single
industry or business dominating the local economy. Local businesses include aerospace
and high technology, petroleum, manufacturing, computer hardware and software,
financial and business services, hotel and tourism, automobile services, large-scale
retailers and surf apparel, just to name a few. The diversification of the City's sales tax
base is enviable, with no particular area of industry over-concentration thereby mitigating
the impact of industry-specific downturns.
City of Huntington Beach
Composition of Sales Tax Revenue
Fiscal Year 2012`2013 l
3
Other
7"
Building and
Cras4ru¢tran GeneralGansurr
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ai ff, 25%
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j 14%
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IResta u ra nts a nd H oWs
1 a5
1V
FIB -67 1- Item 13. - 161
Factors Affecting Financial Condition
The information presented in the financial statements is perhaps best understood when
considered in the broader context in which the City of Huntington Beach operates.
Local Economy
Through the hard work of our residents, businesses, employees and the leadership of
our City Council, we are beginning to experience a solid economic recovery. FY 2013/14
will mark the first time in six years that the General Fund portion of the budget will be
balanced without layoffs, eliminating positions, or cutting departments and services,
signaling a significant turning point for the City.
After a six-year period characterized by worldwide economic adversity, there are
encouraging signs that the City is on the path toward economic recovery to pre-recession
levels of revenue, employment and consumer confidence. General Fund revenues are
rising modestly, and in some cases, reaching or exceeding levels experienced before the
economic meltdown. The FY 2013/14 General Fund Adopted Budget contains a modest
5.8 percent increase in General Fund revenue that reflects the strength of Huntington
Beach's local economy without unnecessarily increasing risk.
Additionally, Huntington Beach has the following economic factors in its favor including:
higher personal median incomes than the State or the County; a stable and increasing
property tax base; a uniquely diverse and increasing sales tax base, a heavy emphasis
on economic development as economic stimulus; increasing sales, hotel, permitting and
parking revenues; modest increases in the City's General Fund reserves; and, a culture
of fiscal conservatism and making tough choices.
Economic indicators are favorable in Huntington Beach, as illustrated by increased
planning and building revenue, property, sales and transient occupancy taxes, to name a
few. New large-scale mixed use projects such as The Residences at Bella Terra and
Pacific City will generate additional revenue going forward. Large retail projects such as
the new Costco, have added $1.0 million to the City's coffers in FY 2012/13 alone.
Property Tax for FY 2013/14 includes the assessed values of both Huntington Beach and
Sunset Beach properties. Assessed valuations have increased steadily each year
despite the impacts of the last recession. In fact, at no time in the City's history over the
past 12 years have overall assessed valuations for the City declined, reflecting a stable
and secure property tax base. For the fiscal year ended September 30, 2013, secured
property tax revenue totaled $38.9 million. For FY 2013/14, secured property taxes are
estimated at $41.9 million reflecting a modest 7.7 percent increase.
v
Item 13. - 162 xB - 72-
City of Huntington Beach
Total Assessed Valuation
I Fiscal Years 2001- 2013
(in billions)
$30.00 5.4
$23 8
$25.00 $213
$18 8 $18.9
$165 $168
$20.00 .. ._. ,,,,...
$15.00
$10.00 _. c
a,
$5.00
$0.00
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
i
Sales tax revenue also performed well and reached an all-time high in FY 2012/13 at
$27.2 million, demonstrating that the City's commitment to its commercial corridors has
paid significant dividends. A new Costco store is generating $1.0 million in General Fund
revenue to the City reminding us all that economic development remains the strongest
economic engine for many cities. While the State of California has abandoned its
commitment to redevelopment as an economic development tool, the City of Huntington
Beach continues to invest in its local businesses and in its future.
City of Huntington Beach
Historical Sales Tax Revenue
$30.0 $26.1
$25.0 $24.0 $23.7 $23.9
$20.3 $20.8
$20.0
o_
$15.0
$10.0v
$5.0
$0.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Transient Occupancy Tax, a 10 percent tax imposed on hotels within the City, ended FY
2012/13 at $7.6 million, surpassing pre-recession levels as the hotel industry continues
to thrive throughout the country and Huntington Beach remains a coveted destination.
As a result of the improving economy, Huntington Beach was able to end the year with a
$1.8 million surplus as of September 30, 2013. That balance was utilized to provide the
seed funding for a new state-of-the-art Senior Center, and to increase funding for long-
term workers' compensation liabilities.
Vi
HB -673- Item 13. - 163
Budget Development and Monitoring
The City operates on a fiscal year basis, beginning October 1st and ending September
30t". The budget is prepared under the supervision of the City Manager and transmitted
to the City Council for deliberation at least thirty days prior to the end of the fiscal year.
Pursuant to the City's Charter, the City Council must adopt the annual budget by
September 30t" and may amend it or revise it at any time at a properly noticed meeting.
Budgetary control is at the department level within each fund and a Department,Head,
with the Director of Finance's approval, may transfer funds within like categories
(operating and capital expenditures) of the same department. The transfer of funds for
salaries and benefits requires additional approval by the City Manager or his designee.
Cash Management Policies and Practices
Surplus cash is invested by the elected City Treasurer as allowed by the City's
investment policy. The investment policy is adopted annually by the City Council after
approval by the Investment Advisory Board. It outlines guidelines to meet the daily cash
flow needs of the City, maximize the efficiency of the City's cash management system,
and identifies prudent investment vehicles for the City's cash balances.
The rate of return earned for the fiscal year ended September 30, 2013 was 0.75
percent. The City Treasurer, as required by California Government Code 53601, has
prepared an annual statement of investment policy which allows for the City to meet
current obligations while earning a market rate of return. Further information regarding
the City's cash and investments can be found in Note 2 of the financial statements.
Long-Term Financial Planning
The Strategic Plan provides the framework for developing the goals and objectives of the
City for the next three years. The City Council approved six Strategic Plan goals:
• Improve long-term financial sustainability;
• Maintain and enhance public safety;
• Improve the City's infrastructure;
• Enhance economic development;
• Develop, retain and attract quality staff; and,
• Improve quality of life.
This plan enables the City to forecast cause and effect relationships for important
financial decisions such as employee labor contracts, capital projects and other
initiatives. The City's Strategic Plan drives budgetary decisions and the day-to-day
operations of the City by ensuring everyone is consistently working to achieve the goals
outlined in the Plan. To meet the Strategic Plan goal of improving long-term financial
sustainability, the City implemented a three-pronged approach to reduce its unfunded
liabilities that will be discussed in greater detail later in this report.
vii
Item 13. - 164 IAB -6 74-
Debt Management and Forecasting
The City has long practiced a commitment to prudent financial management. As a result,
the City has a remarkably low debt burden of 3.3 percent of General Fund expenditures.
In addition, approximately 67 percent of all General Fund debt matures in 10 years,
placing the City in a solid position to reinvest freed up resources in the next decade.
Huntington Beach also has no variable rate exposure, eliminating volatility in its debt
service projections and ensuring reliable forecasting for future budgets.
City of Huntington Beach
General Fund Supported Annual Debt Service
$7,000 Series 0004
$6,000grieQQA
Series 2011A
$5,000
ff Q
$4,000
m
N $3,000
0
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$1,000 ..... ........ ........ ....... ........-........ ..._.. .._...-__... ........ ........ ..... - ........ ....... ........ ........ ........ ...... ........ ....
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Pension and Other Post Employment Benefits
To help meet the goal to "Improve Long-Term Financial Sustainability," the City
developed an innovative, multi-pronged approach to significantly reduce the City's
retirement and Other Post Employment Benefit (OPEB) unfunded liabilities over the next
10 years. These plans are included in the FY 2013/14 Adopted Budget and have
launched a multi-year effort to pay down the City's pension and retiree medical liabilities
while simultaneously savings taxpayers over $16.6 million over the next 15 to 25 years.
The value of the City's unfunded liabilities currently totals $252.6 million. The City's
CalPERS, Retiree Medical and Retiree Supplemental Plans are 79.1 percent, 47.7
percent and 42.9 percent funded, respectively. To address this challenge, staff
developed a unique plan for the pre-payment of the City's unfunded liabilities several
years ahead of schedule. By 2024, the City will have paid off $47.3 million, completely
eliminating the unfunded liabilities for two out of three of the City's retiree benefit plans.
The City's unique three-pronged approach addresses the unfunded liabilities for the
City's: 1) California Public Employees' Retirement (CaIPERS) Pension Plan; 2) Retiree
Medical Plan; and, 3) Supplemental Pension Plan. The "One Equals Five Plan," the "25
to 10 Plan," and the 16 to 10 Plan," respectively, will reduce the unfunded liabilities for
each of the City's retiree benefit plans over the next several years. At the center of each
plan is the expedited pre-payment of unfunded liabilities through significant reductions in
each plan's amortization period. This strategy results in the complete elimination of the
unfunded liabilities for the City's OPEB and Supplemental Pension Plans in 10 years;
and, a significant decline in the CalPERS unfunded liability as well.
Viii
uB -675- Item 13. - 165
"One Equals Five Plan"
The City implemented a unique "One Equals Five Plan" for reducing the $205.3 million
unfunded liability for the City's CalPERS pension plans. Based on an analysis
conducted by the City's independent actuary, each additional $1 million contributed to
the City's pension plans will benefit the City five times over resulting in $5 million in
taxpayer savings over a 25-year period.
As part of the FY 2013/14 Adopted Budget, staff proposed a revision to the City's
Financial Policies allowing for additional General Fund revenue received above budgeted
expectations to be deposited directly into a "One Equals Five" fund for direct payment to
CalPERS each fiscal year end, to significantly reduce the City's unfunded CalPERS
liabilities. This unique proposal will yield millions of tax dollar savings annually and
improve the funded status of the plans, thereby promoting their financial sustainability.
These contributions will be in addition to the existing employer contributions deposited
into the plans on a bi-weekly basis.
"25 to 10 Plan" (Retiree Medical)
The City has negotiated via its Memoranda of Understanding to provide post-
employment medical benefits to retirees. As of the most recent actuarial valuation, the
City's Retiree Medical Plan had a $10.6 million unfunded liability, reflecting a 47.7
percent funded status. For the last three years, the City exceeded each Annually
Required Contribution (ARC) payment to expedite paying down this unfunded liability.
Although the City's policy has generally been to make 100 percent of each year's ARC,
the City has paid an additional $981,000 above amounts required into the Plan over the
last three years. In addition, to further expedite the prepayment of this unfunded liability,
additional funds will be deposited into the plan annually to reduce the amortization period
of the unfunded liability from the current 25-year schedule to a 10-year schedule. The
City Council unanimously approved this plan and the FY 2013/14 Adopted Budget
reflected an estimated $1.0 million in additional contributions to the plan annually. The
new "25 to 10 Plan" reduces the amortization of the unfunded liability from 25 years to 10
years, immediately shaving off 15 years of payments and saving the taxpayers an
estimated $9.2 million over the long term.
16 to 10 Plan" (Supplemental Pension)
The City also administers a Supplemental Pension Plan for all employees hired prior to
1997. As of September 30, 2011, the most recent actuarial valuation, 643 retirees and
beneficiaries received benefits and 319 active employees were eligible for the plan at
retirement. The plan is 42.9 percent funded with an unfunded liability of $36.7 million.
As part of the FY 2013/14 Adopted Budget, the City will contribute an additional $1.1
million to eliminate this liability in 10 years, versus the original amortization of 16 years.
The 16 to 10 Plan" is projected to save taxpayers $7.4 million in the long term.
ix
Item 13. - 166 11B -676-
Major Initiatives
"11113 Rising"
While the State has virtually eliminated its commitment to economic development, the
City remains unflinching and steadfast in its goal to stimulate business development in
Huntington Beach. A new Office of Business Development has been being created in
the City Manager's Office to signal the City's renewed commitment to economic
development.
A new "HB Rising" initiative will continue to promote economic development initiatives
throughout the City reassuring the community that Huntington Beach remains committed
to revitalizing its neighborhoods and enhancing its economic development plans. To that
end, significant progress is being made in securing entitlements, issuing permits or
finalizing plans for the following projects in FY 2013/14:
Pacific City
The Pacific City development will create an upscale retail village consisting of 191,000
square feet of unique and boutique retail and restaurant space overlooking the Pacific
Ocean with signed tenants including Equinox Fitness and others. The facility will include
Pacific City Hotel, a high-end boutique hotel with a spa and conference center with 250
rooms developed by Pacific Hospitality Group/RD Olson, and 516 luxury residential units
with concierge services. Construction has commenced on the parking structure with the
retail stores opening in 2015.
Bella Terra Phase II
The second phase of the successful Bella Terra Regional Center project featured the
May 2013 opening of Costco along with 467 luxury apartment units at the Residences at
Bella Terra, and a 24-hour gym, pool and park area for all residents. Bella Terra Phase
11 will also feature 47,000 square feet of retail space adjacent to an open-space courtyard
setting. The apartments are fully-leased, with 96 percent of the retail open, including
Solita, Motherhood and Eureka.
Waterfront Hilton Tower Expansion
The acclaimed Waterfront Hilton Hotel Resort has finalized plans and is currently
finalizing its financing for a second hotel tower consisting of 250 suites, a state-of-the-art
20,000 square feet luxury spa and additional conference center space.
In addition, there are numerous permitted commercial/industrial projects in plan
check/construction phases including: a 105,000 square feet Living Spaces furniture
store; Hoag Health Center 30,000 square feet expansion including urgent care and
diagnostics; Shea Properties Industrial project consisting of two buildings and 142,000
square feet; 37,000 square feet expansion of Pierside Pavilion; and a new 128 room
Marriott Springhill Suites Hotel.
x
HB -677- Item 13. - 167
Housing
The City permitted 2,655 new residential apartment units in projects with companies
such as UDR and Saris Regis with 2,451 units under construction. In addition, 727
single family units have been permitted with 168 units under construction and 510 units
pending. Included in the residential housing is 78 very-low and low income housing
units.
Neighborhood Investments
The condition of a City's infrastructure is a hallmark of its financial strength. Many cities
will focus resources on operating budgets while neglecting infrastructure and equipment
assets resulting in greater expenses and disrepair. This is problematic as well-
maintained capital assets are a vital and essential business attraction and retention tool.
The FY 2013/14 Adopted Budget reinvests in one of its most vital resources for long-term
success and sustainability — its infrastructure, and includes funding for a new state-of-
the-art Senior Center.
For FY 2013/14, the CIP addresses critical infrastructure and capital needs divided into
numerous categories including drainage and storm water, facilities, neighborhood, parks
and beaches, sewer, streets and transportation and water improvements. New
improvements in the FY 2013/14 Adopted Budget total $28.5 million, an increase of $7.1
million from the prior fiscal year. It is important to note half of this amount relates to the
receipt of $3.1 million in additional but non-recurring Federal and State grant funding for
the Atlanta Widening project and traffic signal modifications in critical intersections
throughout the City.
Senior Center
The FY 2013/14 Adopted Budget contains $1.5 million in the Infrastructure Fund to
support start-up costs for the new Senior Center. The new funding for the Senior Center
represents the culmination of a ballot measure approved by the voters. It is a symbolic
first step toward reinvesting in our highly-valued senior community for generations to
come.
Awards and Acknowledgements
Last year, the City of Huntington Beach was once again the honored recipient of the
"Certificate of Achievement for Excellence in Financial Reporting" award bestowed by the
Government Finance Officers' Association (GFOA) of the United States and Canada.
This was the 27th consecutive year the City has received this prestigious award. Receipt
of the award requires government entities to publish transparent, easily readable and
efficiently organized Comprehensive Annual Financial Reports, conforming to program,
accounting, and legal standards.
The Certificate of Achievement earned for the fiscal year ended September 30, 2012, is
valid for one year only. The City believes that this Comprehensive Annual Financial
Report continues to conform to the Certificate of Achievement Program requirements
and will be submitted to the GFOA for their consideration for another award.
Xi
Item 13. - 168 14B -678-
We are also pleased to report that the City of Huntington Beach received the prestigious
"Innovation Award" from the California Society of Municipal Finance Officers (CSMFO)
on February 21, 2014 for its innovative approaches to reducing the unfunded liabilities for
its pension and Other Post Employment Benefit (OPEB) plans. A total of eleven cities
applied for this new award and only two, including Huntington Beach, were selected as
recipients. This honor demonstrates the City's financial acumen and creative
approaches towards addressing complicated challenges.
I wish to thank the City Council, City Manager, and City Departments for their continued
diligence in their role as fiscal stewards for the City of Huntington Beach. Without their
leadership and support, the favorable financial results contained in this report would not
have been possible.
The preparation of this report would also not have been possible without the professional
dedicated staff of the Finance Department. Specifically, I would like to thank Dahle
Bulosan, Sunny Han, and Dennis Jaw for their hard work, dedication and commitment.
Respectfully,
Lori Ann Farrell
Director of Finance
City of Huntington Beach
Xll
HB -679- Item 13. - 169
City of Huntington Beach
City Council
Matthew Harper, Mayor
Joe Shaw, Mayor Pro Tem
Connie Boardman, Councilmember
Joe Carchio, Councilmember
Jill Hardy, Councilmember
Jim Katapodis, Councilmember
Dave Sullivan, Councilmember
Executive Team
Fred A. Wilson, City Manager
Ken Domer, Assistant City Manager
Teri Baker, Assistant to the City Manager
Julie Toledo, Community Relations Officer
City Treasurer
Alisa Cutchen
Elected Department Heads
Joan L. Flynn, City Clerk
Jennifer M. McGrath, City Attorney
Department Directors
Stephanie Beverage, Library Services
Michele Warren, Human Resources
Lori Ann Farrell, Finance
Chief Robert Handy, Police
Scott Hess, Planning and Building
Travis Hopkins, Public Works
Janeen Laudenback, Community Services
Jack Marshall, Information Services
Chief Patrick McIntosh, Fire
xiii
Item 13. - 170 HB -680-
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_h1_ Item 13. - 171
Government Finance Officers Association
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Xv
Item 13. - 172 11B -682-
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HB -683- Item 13. - 173
FINANCIAL SECTION
Item 13. - 174 HB -684-
Vavrinek, Trine, Day & Co., LLP1"L691 ri
Certified Public Accountants 1
INDEPENDENT AUDITORS' REPORT
The Honorable City Council
City of Huntington Beach, California
Report on the Financial Statements
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 Huntington Beach,
California, (City) as of and for the year ended September 30, 2013, and the related notes to the financial
statements, which collectively comprise the City's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Manac,ement 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; this includes the design,
implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial
statements that are free from material misstatement,whether due to fraud or error.
Auditors'Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted out-
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 Stanclards, issued by the Comptroller General of
the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free fi•om material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the
risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the
financial statements 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 entity's internal control. Accordingly,we express no
such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of significant accounting estimates made by management, as well as evaluating, the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinions.
1
25231 Paseo De Alicia,Suite 100 Laguna Hills.CA a?a;s To'-4a9.768.0833 Fax:949,768.8408 www.vtdcpa.com Item 13. - 175
FRESNO • LAGUNA HILLS • PALO ALTO • PLEASAI`1B -685 NCHO CUCAMONGA • RIVERSIDE • Sf
Opinions
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 September 30, 2013, and the respective changes in financial
position and, where applicable, cash flows thereof for the year then ended in accordance with accounting
principles generally accepted in the United States of America.
Emphasis of Matter
As described in Note I.n. to the financial statements,the City adopted Governmental Accounting Standards Board
(GASB) Statement No. 61, The Financial Reporting Entit17: Omnibus—an amendment of GASB Stalenienl No. 14
and No. 34, GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained
in Pre-November 30, 1989 F,15B and AICPA PronounCe7nents, and GASB Statement No. 63, Financial
Reporting of Deferred Outflotirs of Resources, Deferred Inflows of Resources, and Net Position, effective October
1, 2012. Our opinion is not modified with respect to this matter.
Other Matters
Required Supplenientary Information
Accounting principles generally accepted in the United States of America require that the management's
discussion and analysis, and other required supplementary information identified on the accompanying table of
contents on pages 5-19 and 112-116 be presented to supplement the basic financial statements. Such information,
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.
Other 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 introductory section, combining and individual nonmajor
fund financial statements, and statistical section, are presented for purposes of additional analysis and are not a
required part of the basic financial statements.
The combining and individual nonmajor fund financial statements are the responsibility, of management and were
derived from and relate directly to the underlying accounting and other records used to prepare the basic financial
statements. Such information has been subjected to the auditing procedures applied in the audit of the basic
financial statements and certain additional procedures, including comparing and reconciling such information
directly to the underlying accounting and other records used to prepare the basic financial statements or to the
basic financial statements themselves, and other additional procedures in accordance with auditing standards
generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund
financial statements are fairly stated in all material respects in relation to the basic financial statements as a whole.
The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of
the basic financial statements, and accordingly,we do not express an opinion or provide any assurance on them.
2
Item 13. - 176 uB -686-
Other Reporting Required by GovernmentAuttitins Standards
in accordance with Governrnerit Auditing Standards, we have also issued our report dated March 28, 2014, 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 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 internal control over financial reporting or on compliance. That report is
an integral part of an audit performed in accordance with Government Auditing Standards in considering City's
internal control over financial reporting and compliance.
Laguna Hills, California
March 28, 2014
3
11B -687- Item 13. - 177
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Item 13. - 178 HJ3 - 88-
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended September 30, 2013
As management of the City of Huntington Beach, we offer readers of the City's financial
statements this narrative overview and analysis of the financial activities of the City of
Huntington Beach for the fiscal year ended September 30, 2013. 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 iii-xii of this
report.
Financial Highlights
Below is a summary of the City's government-wide financial information (in thousands):
Total Governmental and Business-Type Activities
Amount Percent
September 30, September 30, Increase Increase
2013 2012(Restated) (Decrease) (Decrease)
Assets $ 1,077,553 $ 1,057,094 $ 20,459 1.9%
Liabilities 115,374 113,290 2,084 1.8%
Total Net Position 962,179 943,804 18,375 1.9%
Unrestricted Net Position 119,671 116,784 2,887 2.5%
Long-Term Obligations 88,197 93,676 (5,479) -5.8%
Program Revenues 133,288 122,956 10,332 8.4%
Taxes 140,403 137,989 2,414 1.7%
Other General Revenues 14,196 16,060 (1,864) -11.6%
Extraordinary Item (4,669) 23,960 (28,629) -119.5%
Expenses 264,843 249,743 15,100 6.0%
• The total assets of the City of Huntington Beach exceeded its liabilities at the
close of the most recent fiscal year by $962,179,000. Of this amount,
$119,671,000 may be used to meet the City's ongoing obligations to citizens and
creditors. Net position increased $18,375,000 or 1.9 percent. This increase is
due in large part to additions made to capital assets for infrastructure
improvements to the City's water and sewer systems and residential street
improvements. Unrestricted net position increased by $2,887,000 or 2.5 percent.
• Long-term obligations decreased by $5,479,000 or 5.8 percent. This decrease is
primarily due to debt service payments, including substantially paying off the
PARS obligation associated with the Early Retirement Incentive Program
implemented in FY 2009/10.
• Program revenues increased by $10,332,000 or 8.4 percent. This increase is
primarily due to increases in fees paid by developers and the receipt of new
Federal and State grants. Other General Revenues decreased by $1,864,000 or
11.6 percent primarily due to decreases in investment yield during FY 2012/13
due to the historically low interest rates.
• Expenses increased by $15,100,000 or 6.0 percent primarily due to increases in
equipment replacement costs, street repairs, workers' compensation costs, and
increased infrastructure spending as required by the City Charter.
• Extraordinary Item in the current year totaled $4,669,000 due to the final
determination and demand letter from the Department of Finance for the Non-
Housing Due Diligence Review as a result of the dissolution of the
Redevelopment Agency.
1413 -689- Item 13. - 179
f
City of Huntington Beach
Management's Discussion and Analysis
„r> For the Year Ended September 30, 2013
1 _v
Overview of the Financial Statements
This discussion and analysis serve as an introduction to the City of Huntington Beach's
basic financial statements. The City of Huntington Beach'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 certain
other supplementary information in addition to the basic financial statements themselves.
Government-wide Financial Statements
The government-wide financial statements are designed to provide readers with a broad
overview of the City's financial condition and are prepared similarly to those in the private
sector.
The statement of net position presents information on all of the City's assets and
liabilities, with the difference between the two reported as net position. Over time,
continued increases or decreases in net position may indicate whether the City's
financial condition is improving or deteriorating.
The statement of activities presents information on how the City's net position changed
during the most recent fiscal year. These changes are reported on the full accrual basis
when the economic event occurs (not when the cash is received or paid).
The government-wide financial statements separate functions that are primarily
supported by taxes and intergovernmental revenues (governmental activities) from
functions that are supported by user fees (business-type activities). Governmental
activities include City Council, City Manager, City Treasurer, City Attorney, City Clerk,
Finance, Human Resources, Planning and Building, Fire, Information Services, Police,
Economic Development, Community Services, Library Services, Public Works, and Non-
Departmental. Business-type activities include Water, Sewer, Refuse, and Hazmat
Service.
The government-wide financial statements include the City and all of its component units
that are legally separate but whose activities entirely support the City of Huntington
Beach.
The government-wide financial statements can be found on pages 23-24 of this report.
Fund Financial Statements
The City separates financial activities into funds to maintain control over resources that
have been legally separated. All of the funds of the City can be divided into three
categories: governmental funds, proprietary funds, and fiduciary funds.
Item 13. - 180 IJB -690-
t
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended September 30, 2013
Governmental Funds
Governmental funds are used to account for the same functions reported in
governmental activities in the government-wide financial statements. However, the focus
in the governmental fund section of these financial statements is on near-term resource
inflows and outflows available for spending, as well as balances of resources available
for spending at the end of the fiscal year.
It is useful to compare information presented for the governmental funds to information
presented for governmental activities in the government-wide financial statements. The
reconciliations indicate to the reader the differences in financial reporting between the
governmental activities section and the governmental funds section.
The City maintains 24 individual governmental funds. Information is presented
separately in the governmental funds balance sheet and in the governmental funds
statement of revenue, expenditures, and changes in fund balances for the General Fund,
Grants Special Revenue Fund, Low and Moderate Income Housing Asset Fund
(LMIHAF) Capital Projects Fund all of which are considered to be major funds. Data
from the other 21 smaller funds are combined into a single, aggregated presentation.
Individual fund data for each of these other governmental funds is provided in combining
statements elsewhere in this report.
The City provides an annual appropriated budget for its governmental funds. Budgetary
comparison schedules for the General Fund and the major special revenue funds
(Grants) are required to be presented and are included on pages 113 and 114 of this
report and demonstrate compliance with the budget.
The basic governmental fund financial statements can be found on pages 25 and 27 of
this report.
Proprietary Funds
The City maintains two different types of proprietary funds, which are used to account for
the same activities as the business-type activities in the government-wide financial
statements. Enterprise funds are used to report the same functions presented as
business-type activities in the government-wide financial statements. The City uses
enterprise funds to account for its Water, Sewer Service, Refuse, and Hazmat Service
activities. Internal Service funds are an accounting device used to accumulate and
allocate costs internally among the City's various functions. The City uses internal
service funds to account for its self-insured worker's compensation fund. Because these
services predominantly benefit governmental rather than business-type functions, they
have been included with governmental activities in the government-wide financial
statements.
H B _691- Item 13. - 181
t
f City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended September 30, 2013
Proprietary funds provide the same type of information as the government-wide financial
statements, only in more detail. The proprietary fund financial statement provides
information for Water, Sewer Service, Refuse, Hazmat Service, and Self Insurance
Workers' Compensation Funds.
The basic proprietary fund financial statements can be found on pages 29-31 of this
report.
Fiduciary Funds
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
statement because the resources of those funds are not available to support the City of
Huntington Beach'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 page 32 of this report.
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 35-109 of this report.
Other information
In addition to the basic financial statements and accompanying notes, this report also
presents certain required supplementary information concerning the City's progress in
funding its obligation to provide pension and OPEB benefits to its employees and
General Fund and major special revenue funds budget-to-actual comparisons. Required
supplementary information can be found on pages 112-116 of this report.
The combining statements and schedules referred to earlier in connection with other
governmental funds is presented immediately following the required supplementary
information on pensions. Combining and individual fund statements and schedules can
be found on pages 121-128 of this report.
Government-wide Financial Analysis
As noted earlier, net position may serve, over time, as a useful indicator of a
government's financial position. At the end of the current fiscal year, the City reported
positive net position balances for both governmental and business-type activities, with
total assets exceeding liabilities by $962,179,000.
Item 13. - 182 HB -692-
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended September 30, 2013
Below is a summary schedule of the City's net position at September -30, 2013 (in
thousands):
Amount Percent
September 30, September 30, Increase Increase
Governmental Activities 2013 2012 (Decrease) (Decrease)
Current and Other Assets $ 170,030 $ 154,811 $ 15,219 9.8%
Capital Assets 661,507 661,360 147 0.0%
Total Assets 831,537 816,171 15,366 1.9%
Current and Other Liabilities 21,242 13,167 8,075 61.3%
Long-Term Obligations 87,085 92,621 (5,536) -6.0%
Total Liabilities 108,327 105,788 2,539 2.4%
Net Position:
Net Investment in Capital Assets 617,267 613,065 4,202 0.7%
Restricted 51,867 44,220 7,647 17.3%
Unrestricted 54,076 53,098 978 1.8%
Total Net Position $ 723,210 $ 710,383 $ 12,827 1.8%
- Amount Percent
September 30, September 30, Increase Increase
Business-Type Activities 2013 2012 (Decrease) (Decrease)
Current and Other Assets $ 100,130 $ 98,992 $ 1,138 1.1%
Capital Assets 145,886 141,931 31955 2.8%
Total Assets 246,016 240,923 5,093 2.1%
Current and Other Liabilities 5,935 6,447 (512) -7.9%
Long-Term Obligations 1,112 1,055 57 5.4%
Total Liabilities 7,047 7,502 (455) -6.1%
Net Position:
Net investment in Capital Assets 145,886 141,931 3,955 2.8%
Restricted 27,488 27,804 (316) -1.1%
Unrestricted 65,595 63,686 1,909 3.0%
Total Net Position $ 238,969 $ 233,421 $ 5,548 2.4%
Analysis of the City's Net position
Current and Other Assets: The increase in current and other assets of $15,219,000 is
primarily due to increases in cash and receivables as a result of improvements in
revenue along with an increase to the Other Postempioyment Benefits Asset due to
additional employer contributions over the annual required contribution.
Current and Other Liabilities: The increase in current and other liabilities of$8,075,000
is primarily due to normal fluctuations in accrued payroll costs and accounts payable.
Long-Term Obligations: The decrease in long-term obligations of $5,536,000 is
primarily due to substantially paying off the PARS obligation associated with the Early
Retirement Incentive Program implemented in FY 2009/10 two years ahead of schedule.
�_,B -693- Item 13. - 183
f
® City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended September 30, 2013
Net Investment in Capital Assets: The largest portion of the City's net position reflects
investment in capital assets (e.g., land, buildings, machinery, equipment, and
infrastructure), less any related debt used to acquire those assets that is still outstanding.
The City uses capital assets to provide services to citizens; consequently, these assets
are not available for future spending. Although the City's investment in its capital assets
is reported net of related debt, the resources needed to repay this debt must be provided
from other sources, since capital assets themselves cannot be used to liquidate these
liabilities. Net position invested in capital assets net of related debt from governmental
activities increased $4,202,000 or 0.7 percent. The increase was primarily due to street
improvements. Net position invested in capital assets net of related debt from business-
type activities increased $3,955,000 or 2.8 percent due to an increase installation of
water mains necessary for new construction developments.
Restricted Net position: An additional portion of the City's net position is subject to
external (legally imposed or statutory) restrictions ($51,867,000 for governmental
activities, and $27,488,000 for business-type activities). These amounts represent 7.2
percent and 11.5 percent of net position for governmental activities and business-type
activities, respectively. Restricted net position from governmental activities increased
$7,647,000 or 17.3 percent. The increase is primarily due to restricted funds used for
public works and community services projects. Restricted net position from business-
type activities decreased by $316,000 or 1.1 percent primarily due to restricted funds
used for improvements to the City's water and sewer systems.
Unrestricted Net position: The unrestricted assets ($54,076,000 for governmental
activities and $65,595,000 for business-type activities) represent 7.5 percent and 27.4
percent of net position for governmental activities and business-type activities,
respectively. Unrestricted net position for governmental activities increased $978,000 or
1.8 percent. Unrestricted net position for business-type activities increased by
$1,909,000 or 3.0 percent, primarily due to increases in water and sewer operating
revenue.
Item 13. - 184 HB -6 4-
® ° City of Huntington Beach
Management's Discussion and Analysis
s 4� For the Year Ended September 30, 2013
an.
A condensed summary of governmental activities (in thousands) follows:
Governmental Activities
Amount Percent
September 30, September 30, Increase Increase
Revenues: 2013 2012(Restated) (Decrease) (Decrease)
Program Revenues:
Charges for Current Services $ 56,620 $ 52,832 $ 3,788 7.2%
Operating Grants and Contributions 7,303 5,088 2,215 43.5%
Capital Grants and Contributions 7191 6,624 567 8.6%
Total Program Revenues 71,114 64,544 6,570 10.2%
General Revenues:
Property Taxes 74,795 74,856 (61) -0.1%
Sales Taxes 30,276 30,051 225 0.7%
Utility Taxes 20,764 20,152 612 3.0%
Other Taxes 14,568 12,930 1,638 12.7%
Use of Money and Property 2,816 3,434 (618) -18.0%
From Other Agencies -Unrestricted 6,003 6,585 (582) -8.8%
Other 5,240 4,941 299 6.1%
Total General Revenues 154,462 152,949 1,513 1.0%
Total Revenues 225,576 217,493 8,083 3.7%
Expenses:
City Council 271 310 (39) -12.6%
City Manager 1,583 1,767 (184) -10.4%
City Treasurer 132 141 (9) -6.4%
City Attorney 2,221 2,313 (92) -4.0%
City Clerk 797 689 108 15.7%
Finance 4,825 4,573 252 5.5%
Human Resources 5,032 4,743 289 6.1%
Planning and Building 6,155 6,123 32 0.5%
Fire 36,323 35,336 987 2.8%
Information Services 6,096 5;857 239 4.1%
Police 60,466 60,690 (224) -0.4%
Economic Development 8,395 3,703 4,692 126.7%
Community Services 15,521 15,586 (65) -0.41%
Library Services 3,873 3,777 96 2.5%
Public Works 28,500 26,508 1,992 7.5%
Non-Departmental 25,563 19,190 6,373 33.2%
Interest on Long-Term Debt 2,289 2,376 (87) -3.7%
Total Expenses 208,042 193,682 14,360 7.4%
Change in Net Position Before Transfers 17,534 23,811
Transfers (38) (38)
Change in Net Position After Transfers 17,496 23,773
Extraordinary Gain/(Loss) (4,669) 23,960
Change in Net Position 12,827 47,733
Net Position-Beginning of Year 709,664 661,931
Prior Period Adjustment 719 -
Net Position -Beginning of Year as restated 710,383 661,931
Net Position -End of Year $ 723,210 $ 709,664
HB -695- Item 13. - 185
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended September 30, 2013
The cost of all governmental activities this year was $208,042,000. However, as shown
in the Statement of Activities, the amount that the taxpayers ultimately financed for these
activities was $136,928,000, because costs of $56,620,000 were paid by those who
directly benefited from the programs, or by other governments and organizations that
subsidized certain programs with operating grants and contributions of $7,303,000, and
capital grants and contributions of $7,191,000. Overall, the City's governmental program
revenues were $71,114,000. The City paid for the remaining "public benefit" portion of
governmental activities with $154,462,000 in taxes and general revenue (some of which
could only be used for certain programs) and with other revenues, such as interest and
general entitlements. Charges for Current Services increased by $3,788,000 or 7.2
percent due to increases in public works, community services, and building and planning
revenues.
Operating Grants and Contributions increased by $2,215,000 or 43.5 percent primarily
due to an increase in public works grants from the prior year. Capital Grants and
Contributions have increased by $567,000 or 8.6 percent primarily due to increases in
public works grants such as the Safe Routes to School and Bridge Rehabilitation grants.
Program expenses increased by $14,360,000 due to the following:
• Economic Development increased by $4,692,000 primarily due to a one-time
State-mandated payment made to the Orange County Auditor-Controller in
accordance with AB 1484.
• Non-Departmental expenses increased by $6,373,000 due to increased
equipment replacement costs and street rehabilitation costs, including the
rehabilitation of Springdale Street.
Total resources available during the year to finance governmental operations were
$935,921,000 consisting of net position at October 1, 2012, of $710,383,000, program
revenues of $71,114,000, general revenues of $154,462,000, less transfers of $38,000.
Total expenses for governmental activities during the year were $208,042,000 including
an extraordinary loss of $4,669,000 thus, net position was increased by $12,827,000, to
$723,210,000.
Item 13. - 186 11B -696-
r
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended September 30, 2013
A condensed summary of business-type activities (in thousands) follows:
Business-Type Activities
Amount Percent
September 30, September 30, Increase Increase
2013 2012(Restated) (Decrease) (Decrease)
Program Revenues:
Charges for Current Services $ 61,330 $ 58,412 $ 2,918 5.0%
Capital Grants and Contributions 844 - 844 100.0%
Total Program Revenues 62,174 58,412 3,762 6.4%
Use of Money and Property 137 1,100 (963) -87.5%
Total Revenues 62,311 59,512 2,799 4.7%
Expenses:
Water Utility 38,446 37,437 1,009 2.7%
Refuse Collection 10,332 10,785 97 0.9%
Sewer Service 7,253 7,623 (370) -4.9%
Hazmat Service 220 216 4 1.9%
Total Expenses 56,801 56,061 740 1.3%
Increase in Net Position Before Transfers 5,510 3,451
Transfers 38 38
Total Change In Net Position 5,548 3,489
Net Position -Beginning of Year 225,619 222,130
Prior Period Adjustment 71802 Net Assets-Beginning of Year as restated 233,421 222,130
Net Position -End of Year $ 238,969 $ 226,619
The City's net position from business-type activities increased by $5,510,000 before
transfers. Contributing to this increase was net program revenue of $5,373,000. Use of
money and property decreased by $963,000 due to a decrease in the rate of return for
the City's cash and investments.
The cost of all Business-Type activities this year was $56,801,000. As shown in the
Statement of Activities, the amount paid by users of the systems was $61,330,000, there
were capital grants and contributions of $844,000, other revenue was $137,000, and
transfers were $38,000. Beginning net position was $233,421,000 and ending net
position was $238,969,000. Of the ending net position amount, $145,885,000, or 61.0
percent, was invested in capital assets, $27,488,000 or 11.5 percent was restricted for
expenses for the Water Master Plan, and $65,595,000, or 27.5 percent was unrestricted.
The transfers for Business-Type activities were $38,000 in both the current year and
prior year.
IJB -697- Item 13. - 187
° City of Huntington Beach
Management's Discussion and Analysis
a For the Year Ended September 30, 2013
Financial Analysis of the City's Major Governmental Funds
Below is an analysis of the City's major governmental fund activities for the year (in
thousands):
GOVERNMENTAL FUNDS
Amount Percent
September 30, September 30, Increase Increase
2013 2012 (Decrease) (Decrease)
Total Fund Equity:
General Fund $ 54,507 $ 54,435 $ 72 0.1%
Grants Special Revenue Fund 2,606 514 2,092 407.0%
LMIHAF Capital Projects Fund 5,637 9,886 (41249) -43.0%
Total Fund Equity $ 62,750 $ 64,835 $ (2,085) -3.2%
The General Fund Balance increased by $72,000 primarily due to strengthening property
and sales tax revenues.
The Grants Special Revenue Fund Balance increased by $2,092,000 primarily due to
increased state grant revenues, including the 2002 Park Bond and Supplemental Law
Enforcement Services Fund (SLESF) grants.
The LMIHAF Capital Projects Fund Balance decreased by $4,249,000 due to a one-time
State-mandated payment of funds to the County for distribution to other taxing entities in
accordance with AB 1484.
Financial Analysis of the City's Major Proprietary Funds
Below is an analysis of the fund equity of the City's proprietary funds (in thousands):
Enterprise Funds
Amount Percent
September 30, September 30, Increase Increase
2013 2012 (Restated) (Decrease) (Decrease)
Net Position:
Water Fund $ 171,747 $ 171,308 $ 439 0.3%
Sewer Fund 66,820 61,875 4,945 8,0%
Refuse Fund 201 83 118 142.2%
Hazmat Service Fund 201 155 46 29.7%
Total Net Position $ 2387969 $ 2337421 $ 5,548 2.4%
Unrestricted Net Position:
Water Fund $ 36,438 $ 38,289 $ (1,851) 48%
Sewer Fund 28,755 25,159 3,596 14.3%
Refuse Fund 201 83 118 142.2%
Hazmat Seance Fund 201 155 46 29.7%
Total Unrestricted Net Position $ 65,595 $ 63,686 $ 1,909 3.0%
The Water Fund total net position increased by $439,000 and unrestricted net position
decreased by $1,851,000. Total net position increased in large part due to an increase
in water mains throughout the City. Unrestricted net position decreased in large part due
to infrastructure construction costs.
Item 13. - 188 1 IB -698-
City of Huntington Beach
G Management's Discussion and Analysis
- f For the Year Ended September 30, 2013
The Sewer Fund net position increased by $4,945,000 and unrestricted net position
increased by $3,596,000. This increase is due to a reduction in required repairs and
maintenance costs.
Long-Term Obligations
Below is a schedule of the changes to the City's long-term obligations (in thousands):
Balance Balance
October 1, September 30,
Governmental Activities 2012 Additions Retirements 2013
Re\A--nue Bonds $ 46,720 $ - $ (3,615) $ 43,105
Judgement Obligation Bonds 4,339 - (865) 3,474
Claims Payable 18,872 11,387 (7,271) 22,988
Compensated Absences 10,985 - (99) 10,886
Net Pension Obligation 3,613 4,435 (4,607) 3,441
Loans 1,285 - (150) 1,135
Leases Payable 290 - (290) -
Pollution Remediation 2,000 - - 2,000
PARS Payable 4,517 - (4,461) 56
Total Long-Term Obligations-Governmental
Activities 92,621 15,822 (21,358) 87,085
Business-Type Activities:
Compensated Absences 1,055 238 (181) 1,112
Business-Type Activities 1,055 238 (181) 1,112
Total Long-Term Obligations $ 93,676 $ 16,060 $ (21,539) $ 88,197
Additional information on the City's long-term debt is shown in Note 10 to the financial
statements. The City of Huntington Beach is legally restricted to issuing general
obligation bonds to 12 percent of its assessed valuation. Since the City has no general
obligation bonds outstanding, the limit does not apply. This is shown on page 158 of the
financial statements. The City's total long-term obligations decreased $5,479,000 or 5.8
percent from the prior fiscal year. This decrease was due in large part to the following:
• Paying off a substantial portion of the PARS obligation for the Early Retirement
Incentive Program two years ahead of schedule.
• Current year debt service payments on Bonds and various other loans.
The City continues to maintain strong credit ratings on all of its debt issues. The
following are the ratings as determined by Moody's Investors Service and Standard and
Poor's as of September 30, 2013.
Debt Instrument Moody's S & P
1999 Tax Allocation Refunding Bonds Baa2 A
2002 Tax Allocation Refunding Bonds Baa2 A
2004 Judgment Obligation Bonds Aa3 AA
2010 Lease Revenue Bonds, Series A Aa3 AA
2011 Lease Revenue Bonds, Series A Aa3 AA
HB -699- Item 13. - 189
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended September 30, 2013
Capital Assets
The capital assets of the City are those assets which are used in the performance of the
City's functions including infrastructure assets. The City has elected to use the "Basic
Approach" as defined by GASB Statement No. 34 for infrastructure reporting. The
following infrastructure networks are recorded as capital assets in the government-wide
financial statements:
• Storm drain system including pump stations, drainage system and manholes.
• Streets (including land underneath streets), traffic signals, curbs, gutters, and
sidewalks.
Below is a schedule of the City's capital assets, net of accumulated depreciation (in
thousands):
Amount Percent
September 30, September 30, Increase Increase
Governmental Activities: 2013 2012(Restated) (Decrease) (Decrease)
Land $ 352,833 $ 352,833 $ - 0.0%
Buildings 128,674 130,555 (1,881) -1.4%
Machinery and Equipment 9,733 9,649 84 0.9%
Construction in Progress 3,650 3,776 (126) -3.3%
Joint Venture 2,419 2,310 109 4.7%
Infrastructure 164,198 162,237 1,961 1.2%
Total Governmental Activities 661,507 661,360 147 0.0%
Business-Type Activities:
Land 3,907 3,907 - 0.0%
Buildings 48,582 38,678 9,904 25.6%
Machinery and Equipment 2,050 2,414 (364) -15.1%
Construction in Progress 15,751 21,111 (5,360) -25.4%
Infrastructure 75,596 75,821 (225) -0.3%
Total Business-Type Activities 145,886 141,931 3,955 2.8%
Total Capital Assets $ 807,393 $ 803,291 $ 4,102 0.5%
Capital assets from governmental activities increased $147,000. This increase is largely
due to re-roofing and ADA compliance projects for the City's public buildings. Capital
assets from business-type activities increased $3,955,000 or 2.8 percent due to a rise in
infrastructure investment and contributions. Further information on the City's capital
assets can be found in Note 11 of the financial statements.
Item 13. - 190 1 -700-
City of Huntington Beach
Management's Discussion and Analysis
t
-4 4 For the Year Ended September 30, 2013
General Fund Budgetary Highlights
Changes to Original Budget
Final budgeted revenues for the General Fund increased $14,814,000 or 8.1 percent
from the original (adopted) budget for the fiscal year ended September 30, 2013. The
change from original to final budget occurred primarily as a result of adjustments made to
budgeted property tax, sales tax, charges for current services, licenses and permits, and
one time revenues associated with the dissolution of the former Redevelopment Agency
and certain large development and construction projects.
Comparing the FY 2012/13 original (or adopted) budget, General Fund expenditures
amount of $180,266,000 to the final budgeted amount of $190,087,000 shows a net
increase of $9,821,000, or 5.4 percent. This overall increase was the result of budget
carryovers from the previous year, an accelerated payment of the PARS obligation, and
additional capital projects spending to meet the City's 15 percent Charter requirement for
infrastructure spending.
Variance with Final Budget
General Fund actual revenues were greater than the final budget by $1,175,000 for the
fiscal year ended September 30, 2013 due in large part to the following:
• Property Taxes: The net $1,611,000 positive variance in actual vs. final budgeted
revenue in this category was primarily due to the strengthening property tax
values.
General Fund expenditures were $5,072,000 less than the final budget. The favorable
budget variance is due in large part to the following:
• The Police Department realized $1,439,000 in savings primarily due to lower
personnel costs than anticipated associated with vacancy savings.
• The Planning and Building Department realized $793,000 in savings from the
deferral of various building and planning contracts.
• The Community Services and Library Services Department generated $1,899,000
in savings due to expenses originally budgeted in FY 2012/13 that were not
incurred until the subsequent fiscal year.
HB -701- Item 13. - 191
City of Huntington Beach
Management's Discussion and Analysis
-4 For the Year Ended September 30, 2013
Analysis of City's Other Major Governmental Funds
Grants Special Revenue Fund
The fund balance in the Grant Special Revenue Fund increased by $2,092,000 due to
the inherent timing differences between when grant expenditures are incurred versus
when the revenues are received. Significant grant expenditures in the current year were
for Police, Fire, and street improvement grants.
LMIHAF Capital Proiects Fund
The fund balance in the LMIHAF Capital Projects Fund decreased by $4,249,000 due to
a one-time State-mandated payment made to the Orange County Auditor-Controller in
accordance with AB 1484.
Economic Factors and Next Year's Budget
As the economy regains its foothold, the Budget for FY 2013/14 reflects a stabilization of
General Fund revenue and a conservative overall increase of 4.3 percent from the prior
year's budget. This conservative budget strategy protects the City from unanticipated
revenue declines or cost increases while still reflecting the revenue gains related to the
improving local economy.
On the expenditure side, the FY 2013/14 Budget reflects a modest 6.5 percent increase
primarily attributed to greater spending in the Capital Improvement Program (CIP) and
the receipt of new Federal and State grants. Personnel Services reflects a slight
increase in staffing with the addition of 9.75 FTEs, including the restoration of funding for
five Police Officer positions previously defunded during the economic crisis.
Key General Fund revenue highlights are discussed below:
• Secured property tax revenue included assessed values of Huntington Beach and
Sunset Beach properties, with an 11.4 percent increase projected for the City.
• Sales tax revenue has exceeded the previous high mark in FY 2007/08 due to
new store openings and the acquisition of new businesses, with a 12.3 percent
increase projected for FY 2013/14.
• Transient Occupancy Tax revenue remains strong as the Huntington Beach
Marketing and Visitor's Bureau continues to promote the City as a tourist
destination, and the Sunset Beach hotels are factored in for a full year of hotel tax
receipts.
• Utility Taxes will remain relatively flat as energy conservation efforts continue to
suppress demand and prices.
• Licenses and Permits revenue reflects a modest 3.6 percent increase from the
prior year due to the continuation of multiple large-scale multi-use development
projects currently underway.
Item 13. - 192 HB -702-
City of Huntington Beach
Management's Discussion and Analysis
-2 For the Year Ended September 30, 2013
Lastly, as part of the FY 2013/14 budget, the City has adopted its new "One Equals Five"
Plan, which allows for a certain amount of additional General Fund revenue received
above budgeted expenses to be used to pay down the City's unfunded CalPERS liability.
According to actuarial calculations, each additional $1 million contributed to the City's
plan will benefit the City five times over, resulting in $5 million in taxpayer savings over a
25 year period.
Similarly, the "25 to 10" Plan has been adopted by the City to expedite the payment of
the City's Retiree Medical unfunded liability. The budget reflects an additional $1.1
million contribution to the plan, reducing the amortization of the unfunded liability from 25
years to 10 years, immediately shaving off 15 years of payments.
The City has also adopted a plan to expedite the payment of the unfunded liability for the
City's supplemental defined benefit retirement plan. An additional $568,000 has been
committed above the FY 2012/13 Budget and beyond to decrease this liability with the
plan of paying down the unfunded liability in 10 years, versus the original amortization of
16 years.
Contacting the City's Financial Management Team
This financial report is designed to provide our citizens, taxpayers, customers, and
investors and creditors with a general overview of the City's finances and to show the
City's accountability for the money it receives. If you have questions about this report,
separate reports of the City's component units or need any additional financial
information, contact the Finance Department at 2000 Main Street, Huntington Beach,
California, 92648-2702, phone (714) 536-5630 or e-mail mloadsman@surfcity-hb.org.
1113 -70;_ Item 13. - 193
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Item 13. - 194 IJB -704-
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-705- Item 13. - 195
BASIC I A IAL STATEMENTS
Item 13. - 196 HB -�06-
CITY OF HUNTINGTON BEACH
STATEMENT OF NET POSITION
SEPTEMBER 30, 2013
(In Thousands)
Governmental I Business-Type
ASSETS Activities Activities Total
Cash and Investments $ 49,864 $ 64,949 $ 114,813
Receivables, Net 37,577 6,488 44,065
Advances to Successor Agency 5,290 - 5,290
Imentories - 1,205 1,205
Prepaids 4,640 - 4,640
Other Assets 1,266 - 1,266
Other Postemployment Benefits Asset 10,558 - 10,558
S u btota 1 109,195 72,642 181,837
Restricted Assets:
Cash and Investments 39,309 27,488 66,797
Cash and Investments with Fiscal Agent 4,331 - 4,331
Receivables, Net 17,195 - 17,195
Total Restricted Assets 60,835 27,488 88,323
Capital Assets:
Non-Depreciable 358,902 19,659 378,561
Depreciable, Net 302,605 126,227 428,832
Total Capital Assets 661,507 145,886 807,393
Total Assets 831,637 246,016 1,077,563
LIABILITIES
Accounts Payable 4,467 4,277 8,744
Accrued Payroll 6,503 43 6,546
Deposits 1,304 1,615 2,919
Subtotal 12,274 5,935 18,209
Liabilities Payable from Restricted Assets:
Accounts Payable 6,708 - 6,708
Accrued Interest Payable 239 - 239
Deposits 2,021 - 2,021
Total Liabilities Payable from Restricted Assets 8,968 - 8,968
Long-Term Obligations:
Long-Term Obligations Due Within One Year 16,449 304 16,753
Long-Term Obligations Due in More than One Year 70,636 808 71,444
Total Long-Term Obligations 87,086 1,112 88,197
Total Liabilities 108,327 7,047 115,374
NET POSITION
Net Investment in Capital Assets 617,267 145,886 763,153
Restricted for:
Debt Service 4,350 - 4,350
Capital Projects 17,001 27,488 44,489
Public Works and Community Services Projects 30,516 - 30,516
Total Restricted Net Position 51,867 27,488 79,355
Unrestricted 54,076 65,595 119,671
Total Net Position $ 723,210 $ 238,969 $ 962,179
See Notes to Financial Statements
l-IB -707- Item 13. - 197
CITY OF HUNTINGTON BEACH
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED SEPTEMBER 30,2013
(In Thousands)
Net(Expense)Revenue and Changes in
Program Revenues Net Position
Charges for Operating Capital Grants Business
Current Grants and and Governmental Type
Functions/Programs Expenses Services Contributions Contributions Activities Activities Total
Governmental Activities:
City Council $ 271 $ 66 $ $ $ (205) $ $ (205)
City Manager 1,583 134 (1,449) (1,449)
City Treasurer 132 602 470 470
City Attorney 27221 135 (2,086) (2,086)
City Clerk 797 248 (549) (549)
Finance 4,825 1,275 (3,550) (3,550)
Human Resources 5,032 1,236 (3,796) (31796)
Planning&Building 6,155 9,411 3,256 3,256
Fire 36.323 9;482 833 (26,008) (26.008)
Information Services 6,096 786 - (5,310) (5,310)
Police 60,466 41653 1,663 - (54,150) (54.150)
Economic Development 8,395 2,505 1,316 951 (3,623) (3.623)
Community Services 15,521 17,832 1,133 - 3,444 3.444
Library Semites 3,873 634 164 - (3,075) (3,075)
Public Works 28,500 7,315 2,194 6,240 (12,751) (12,751)
Non-Departmental 25,563 306 - - (25,257) (25,257)
Interest on Long-Term Debt 2,289 - (2,289) (2,289)
Total Governmental Activities 208,042 56,620 7,303 7,191 (136,928) (136,928)
Business-type Activities:
Water Utility 38,446 37,835 - 844 233 233
Sewer SeNce 7,253 12,267 - 5,014 51014
Refuse Collection 10,882 10950 68 68
Hazmat Service 220 278 58 58
Total Business-Type Activities 56,801 61,330 - 844 5,373 5,373
Total Governmental and Business
Type Activities $ 264,843 $ 117,950 $ 7,303 $ 8,035 (136,928) 5,373 (131,555)
General Revenues:
Taxes:
Property Taxes 74,795 74,795
Sales Taxes 30,276 30,276
Utility Taxes 20,764 20,764
Other Taxes 14,568 14,568
Total Taxes 140,403 140,403
Other:
Use of Money and Property 2,816 137 2,953
From Other Agencies-Unrestricted 6,003 - 6,003
Other 5,240 - 5,240
Total General Revenues 154,462 137 154,599
Transfers (38) 38 -
Total General Revenues and Transfers 154,424 175 154,599
Extraordinary Item (4,669) - (4,669)
Change in Net Position 12,827 5,548 18,375
Net Position-Beginning of Year 709,664 225,619 935,283
Prior Period Adjustment 719 7,802 8,521
Net Position-Beginning of Year as restated 710,383 233,421 943,804
Net Position-End of Year $ 723,210 $ 238,969 $ 962,179
See Notes to Financial Statements
Item 13. - 198 xB -708-
CITY OF HUNTINGTON BEACH
BALANCE SHEET
GOVERNMENTALFUNDS
SEPTEMBER 30,2013
(In Thousands)
Grants Other
Special LMIHAF Capital Governmental
ASSETS General Fund Revenue Projects Funds Total
Cash and Investments $ 49,864 $ 1,559 $ 3.989 $ 28,682 $ 84,094
Cash and Investments with Fiscal Agent - - - 4,331 4,331
Taxes Receivable 31,449 - - 779 32,228
Other Receivables, Net 6,128 5,642 9,983 791 22,544
Due from Other Funds - - - 209 209
Advances to Successor Agency 5,290 - 5,290
Other Assets - - 1,266 1,266
Prepaids 4,040 - - 4,040
TOTAL ASSETS $ 91,481 $ 7,201 $ 19,262 $ 36,058 $ 154,002
LIABILITES AND FUND BALANCES
Liabilities:
Accounts Payable $ 4,467 $ 343 $ 3,649 $ 2,716 $ 11,175
Accrued Payroll 6,494 5 - 4 6,503
Due to Other Funds - - 209 209
Deposits Payable 1,304 1 - 2,020 3,325
Deferred Revenue 21,446 4,246 9,976 723 36,391
Claims Payable 3,263 - - - 3,263
Total Liabilities 36,974 4,595 13,625 5,672 60,866
Fund Balances:
Nonspendable
Prepaid Insurance 4,040 - - - 4,040
Restricted
Underground Utilities 364 - 364
Restitution 269 - 269
Pollution Remediation - - 336 336
Debt Service - 4,350 4,350
Highways, Streets and Transportation - 7,749 7,749
Low Income Housing - 57637 227 5,864
Air Quality - 727 727
Parks - 3,791 3,791
Other Capital Projects - - 976 976
Other Purposes 1,245 2,606 1,026 4,877
Committed
Economic Uncertainties 24,011 - - 24,011
Other Capital Projects - 11,098 11,098
Assigned
Litigation Reserves 900 - 900
Capital Projects Reserve 7,136 - 147 7,283
Equipment Replacement 8,295 - 8,295
Redevelopment Dissolution 1,323 - 1,323
Retiree Medical Unfunded Liability 698 - 698
General Plan Maintenance 720 720
Senior Center Debt Service Reserve 2;000 2,000
CalPERS One Equals Five Plan 500 - - 500
Other Purposes 31006 169 3,175
Unassigned - - (210) (210)
TOTAL FUND BALANCES 54,507 2,606 5,637 30,386 93,136
TOTAL LIABILITIES AND FUND BALANCES $ 91,481 $ 7,201 $ 19,262 $ 36,058 $ 154,002
See Notes to Financial Statements
FIB -709- Item 13. - 199
CITY OF HUNTINGTON BEACH
RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS
TO THE STATEMENT OF NET POSITION
SEPTEMBER 30, 2013
(In Thousands)
Amounts reported for governmental activities in the statement of net position are
different because:
Total Fund Balances Governmental Funds $ 93,136
Net capital assets used in governmental activities are not current financial resources and,
therefore, are not reported in the governmental funds
Capital Assets 943,081
Accumulated Depreciation (281;574)
Total Capital Assets 661,507
Internal Services funds are used by management to charge the cost of various city
activities to individual governmental and business-like funds. The assets and
liabilities of the internal service fund is included in governmental activities in the
Statement of Net Position. 851
Long-term receivables are not available to pay for current-period expenditures and
accordingly are deferred in the governmental funds. 36,391
Other Postemployment Benefit Asset is not a financial resource and, therefore, are not
reported in the governmental funds. 10,558
Other long-term liabilities are not due in the current period and, therefore, are not recorded
in the governmental funds.
Accrued Interest Payable (239)
Long-term Liabilities, including bonds and certificates of participation payable, are not due
and payable in the current period and therefore are not reported in the governmental funds.
Long-Term Obligations Due in One Year (8,358)
Long-Term Obligations Due in More than One Year (70,636)
Net Position of Governmental Activities $ 723,210
See.Notes to Financial Statements
Item 13. - 200 I-1B -710-
CITY OF HUNTINGTON BEACH
STATEMENT OF REVENUES, EXPENDITURES,AND
CHANGES IN FUND BALANCES
GOVERNMENTALFUNDS
FOR THE YEAR ENDED SEPTEMBER 30,2013
(In Thousands)
Other
Grants Special LMIHAF Capital Governmental
REVENUES General Fund Revenue Projects Funds Total
Property Taxes $ 73,423 $ - $ $ 1,019 $ 74,442
Sales Taxes 27,199 2,564 29,763
Utility Taxes 20,764 - 20,764
Other Taxes 14,568 - - 14,568
Licenses and Permits 8,983 - 897 9,880
Fines and Forfeitures 4,058 - - 4,058
From Use of Money and Property 14,981 364 572 129 16,046
Intergovernmental 5,453 6,928 464 5,392 18,237
Charges for Current Services 26,374 - - 4,775 31,149
Other 2,074 - 1 926 3,001
Total Revenues 197,877 7,292 1,037 15,702 221,908
EXPENDITURES
Current:
City Council 260 - - - 260
City Manager 1,341 233 - 1,574
City Treasurer 132 - 132
City Attorney 2,221 - 2,221
City Clerk 797 797
Finance 4,825 - - 4,825
Human Resources 5,442 219 5,661
Planning& Building 6,155 - - 6,155
Fire 35,497 411 12 35,920
Information Services 6,096 - - 6,096
Police 59,274 1,177 - 9 60,460
Economic Development 1,556 575 4,881 - 7,012
Community Services 13,050 269 - 633 13,952
Library Services 3,547 41 - - 3,588
Public Works 20,209 238 - 1,722 22,169
Non-Departmental 19,671 - - 13 19,684
Capital Outlay - 2,299 - 8,446 10,745
Debt Service:
Principal 4,751 150 - 4,480 9,381
Interest 191 43 - 2,087 2,321
Total Expenditures 185,015 5,655 4,881 17,402 212,953
Excess(Deficiency)Of Revenues Over
(Under)Expenditures 12,862 1,637 (3,844) (1,700) 8,955
OTHER FINANCING SOURCES(USES)
Transfers In 913 455 - 8,133 9,501
Transfers Out (9,034) - (405) (900) (10,339)
Total Other Financing Sources (Uses) (8,121) 455 (405) 7,233 (838)
EXTRAORDINARY ITEM:
Dissolution of Redevelopment Agency (4,669) - - - (4,669)
Net Change In Fund Balances 72 2,092 (4,249) 5,533 3,448
Fund Balances-Beginning Of Year 54,435 514 9,886 24,853 89,688
Fund Balances-End Of Year $ 54,507 $ 2,606 $ 5,637 $ 30,386 $ 93,136
See Notes to Financial Statements
IJB _;1 1- Item 13. - 201
CITY OF HUNTINGTON BEACH
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED SEPTEMBER 30,2013
(In Thousands)
Amounts reported for governmental activities in the Statement of
Activities are different because:
Net Changes in Fund Balances-Total Governmental funds $ 3,448
Capital Expenditures -Governmental funds report capital outlays as
expenditures. However, in the Statement of Activities, the cost of these
assets are allocated over their estimated useful lives and reported as
depreciation expense.
Depreciable Assets Purchased 13,111
Non-Depreciable Assets Purchased 2,151
Non-Depreciable Assets Disposition (2,168)
Captial Asset Dispositions (30)
Capital Asset Depreciation (12,917)
Accrual of Revenues -Certain revenues in the Statement of Activities do not
meet the "availability" criteria for revenue recognition in the governmental
funds and are not reported in the governmental funds as revenue.
Current Year Property and Sales Tax Accrual 20,187
Prior Year Property and Sales Tax Accrual (19,321)
Current Year Grant and Other Revenue Accrual 2,481
Prior Year Grant and Other Revenue Accrual (2,413)
Repayments on long-term receivables provide current financial resources to
governmental funds, while loans provided consume the current financial
resources of governmental funds. These transactions, however, have no
effect on net position. 51
Other Postemployment Benefits Payments -Expenses reported in the
Statement of Activities do not require the use of current financial resources and
therefore are not reported as expenditures in governmental funds (expenses). 1,199
Internal service funds are used by management to charge the costs of certain
activities, such as self insurance workers'compensation charges. The net
revenue of this internal service fund is reported as governmental activities. 851
Liabilities not Liquidated with Current Resources -Some expenses reported
in the Statement of Activities do not require the use of current financial
resources and, therefore.. are not reported as expenditures in governmental
funds.
Current Year Interest Accrual (239)
Prior Year Interest Accrual 271
Repayment of long-term debt principal is an expenditure in the
governmental funds, but the repayment reduces long-term liabilities in the
Statement of Net Position.
9,381
Some expenses such as compensated absences, claims,and pension
expenses are reported in the Statement of Activities do not require the use of
current resources, and therefore are not reported as expenditures in the (3,216)
governmental funds.
Change in Net Position of Governmental Activities $ 12,827
See Notes to Financial Statements
Item 13. - 202 HB _71�_
CITY OF HUNTINGTON BEACH
STATEMENT OF NET POSITION
PROPRIETARY FUNDS
SEPTEMBER 30,2013
(In Thousands)
Governmental
Business-type Activities-Enterprise Funds Activities
Internal Service
Hazmat Fund-Self
Sewer Service Service Insurance
Water Fund Fund Refuse Fund Fund Total Workers'Comp
ASSETS
Current Assets:
Cash and Investments $ 36,357 $ 23,509 $ 54 $ 29 $ 64,949 $ 5,079
Restricted Cash and Imestments 27.483 - - - 27,488 -
Other Receivables, Net 2.684 599 584 182 4,049 -
Prepaids - - - - - 600
Inventories 1,205 - - 1,205 -
Unbilled Receivables 1.547 439 453 2,439
Total Current Assets 69,281 29,547 1,091 211 100,130 5,679
Capital Assets:
Land 3,907 - - - 3,907
Buildings and Improvements 52,047 13,505 65,552
Machinery and Equipment 8,638 1,345 9,983
Infrastructure 103,176 40,213 143,389
Construction in Progress 5,635 10,117 15,752
Less Accumulated Depreciation (65,583) (27,114) (92,697)
Total Capital Assets 107,820 38,066 - - 145,886 -
Total Assets 177,101 67,613 1,091 211 246,016 5,679
LIABILITIES
Current Liabilities:
Accounts Payable Z908 507 860 2 4,277 -
Accrued Payroll 29 12 1 1 43
Deposits Payable 1,615 - - - 1,615 -
Current Portion of Claims Payable - - - - - 4,828
Current Portion of Compensated Absences 219 75 8 2 304 -
Total Current Liabilities 4,771 594 869 5 6,239 4,828
Non-Current Liabilities:
Compensated Absences 583 199 21 5 808 -
Claims Payable - - - - - 11,355
Total Non-Current Liabilities 583 199 21 5 808 11,355
Total Liabilities 5,354 793 890 10 7,047 16,183
NET POSITION
Net Investment in Capital Assets 107,820 38,066 - - 145,886 -
Restricted for:
Capital Projects 27,488 - - 27,488
Unrestricted 36,439 28,754 201 201 65,595 (10,504)
Total Net Position $ 171,747 $ 66,820 $ 201 $ 201 $ 238,969 $ (10,504)
See Notes to Financial Statements
uB -713- Item 13. - 203
CITY OF HUNTINGTON BEACH
STATEMENT OF REVENUES,EXPENSES,AND CHANGES IN FUND NET POSITION
PROPRIETARY FUNDS
FOR THE YEAR ENDED SEPTEMBER 30,2013
(In Thousands)
Governmental
Business-type Activities-Enterprise Funds Activities
Internal Service
Hazmat Fund-Self
Sewer Service Service Insurance
Water Fund Fund Refuse Fund Fund Total Workers'Comp
OPERATING REVENUES
Sales $ 36.110 $ - $ - $ - $ 36,110 $ -
Fees and Charges for Service - 10,617 10,768 263 21,648 5,600
Other 1,725 1,650 182 15 3,572 -
Total Operating Revenues 37,835 12,267 10,950 278 61,330 5,600
OPERATING EXPENSES
Water Purchases 14,184 - - - 14,184 -
Supplies and Operations 7,797 6,020 10,882 220 24,919 1,176
Engineering 428 - - - 428 -
Production and Distribution 6,773 6,773
Maintenance 249 249
Water Meters 4,316 4,316
Water Quality 704 704
Water Use Efficiency 559 559 -
Claims and Judgments - - - 4,373
Depreciation 3,436 1,233 - - 4,669 -
Total Operating Expenses 38,446 7,253 10,882 220 56,801 5,549
Operating Income(Loss) (611) 5,014 68 58 4,529 51
NON-OPERATING REVENUES(EXPENSES)
Interest Income(Expense) 206 (69) (1) 1 137 -
Income(Loss)BeforeTransfers,Capital
Contributions,and Special Item (405) 4,945 67 59 4,666 51
TRANSFERS,CAPITAL CONTRIBUTIONS,
AND SPECIAL ITEMS
Capital Contributions 844 - - - 844 -
Transfers In - 51 - 51 800
Transfers Out - - (13) (13) -
Special Item - - - (11,355)
Total Transfers, Capital Contributions,
and Special Item 844 51 (13) 882 (10,555)
Change in Net Position 439 4,945 118 46 5,548 (10,504)
Net Position-Beginning Of Year 163,583 61,798 83 155 225,619
Prior Period Adjustment 7,725 77 - - 7,802
Net Position-Beginning of Year as restated 171,308 61,875 83 155 233,421
Net Position-End Of Year $ 171,747 $ 66,820 $ 201 $ 201 $ 238,969 $ (10,504)
See Notes to Financial Statements
Item 13. - 204 HIB -714-
CITY OF HUNTINGTON BEACH
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
FOR THE YEAR ENDED SEPTEMBER 30,2013
(In Thousands)
Governmental
Business-type Activities-Enterprise Funds Activities
Internal Service
Hazmat Fund-Self
Sewer Service Service Insurance
Water Fund Fund Refuse Fund Fund Total Workers'Comp
CASH FLOWS FROM OPERATING ACTIVITIES
Cash Receieed from Customers and Users $ 37,329 $ 12,163 $ 10,875 $ 215 $ 60,582 $ 5,600
Cash Paid to Employees for Seances (7,767) (2,891) (235) (163) (11,056) (483)
Cash Paid to Suppliers of Goods and Services (28,001) (2,899) (10,620) (52) (41,572) (5,666)
Net Cash and Investment Provided(Used)by
Operating Activities 1,561 6,373 20 - 7,954 (549)
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Transfers In - - 51 - 51 800
Transfers Out - - (13) (13) -
Cash Receieed(Paid)from/(to)Other Funds 16 (16) - - 4,828
Net Cash and Investments Used by
Noncapital Financing Activities 16 35 (13) 38 5,628
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Purchase of Capital Assets (5,197) (2,583) (7,780)
Net Cash and Investments Used by
Capital and Related Financing Activities (5,197) (2,583) (7,780)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest Receked(Paid) 206 (69) (1) 1 137
Net Cash and Investments Provided(Used)by
Investing Activities 206 (69) (1) 1 137
Net Increase(Decrease)in Cash
and Inestments (3,414) 3,721 54 (12) 349 5,079
Cash and Inestments-
BeginningofYear 67,259 24,788 - 41 92,088 -
Cash and Investments-End of Year $ 63,845 $ 28,509 $ 54 $ 29 $ 92,437 $ 5,079
RECONCILIATION OF OPERATING
INCOME(LOSS)TO NET CASH AND INVESTMENTS
PROVIDED(USED)BY OPERATING ACTIVITIES
Operating Income(Loss) $ (611) $ 5,014 $ 68 $ 58 $ 4,529 $ 51
Adjustments to Reconcile Operating
Income to Net Cash and Investments
Provided(Used)by Operating Activities
Depreciation 3,436 1,233 - - 4,669
(Increase)in Other Receivables, Net (648) (139) (80) (63) (930)
Decrease in Unbilled Receivables 127 36 7 - 170 -
(Increase)in Prepaids - - - - (600)
(Increase)in Imentory (29) - - - (29) -
Increase(Decrease)in Accounts Payable (785) 197 18 2 (568)
Increase in Accrued Payroll 29 12 1 1 43
Increase(Decrease)in Deposits Payable 15 (1) (1) - 13
Increase in Compensated Absences 27 21 7 2 57 -
Net Cash and Investments Provided(Used)
by Operating Activities $ 1,561 $ 6,373 $ 20 $ - $ 7,954 $ (549)
See Notes to Financial Statements
xB -715- Item 13. - 205
CITY OF HUNTINGTON BEACH
STATEMENT OF FIDUCIARY FUND NET POSITION
FIDUCIARY FUNDS
SEPTEMBER 30,2013
(In Thousands)
Huntington Beach
Pension Trust Redevelopment
Fund-Retirement Successor Agency
Total Agency Supplemental Private Purpose
ASSETS Funds Fund Trust
Cash and Imestments $ 4,577 $ 1,115 $ 18,153
Cash and Imestments with Fiscal Agent 3,476 - 2,423
Mutual Funds - 37,764 -
Money Market Funds - 200 -
Accounts Receivable, Net 1,011 2 105
Land Held for Resale - - 5,978
Land - - 15,033
Total Assets $ 9,064 $ 39,081 $ 41,692
LIABILITIES
Accounts Payable $ 746 $ - $ 11,224
Accrued Payroll - 1 1
Due to Bondholders 4,536 - -
Advances from City of Huntington Beach - - 5,290
Held for Others 3,782 - -
Benefits Due to Plan Members and Beneficiaries - 3,441 -
Long-Term Obligations
Long-Term Obligations Due Within One Year - 3,015
Long-Term Obligations Due in More than One Year - - 42,134
Total Liabilities $ 9,064 $ 3,442 $ 61,664
NET POSITION
Held in Trust For Pension Benefits and Other Purposes $ 35,639 $ (19,972)
CITY OF HUNTINGTON BEACH
STATEMENT OF CHANGES IN FIDUCIARY FUND NET POSITION
FIDUCIARY FUNDS
FOR THE YEAR ENDED SEPTEMBER 30,2013
(In Thousands)
Huntington Beach
Pension Trust Redevelopment
Fund-Retirement Successor Agency
Supplemental Private Purpose
ADDITIONS Fund Trust
Employer Contributions $ 4,607 $ -
Property Taxes - 12,888
Rental Income - 841
Other Income 172 223
Irnestment Income, Net 5,950 -
Total Additions 10,729 13,952
DEDUCTIONS
Benefits 3,334 -
AdministratNe Costs 100 -
Economic Development - 530
County Payment 11,071
Interest and Fiscal Agency Expenses - 3,789
Total Deductions 3.434 15,390
Extraordinary Item
Dissolution of Redevelopment Agency - 4=669
Change in Net Position 7,295 3,231
Net Position-Beginning of Year 28,344 (23,203)
Net Position-End of Year $ 35,639 $ (19,972)
See Notes to Financial Statements
Item 13. - 206 1 IB -71<-
THIS PAGE INTENTIONALLY LEFT BLANK
I-1B _717_ Item 13. - 207
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
Footnote
Number Description Page
1. Summary of Significant Accounting Policies..... ..........35-52
2. Cash and Investments .................-..................................53-58
3. Other Receivables ............................................................59-60
4. Deferred Revenue.............................................................61
5. Retirement Plan — Normal ...............................................62-65
6. Retirement Plan — Supplemental ...................................66-68
7. Postemployment Medical Insurance ............................68-71
8. Risk Management...................... ..........................._ 72-73
9. Interfund Transactions............................................................74-75
10. Long-Term Obligations.....................................................76-89
11. Capital Assets....................................................................90-91
12. Successor Agency Trust for Assets of the Former
Redevelopment Agency of the City of Huntington
Beach........................................................................ 92-103
13. Commitments and Contingencies..................................104-107
14. Other Information ............................................................-107
15. Extraordinary Item.........__......... ............... .....................107
16. Prior Period Adjustement.................................................108
17. Special Item, Self Insurance Workers' Comp Fund....109
Item 13. - 208 HB -71 b-
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Reporting Entity
The City of Huntington Beach is the primary government. It was incorporated in
1909 as a charter, full-service city. The form of government is Council-Manager.
Component units are legally separate organizations for which the City Council is
financially accountable, or organizations that if excluded from the accompanying
financial statements, would make them misleading. The component units
described below are blended (presented as if they are part of the primary
government) with the primary government for financial reporting purposes
because either the component units have governing bodies identical to the City's
(the City Council) or provide services exclusively to the City. Financial
accountability means the appointment of a voting majority of the component unit's
board and either the ability to impose will by the City or the possibility that the
component unit will provide a financial benefit or impose a financial burden on the
City.
Huntington Beach Housing Authority
The Housing Authority (the Authority) was established in March 2011 pursuant to
Housing Authority Laws of California to provide rental assistance programs to low-
income families and senior citizens, and to operate a Housing Rehabilitation Loan
Program and other approved programs. The Authority is governed by a
commission of seven members comprised of the City Council, which appoints
management and has full accountability for the Authority's fiscal affairs. The
Authority's financial data and transactions are included within the capital projects
Low and Moderate Income Housing Asset Fund (LMIHAF). On January 9, 2012,
the City adopted a resolution designating the Housing Authority of the City of
Huntington Beach to serve as the Housing Successor Agency. The Housing
Successor Agency's financial data and transactions are included within the
LMIHAF Capital Projects Fund. There is no separate Component Unit Financial
Report (CUFR) prepared for the Authority.
Huntington Beach Public Financing Authority (Public Financing Authority) —
This Corporation was formed in March 1988 to issue debt to finance public
improvements and other capital purchases for the City and the former
Redevelopment Agency. The Public Financing Authority's governing body is the
City Council, which also adopts its annual budget. The Public Financing Authority
is financially dependent on the City. There are no separately issued financial
statements available for the Public Financing Authority.
HB -719- Item 13. - 209
City of Huntington Beach
�M Notes to Financial Statements
For the Year Ended September 30, 2013
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The City of Huntington Beach Community Facilities Districts 1990-1, 2000-1,
2002-1, and 2003-1 (Community Facilities Districts) — were formed to construct
public improvements within the City boundaries. The governing board of these
districts is the City Council. The proceeds of debt issued and the expenditures for
the public improvements are recorded in capital projects funds. The Community
Facilities Districts' debt is not an obligation of the City. There are no separate
financial statements prepared for these entities.
The City of Huntington Beach Supplemental Retirement Plan and Trust
(Supplemental Retirement Plan and Trust) — The Trust was formed to provide a
supplemental retirement plan for all employees hired prior to 1997 (exact dates
differed for various associations). The governing board of the Supplemental
Retirement Plan consists of the City Treasurer, Director of Finance, and the City
Administrator (or designee). The Retirement Board is responsible for supervising
all investments, resolving benefit disputes, and ensuring that contributions are
made in order to pay the required benefits. There are no separate financial
statements for this plan and trust.
b. Government-wide Financial Statements
The government-wide financial statements include a Statement of Net Position
and a Statement of Activities. These statements present summaries of
Governmental and Business-Type Activities for the City accompanied by a total
column. Fiduciary activities of the City are not included in these statements.
These statements are presented on an "economic resources" measurement focus
and the accrual basis of accounting. Accordingly, all of the City's assets and
liabilities, including capital assets, as well as infrastructure assets, and long-term
liabilities, are included in the accompanying Statement of Net Position. The
Statement of Activities presents changes in Net Position. Under the accrual basis
of accounting, revenues are recognized in the period in which they are earned
while expenses are recognized in the period in which the liability is incurred.
Item 13. - 210 HB -720-
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The Statement of Activities demonstrates the degree to which the direct expenses
of a given function or segment is offset by program revenues. Direct expenses
are those that are clearly identifiable with a specific function or segment. Indirect
expenses are allocated to the various functions based on a proportionate use of
services. The types of transactions reported as program revenues for the City are
reported in three categories: 1) charges for current services; 2) operating grants
and contributions, and, 3) capital grants and contributions. Taxes and other items
not properly included among program revenues are reported as general revenues.
When both restricted and unrestricted resources are available for use, it is the
government's policy to use restricted resources first, then unrestricted resources
as they are needed.
Government-wide financial statements do not provide information by fund. They
simply distinguish between governmental and business-type activities. The City's
Statement of Net Position includes both current and non-current assets and
liabilities.
Financial Statement Classification
In the government-wide financial statements, net position is classified in the
following categories:
Net Investment in Capital Assets — This category groups all capital assets,
including infrastructure, into one component of net position. Accumulated
depreciation and the outstanding balances of debt that are attributable to the
acquisition, construction, or improvement of these assets reduce this category.
Restricted Net Position — This category presents restrictions imposed by
creditors, grantors, contributors or laws or regulations of other governments and
restrictions imposed by law through constitutional provisions or enabling
legislation. The government-wide Statement of Net Position reports $51,867,000
of governmental activities restricted net position, of which $28,058,000 is
restricted by enabling legislation. This category presents restrictions placed on
the categories of Capital Projects, Debt Service, and Specific Projects and
Programs.
Unrestricted Net Position —This category represents the net position of the City,
not restricted for any project or other purpose.
HB -72 t- Item 13. - 211
City of Huntington Beach
Notes to Financial Statements
k For the Year Ended September 30, 2013
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
c. Fund Financial Statements
Separate fund financial statements are prepared for governmental funds,
proprietary funds, and fiduciary funds. Major individual governmental and
enterprise funds are reported as separate columns in the fund financial
statements.
Measurement Focus, Basis of Accounting, and Financial Statement
Presentation
All governmental funds are accounted for on a spending or "current financial
resources" measurement focus and the modified accrual basis of accounting. Only
current assets and current liabilities are included on. the Balance Sheets. The
Statement of Revenues, Expenditures, and Changes in Fund Balances present
increases (revenues and other financing sources) and decreases (expenditures
and other financing uses) in net current assets. Under the modified accrual basis
of accounting, revenues are recognized in the accounting period in which they
become both measurable and available to finance expenditures of the current
period.
Revenues are recorded when received in cash, except that revenues subject to
accrual (generally 60 days after year-end) are recognized when due. The primary
revenue sources, which have been treated as susceptible to accrual by the City,
are property tax, sales tax, use of money and property, intergovernmental
revenues, charges for current services, and other taxes. Expenditures are
recorded in the accounting period in which the related fund liability is incurred.
However, debt service expenditures as well as expenditures related to
compensated absences and claims are recorded only when payment is due.
Item 13. - 212 xB -722-
t
City of Huntington Beach
Y Notes to Financial Statements
a: For the Year Ended September 30, 2013
k'.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Governmental Funds Financial Statements
Governmental Funds Financial Statements include a Balance Sheet and a
Statement of Revenues, Expenditures, and Changes in Fund Balances for all
major governmental funds and non-major funds aggregated. Accompanying
schedules are presented to reconcile and explain the differences in fund balances
and changes in fund balances as presented in these statements to the net
position and changes in net position presented in the government-wide financial
statements. The City presents all major funds that meet those qualifications.
The City's Governmental Fund Balances are comprised of the following
components:
• Nonspendable fund balance typically includes inventories, prepaid items, and
other items that by definition are not in spendable form.
• The restricted fund balance category includes amounts that can be spent only
for the specific purposes stipulated by constitution, external resource
providers, or through enabling legislation.
• The committed fund balance classification includes amounts that can be used
only for the specific purposes determined by a formal action of the City
Council. The City Council has authority to establish, modify, or rescind a fund
balance commitment through the passage of an ordinance, the city's highest
level of decision-making authority.
• Amounts in the assigned fund balance classification are intended to be used
by the City for specific purposes but do not meet the criteria to be classified as
restricted or committed. The City Council with a lesser action than an
ordinance, City Manager or designee has the authority to establish, modify, or
rescind a fund balance assignment.
• Unassigned fund balance is the residual classification for the City's General
Fund and includes all spendable amounts not contained in the other
classifications. Unassigned fund balance in other governmental funds is
limited to any negative residual fund balance after fund balance has been
classified as restricted, committed, or assigned.
xB -72;_ Item 13. - 213
g City of Huntington reach
Notes to Financial Statements
For the Year Ended September 30, 2013
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In the government-wide statements, the City considers restricted funds to be
spent first then unrestricted amounts when expenditures are incurred for purposes
for which both restricted and unrestricted fund balance is available. In the
governmental fund statements, when expenditures are incurred, the City's uses
the most restrictive funds first. The City would use the appropriate funds in the
following order: committed, assigned, and lastly unassigned amounts.
The City establishes encumbrances to record the amount of purchase orders,
contracts, and other obligations, which have not yet been fulfilled, cancelled, or
discharged. Encumbrances outstanding at year-end are recorded as part of
restricted or assigned fund balance.
Encumbrances outstanding as of September 30, 2013, by major fund (in
thousands):
General Fund $ 4,265
Grants Special Revenue 1,599
LMIHAF Capital Projects 7
Other Governmental Funds 6,646
Total Encumbrance All Funds $ 12,517
Economic Uncertainties Reserve
The City Council established an Economic Uncertainty Reserve in the General
Fund through a resolution with a goal to commit the value of two months of the
General Fund expenditure adopted budget amount. The City considers both an
ordinance and a resolution the most binding action available to the City Council,
the highest level of decision making body of the City. Appropriations from the
Economic Uncertainties Reserve commitments can only be made by formal City
Council action. Generally, appropriations and access to these funds will be
reserved for emergency situations. Examples of such emergencies include, but
are not limited to:
• An unplanned, major event such as catastrophic disaster requiring
expenditures over 5% of the General Fund adopted budget;
• Budgeted revenue taken by another government entity;
• Drop in projected/actual revenue of more than 5% of the General Fund
adopted revenue budget; and,
• Should the Economic Uncertainties Reserve be used, and its level falls below
the minimum amount of two months of General Fund expenditures adopted
budget, the goal is to replenish the fund within three fiscal years.
Item 13. - 214 H -7 24-
City of Huntington Beach
{
Notes to Financial Statements
� £ For the Year Ended September 30, 2013
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
ProprietaryFund Financial Statements
The City's enterprise and internal service funds are proprietary funds. Proprietary
Fund Financial Statements include a Statement of Net Position, a Statement of
Revenues, Expenses, and Changes in Fund Net Position, and a Statement of
Cash Flows for each mayor proprietary fund.
Proprietary funds are accounted for using the "economic resources" measurement
focus and the accrual basis of accounting. Accordingly, all assets and liabilities
(whether current or non-current) are included on the Statement of Net Position.
The Statement of Revenues, Expenses; and Changes in Fund Net Position
present increases (revenues) and decreases (expenses) in total Net Position.
Under the accrual basis of accounting, revenues are recognized in the period in
which they are earned while expenses are recognized in the period in which the
liability is incurred.
Operating revenues in the proprietary funds are those revenues that are
generated from the primary operations of the fund. All other revenues are
reported as non-operating revenues. Operating expenses are those expenses
that are essential to the primary operations of the fund. All other expenses are
reported as non-operating expenses.
Self Insurance Workers' Comp Fund — accounts for the City's self insurance
workers' compensation program in an internal service fund. City departments are
the primary users of these services and are charged a fee on a cost
reimbursement basis.
Fiduciary Funds Financial Statements
Fiduciary Funds Financial Statements include a Statement of Net Position and a
Statement of Changes in Net Position for Trust Funds. The City's fiduciary funds
include Agency and Trust Funds. Agency Funds are custodial in nature (assets
equal liabilities) and do not involve measurement of results of operations. The
agency funds are accounted for on the accrual basis of accounting. Trust Funds
present results of operations and include net position. The Retirement
Supplemental Trust Fund accounts for the activities of the supplemental
retirement plan for all employees hired prior to 1997, which accumulates
resources for pension benefits to qualified employees. Contributions made are
funded by a percentage of the Retirement Trust payroll and are recognized when
the payroll is incurred. The Huntington Beach Redevelopment Successor Agency
Private Purpose Trust Fund accounts for the Successor Agency for the former
Redevelopment Agency pursuant to Assembly Bill X1 26. Fiduciary funds are not
presented in the government-wide financial statements because these funds do
not represent net position available to the City.
14B -725- Item 13. - 215
City of Huntington Beach
+ Notes to Financial Statements
KR�4
For the Year Ended September 30, 2013
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The City reports the following major funds:
Governmental Funds
General Fund — accounts for activity not required to be accounted for in another
fund.
Grant Special Revenue — accounts for grant revenues received from federal,
state, and local agencies restricted for related project expenditures.
LMIHAF Capital Projects — accounts for the activity related to the development of
affordable housing.
Proprietary Funds
Water Fund — used to account for water sales to customers.
Sewer Service Fund — accounts for user fees charged to residents and
businesses for sewer service.
Refuse Fund — used to account for activities related to refuse collection and
disposal.
Hazmat Service Fund — accounts for user fees charged for the City's hazardous
waste material program.
The City's fund structure also includes the following fund types:
Special Revenue Funds are used to account for and report the proceeds of
specific revenue sources that are restricted or committed to expenditure for
specified purposes other than debt service or capital projects.
Debt Service Funds are used to account for the receipts for and payment of
general long-term debt.
Capital Projects Funds are used to account for and report financial resources
that are restricted, committed, or assigned to expenditure for capital outlays,
including the acquisition or construction of capital facilities and other capital
assets.
Item 13. - 216 uB -726-
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
ti
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fiducia!y Funds
Agency Funds — accounts for assets temporarily held by the City as trustee,
agent, or custodian. Agency funds are custodial in nature and do not involve
measurement of results of operations.
Pension Trust Fund — Retirement Supplemental Fund - accounts for the City's
supplemental retirement plan.
Huntington Beach Redevelopment Successor Agency Private Purpose Trust
Fund — accounts for the Successor Agency of the former Redevelopment Agency
in accordance with the Dissolution Act.
I t 3 -727- Item 13. - 217
�,,.• City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
d. Cash and Investments
The City pools cash resources of its various funds to facilitate cash management.
Cash in excess of daily needs is invested and reported as investments. It is the
City's intent to hold investments until maturity. However, the City may, in
response to market conditions, sell investments prior to maturity in order to
improve the quality, liquidity, or yield of the portfolio. Interest earnings are
apportioned among funds based on month-end cash and investment balances.
The City's cash and cash equivalents are considered to be cash on hand, demand
deposits, and highly liquid investments, such as money market funds, and any
investment with a maturity of 90 days or less at the time of purchase.
In accordance with GASB Statement No. 31, Accounting and Financial Reporting
for Certain Investments and for External Investment Pools, highly liquid market
investments with maturities of one year or less at time of purchase are stated at
amortized cost. All other investments are stated at fair value. Market value is
used as fair value for those securities for which market quotations are readily
available.
The City participates in the Local Agency Investment Fund (LAIF), an investment
pool managed by the State Treasurer of the State of California. LAIF has invested
a portion of the pool funds in structured notes and asset-backed securities. LAIF's
investments are subject to credit risk. In addition, these structured notes and
asset-backed securities are subject to interest rate risk as a result of changes in
interest rates. The City's investment policy is further discussed in Note 2 on page
53.
The City pools all non-restricted cash for investment purchases and allocates
interest income to the funds based on month-end cash balances. Funds that have
restricted cash record interest income in the respective fund.
Item 13. - 218 HB -728-
City of Huntington Beach
d � •^'' ?l ^lY'Y a
3z Notes to Financial Statements
. ft For the Year Ended September 30, 2013
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
e. Capital Assets
Capital assets, which include property, plant, equipment, and infrastructure, are
reported in the applicable governmental or business-type activities columns in the
government-wide financial statements and in the proprietary funds financial
statements. Capital assets have an acquisition cost of $50,000 or greater
($100,000 for infrastructure) and a useful life of one year or more.
The City records all purchased capital assets at historical cost (where historical
records are available) and at estimated historical cost where no historical records
exist. Capital assets acquired from gifts or contributions are recorded at fair value
at the time received, or in the case of infrastructure assets, at City Council
acceptance date. Capital assets acquired through annexation are recorded at net
book value.
In the government-wide and proprietary funds financial statements, depreciation is
recorded on the straight-line method over the estimated useful life of the assets as
shown below and charged to the respective activity or fund. No depreciation is
recorded in the governmental funds of the fund financial statements.
Buildings 20 to 50 years
Machinery and Equipment 5 to 30 years
Infrastructure 50 Years
Interest is capitalized on proprietary fund assets acquired with taxable and tax-
exempt debt. The amount of interest to be capitalized is calculated by offsetting
interest expense incurred from the date of borrowing until completion of the
project, and for tax-exempt debt, offset with interest earned on the invested
proceeds over the same period. There was no capitalized interest for the year
ended September 30, 2013.
xB -729- Item 13. - 219
. City of Huntington Beach
a �
Notes to Financial Statements
. � ` For the Year Ended September 30, 2013
z
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
f. Inventories
Proprietary fund inventories are valued at weighted-average cost.
g. Interfund Transactions
As a general rule, interfund transactions have been eliminated from the
government-wide financial statements. Exceptions to this rule are payments in-
lieu or charges for current service between the City's enterprise activities and the
City's governmental activities. Elimination of these transactions would distort the
direct costs and program revenues for the various functions. Certain eliminations
have been made regarding interfund activities, payables, and receivables. All
internal balances in the Statement of Net Position have been eliminated except
those representing balances between the governmental activities and the
business-type activities, which are presented as internal balances and eliminated
in the total primary government column.
Numerous transactions occur between funds of the City resulting in transfers and
amounts due to or from other funds. Amounts due to or from are the current (due
within one year) portion of moneys that are to be paid or to be received from other
funds.
h. Long-Term Obligations
In the government-wide and proprietary funds financial statements, long-term
obligations are recorded as liabilities in the applicable governmental activities,
business-type activities, or proprietary fund-type statement of net position. Bond
premiums and discounts, as well as issuance costs, are deferred and amortized
over the life of the debt. In the governmental fund financial statements, bond
discounts and premiums are recognized as another financing source or use.
Issuance costs are recorded as a current year debt service expenditure.
i. Employee Compensated Absences
The City records the cost of all accumulated and unused leave time (vacation,
sick, and camp) as a liability when earned in the government-wide and proprietary
funds financial statements. In the governmental funds financial statements these
amounts are recorded as expenditures when due and payable.
Item 13. - 220 H -730-
City of Huntington Beach
Notes to Financial Statements
LL `' For the Year Ended September 30, 2013
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
j. Property Tax Revenue
Property tax in California is levied according to Article 13-A of the California
Constitution. The basic levy is a countywide-levy of one percent of total assessed
valuation and is allocated to county governments, school districts, cities and
special districts. Additional levies require two-thirds approval by voters and are
allocated directly to the specific government.
In the government-wide financial statements, property tax is recorded when
earned, regardless of when levied, due, or received. In the fund financial
statements, property tax revenue is recognized in the fiscal year levied provided
that revenue is collected in time to pay current year liabilities. Deferred property
tax revenue represents property taxes related to the current fiscal year that are
collected more than 60 days after the fiscal year-end. Since the City's fiscal year
differs from the County's property tax year, there is a difference between the
property tax revenue recorded on the fund financial statements and the
government-wide financial statements, which is noted as a reconciling item in both
the Reconciliation of the Statements of Revenues, Expenditures, and Changes in
Fund Balances of Governmental Funds to the Statement of Activities and the
Reconciliation of the Balance Sheet of Governmental Funds to the Statement of
Net Position.
The County acts as a collection agent for property tax for all of the local
governmental units. Property taxes are normally collected twice per year. The
property tax calendar is as follows:
• Lien Date, January 1 - Prior Fiscal Year
• Levy Date, 4t" Week in September - Levy Fiscal Year
• Due Date, First Installment - November 1
• Due Date, Second Installment - February 1
• Delinquent Date, First Installment - December 10
• Delinquent Date, Second Installment - April 10
xB _73 I- Item 13. - 221
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
k. Redevelopment Property Tax Trust Funds
Under ABX1 26, revenues that were previously distributed to redevelopment
agencies (prior to their dissolution) in the form of property tax increment will no
longer be received. Instead, revenues are deposited by County Auditors into
Redevelopment Property Tax Trust Funds (RPTTF) created in the County
Treasury for each Successor Agency. The County Auditor administers the RPTTF
and disburses twice annually from this fund pass-through payments to affected
taxing entities, an amount equal to the total of obligation payments that are
required to be paid from tax increment as denoted on the Recognized Obligation
Payment Schedules (ROPS) to Recognized Obligation Retirement Funds (RORF)
established in the treasury of the Successor Agencies, and various allowed
administrative fees and allowances. Any remaining balance is then distributed by
the County Auditor back to affected taxing entities under a prescribed method that
accounts for pass-through payments.
The calendar for distribution of RPTTF funds is as follows:
• January - June ROPS submission due to Department of Finance,
September 1
• Distribution of RPTTF to Successor Agencies for the January-June ROPS
period, January 2
• July - December ROPS submission due to Department of Finance, March 1
• Distribution of RPTTF to Successor Agencies for the July-December ROPS
period, June 1
I. Cash Flow Statements
For purposes of the Statement of Cash Flows, the Proprietary Funds consider all
cash and investments to be cash equivalents, as these funds participate in the
citywide cash and investment pool.
m. Estimates
The accompanying financial statements require management to make estimates
and assumptions that effect certain reported amounts and disclosures. Actual
results could differ from those estimates.
Item 13. - 222 ITB -732-
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
n. Implementation of New Accounting Pronouncements
Beginning October 1, 2012, the City adopted the following new pronouncements
issued by the GASB:
In November 2010, GASB issued Statement No. 60, Accounting and Financial
Reporting for Service Concession Arrangements. The objective of this Statement
is to improve financial reporting by addressing issues related to service
concession arrangements ("SCAs"), which are a type of public-private or public-
public partnership. This Statement requires disclosures about an SCA including a
general description of the arrangement and information about the associated
assets, liabilities, and deferred inflows, the rights granted and retained, and
guarantees and commitments.
In November 2010, GASB issued Statement No. 61, The Financial Reporting
Entity: Omnibus — an amendment of GASB Statement No. 14 and No. 34. The
objective of this statement is to improve the financial reporting for a governmental
financial reporting entity.
In December 2010, GASB issued Statement No. 62, Codification of Accounting
and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB
and AICPA Pronouncements. The objective of this Statement is to incorporate into
the GASB's authoritative literature certain accounting and financial reporting
guidance that is included in the following pronouncements issued on or before
November 30, 1989, which does not conflict with or contradict GASB
pronouncements:
1. Financial Accounting Standards Board ("FASB") Statements and
Interpretations
2. Accounting Principles Board Opinions
3. Accounting Research Bulletins of the American Institute of Certified Public
Accountants' ("AICPA") Committee on Accounting Procedure
This Statement will improve financial reporting by contributing to the GASB's
efforts to codify all sources of generally accepted accounting principles for state
and local governments so that they derive from a single source.
I B 4/133- Item 13. - 223
k City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In June 2011, GASB issued Statement No. 63, Financial Reporting of Deferred
Outflows of Resources, Deferred Inflows of Resources, and Net Position. This
Statement provides financial reporting guidance for deferred outflows of resources
and deferred inflows of resources. This Statement also amends the net asset
reporting requirements in Statement No. 34, Basic Financial Statements—and
Management's Discussion and Analysis—for State and Local Governments, and
other pronouncements by incorporating deferred outflows of resources and
deferred inflows of resources into the definitions of the required components of the
residual measure and by renaming that measure as net position, rather than net
assets.
The City is currently analyzing its accounting practices to determine the potential
impact on the financial statements for the following GASB Statements:
GASB Statement No. 65, Items Previously Reported as Assets and Liabilities.
Issued in March 2012, this Statement establishes accounting and financial
reporting standards that reclassify as deferred outflows of resources or deferred
inflows of resources, certain items that were previously reported as assets and
liabilities and recognizes as outflows of resources or inflows of resources, certain
items that were previously reported as assets and liabilities. The requirements of
this Statement are effective for the City's fiscal year ending September 30, 2014.
In March 2012, GASB issued Statement No. 66, an Amendment of GASB
Statement No. 10 and No.62. This Statement resolves the conflicting guidance
that resulted from the issuance of two pronouncements. The statement amends
Statement No. 10, Accounting and Financial Reporting for Risk Financing and
Related Insurance Issues, by removing the provision that limits fund based
reporting of an entity's risk financing activities to the general fund and the internal
service fund type. It also amends Statement No. 62, Fund Balance Reporting and
Governmental Fund Type Definition, by providing specific guidance on accounting
for operating lease payments, purchased loan or group of loans, and service fees
related to mortgaged loans. The requirements of this Statement are effective for
the City's fiscal year ending September 30, 2014.
In June 2012, GASB issued Statement No. 67, Financial Reporting for Pension
Plans — an amendment of GASB Statement No. 25. The objective of this
Statement is to improve financial reporting by state and local governmental
pension plans. This Statement results from a comprehensive review of the
effectiveness of existing standards of accounting and financial reporting for
pensions with regard to providing decision-useful information, supporting
assessments of accountability and interperiod equity, and creating additional
transparency. This Statement replaces the requirements of Statement No. 25,
Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for
Item 13. - 224 HB -734-
City of Huntington Beach
Notes to Financial Statements
Y For the Year Ended September 30, 2013
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Defined Contribution Plans, and Statement No. 50, Pension Disclosures, as they
relate to pension plans that are not administered through trust covered by the
scope of this Statement and to defined contribution plans that provide
postemployment benefits other than pension. The Statement is effective for the
City's fiscal year ending September 30, 2014.
In June 2012, GASB issued Statement No. 68. This Statement provides guidance
for employers offering defined benefit pensions through plans administered as
trusts or equivalent arrangements. It replaces certain requirements related to plan
trusts in Statement No. 27 Accounting for Pension by State and Local
Governmental Employers, as well as the requirements of Statement No. 50,
Pension Disclosures. This Statement establishes standards for measuring and
recognizing liabilities, deferred outflows of resources, and deferred inflows of
resources, and expense/expenditures. For defined benefit pensions, this
Statement identifies the methods and assumptions that should be used to project
benefit payments, discount projected benefit payments to their actuarial present
value, and attribute that present value to periods of employee service. The
requirements of this Statement are effective for the City's fiscal year ending
September 30, 2015.
In January 2013, GASB issued Statement No. 69, Government Combinations and
Disposals of Government Operations. This Statement establishes accounting and
financial reporting standards related to government combinations and disposals of
government operations. As used in this Statement, the term government
combinations include a variety of transactions referred to as mergers, acquisitions,
and transfers of operations. The requirements of this Statement are effective for
the City's fiscal year ending September 30, 2015.
In April 2013, GASB issued Statement No. 70, Accounting and Financial
Reporting for Nonexchange Financial Guarantees. Some governments extend
financial guarantees for the obligations of another government, a not-for-profit
organization, a private entity, or individual without directly receiving equal or
approximately equal value in exchange (a nonexchange transaction). As part of
this nonexchange financial guarantee, a government commits to indemnify the
holder of the obligation if the entity or individual that issued the obligation does not
fulfill its payment requirements. Also, some governments issue obligations that
are guaranteed by other entities in a nonexchange transaction. The objective of
this Statement is to improve accounting and financial reporting by state and local
governments that extend and receive nonexchange guarantees. The
requirements of this Statement are effective for the City's fiscal year ending
September 30, 2014.
HB -735- Item 13. - 225
City of Huntington Beach
3
Notes to Financial Statements
For the Year Ended September 30, 2013
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In November 2013, GASB issued Statement No. 71, Pension Transition for
Contributions Made Subsequent to the Measurement Date. The objective of this
Statement is to improve accounting and financial reporting by addressing an issue in
Statement No. 68, Accounting and Financial Reporting for Pensions, concerning
transition provisions related to certain pension contributions made to defined benefit
pension plans prior to implementation of that Statement by employers and
nonemployer contributing entities. The requirements of this Statement are effective
for the City's fiscal year ending September 30, 2015.
Item 13. - 226 uB -736-
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
2. CASH AND INVESTMENTS
Investments Authorized by the California Government Code and the City's
Investment Policy
The table below identifies the investment types that are authorized for the City by the
California Government Code (or the City's investment policy, where more restrictive).
The table also identifies certain provisions of the California Government Code 53601
(or the City's investment policy, where more restrictive) that address interest rate risk
and concentration of credit risk.
Maximum Maximum
Maximum Percentage Investment
Authorized Investment Type* Maturity of Portfolio in One Issuer
United States(U.S.)Treasury Obligations 5 years No Limit No Limit
U.S.Government Sponsored
Enterprise Securities 5 years No Limit No Limit
Banker's Acceptances 180 days 25%/40%**(c) 10%
Time Certificate of Deposits 3 years(a) 50%(d) 10%
Negotiable Certificates of Deposit 3/5 years(a)*** 30% 10%
Repurchase Agreements 3 months(b) 20% 10%
Reverse-Repurchase Agreements*** * 92 days 20% 10%
Local Agency Investment Fund (LAIF) N/A No Limit $60 million
Commercial Paper 270 days 25% (e) 10%
Municipal Bonds from Any State 5 years 50%(d) 10%
Money Market Funds 60 Day Wgt Avg 15% (e) 10%
Medium Term Notes 5 years 20%/30%**** (f) 10%
Notes: California Government Code:
*The following investment types are authorized for the City by the California Government Code; (a)5 years
however,theyare notconsidered permissible investments bythe Citys Investment Policy (b)1 year
mortgage pass-through securities,CD placement service,and collateralized bank deposits. (c)40%
**-40%only with City Council approval (d)N/A
*** -5 years only with City Council approval (e)20%
0
30%with City Council approval ( 3 0
-Onlywith City Council approval
N/A-Not Applicable
HB -737- Item 13. - 227
City of Huntington Beach
Notes to Financial Statements
n � For the Year Ended September 30, 2013
2. CASH AND INVESTMENTS (Continued)
Investments Authorized by Debt Agreements
Investments of debt proceeds held by bond trustee are governed by provisions of the
debt agreements, rather than the general provisions of the California Government
Code or the City's investment policy. The table below identifies the investment types
that are authorized for investments held by a bond trustee, but bond indentures do
allow for other forms of investments if approved in writing by the bond insurer that are
not identified below. The table also identifies certain provisions of these debt
agreements that address interest rate risk and concentration of credit risk.
Maximum Maximum
Maximum Percentage Investment
Authorized Investment Type Maturity of Portfolio in One Issuer
United States (U.S.) Treasury Obligations Life of Bond No Limit No Limit
U.S. Government Sponsored
Enterprise Agency Securities Life of Bond No Limit No Limit
Banker's Acceptances 180 days No Limit No Limit
Time Certificate of Deposits 360 days No Limit No Limit
Negotiable Certificates of Deposit 360 days No Limit No Limit
LAIF N/A No Limit No Limit
Commercial Paper 270 days No Limit No Limit
Municipal Bonds from Any State Life of Bond No Limit No Limit
Money Market Funds N/A No Limit No Limit
Investment Agreements Life of Bond No Limit No Limit
Forward Purchase/Delivery Agreements Life of Bond No Limit No Limit
NIA-Not Applicable
Item 13. - 228 HB -738-
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
2. CASH AND INVESTMENTS (Continued)
Investment of the Pension Trust Fund — Retirement Supplemental Fund
The Investment Policy Statement (IPS) of the Huntington Beach Supplemental
Pension Trust is established in accordance with the assignment of fiduciary duties by
the State of California Constitution and State and Local Government Codes. The
purpose of the Investment Policy is to set guidelines for a prudent investment-making
process. The policy was established with the assumption that the longer-term nature
of the portfolio provides for higher risk tolerance and short-term volatility, but more
potential for capital growth. The Investment Manager will be responsible for carrying
out the activities related to the portfolio in accordance with the IPS to meet the goals
of an agreed upon risk/return profile, and in accordance with the mix of parameters
outlined below:
Maximum
Maturity/ Strategic
Authorized Investment Type Credit Quality Allocation
Fixed Income 30%
Money Market& Cash Equivalents 13 months/A-1 1%
P-1/AAA
Investment Grade BBB or higher 16%
High Yield N/A 3%
Inflation Protected Securities N/A 2%
Foreign Sovereign N/A 8%
Equity N/A 59%
Real Estate N/A 7%
Commodities N/A 4%
N/A - Not Applicable
11B -739- Item 13. - 229
City of Huntington Beach
(Votes to Financial Statements
4x ; e For the Year Ended September 30, 2013
2. CASH AND INVESTMENTS (Continued)
At year-end the City had the following deposits and investments (amounts in
thousands):
Primary Government:
Cash and Investments $ 114,813
Restricted Assets (Cash and Investments) 66,797
Cash and Investments with Fiscal Agent-Restricted 4,331
Total Primary Government 185,941
Fiduciary Funds:
Cash and Investments 23,845
Cash and Investments with Fiscal Agent-Restricted 43,863
Total Fiduciary Funds 67,708
Total Deposits and Investments $ 253,649
Interest Rate Risk- As a means of limiting exposure to fair value losses arising from
interest rates, the City's investment policy limits investments over three years to be
30% or less of the total portfolio.
As of September 30, 2013, the City held $136,245,075 in callable securities, which
amounted to approximately 58.2% of investments.
Investment maturities are as follows (in thousands):
Investment Maturities(In Years)
INVESTMENTS: Fair Value I Less than 1 1 to 3 1 3 to 5 T More than 5 I Total
U.S.Agency Securities $ 136,340 $ - $ 55,254 $ 80,102 $ 984 $ 136,340
Mutual Funds 37,765 37,765 - - - 37,765
Money Market Funds 2,620 2,620 - - 2,620
Medium Term Notes 26.148 2,009 21.249 2,890 - 26,148
Local Agency Investment Fund 31,337 31,337 - - - 31,337
Total Investments $ 234,210 $ 73,731 $ 76,503 $ 82,992 $ 984 234,210
Total Deposits 19,439
Total Deposits and Investments $ 253,649
Item 13. - 230 14B -740-
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
2. CASH AND INVESTMENTS (Continued)
Credit Risk - State law allows investment in United States Government-Sponsored
Enterprise (GSE) obligations noted above as US Agencies. As of year-end, the
Standard and Poor's and Moody's ratings of the GSE's were AA and AAA,
respectively. State law limits investments in commercial paper to those rated A-1 or
P-1, and investments in Corporate Bonds to having an "A" rating, and issued by a
nationally recognized statistical rating organization. As of year-end, the City had no
commercial paper holdings.
The City's investment policy for operating funds limits investments in Money Market
Funds to 15% of the portfolio. Both Standard and Poor's and Moody's have rated the
Money Market Funds in the City's bond investment portfolio as AAA. The City's
investments in Corporate Bonds are rated A or better, by a nationally recognized
statistical rating organization, per State code.
Concentration of Credit Risk — The City's investment policy limits investments in any
one issuer, except for U.S. Treasury Securities, U.S. Government Agencies and the
Local Agency Investment Fund, to no more than 10% of the portfolio. In addition, no
more than 50% can be invested in a single security type or with single financial
institution and every security type has a specific limit. This is in addition to the limits
placed on investments by State law. Investments in any one issuer (other than US
Treasury Securities, external investment pools, or Money Market Funds) that
represent 5% or more of total City's investments are as follows (amounts in
thousands):
Fair Value
Issuer Investment Type Amount
Federal Farm Credit Bank U.S. Government Sponsored
Enterprise Securities $20,000
Federal Home Loan Mortgage Corporation U.S. Government Sponsored
Enterprise Securities $34,802
Federal National Mortgage Association U.S. Government Sponsored
Enterprise Securities $72,313
1-4B -741- Item 13. - 231
City of Huntington Beach
- Notes to Financial Statements
.r For the Year Ended September 30, 2013
2. CASH AND INVESTMENTS (Continued)
Custodial Credit Risk — For an investment, custodial credit risk is the risk that, in the
event of the failure of the counterparty, the City will not be able to recover the value of
its investments or collateral securities that are in the possession of an outside party.
None of the City's investments were subject to custodial credit risk. Per the
Investment Policy Statement, the City of Huntington Beach is the registered owner of
all investments in the portfolio.
Local Agency Investment Fund — The City is a voluntary participant in the Local
Agency Investment Fund (LAIF) that is regulated by California Government Code
Section 16429 under the oversight of the Treasurer of the State of California. The fair
value of the City's investment in this pool is reported in the accompanying financial
statements at amounts based upon the City's pro-rata share of the fair value provided
by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio).
The balance available for withdrawal is based on the accounting records maintained
by LAIF, which are recorded on an amortized cost basis. LAIF had invested 2.12% of
the pooled investments funds in Structured Notes and Asset-Backed Securities. This
external investment pool is not rated and is not registered with the Securities and
Exchange Commission.
Item 13. - 232 FIB -742-
City of Huntington Beach
Notes to Financial Statements
t
For the Year Ended September 30, 2013
3. OTHER RECEIVABLES
a. Other Receivables
A summary of Other Receivables as of September 30, 2013 is as follows (in
thousands):
Description Amount
Developer Loans Receivable $ 36,458
Emerald Cove Loan Receivable 8,009
Housing Rehabilitation Loans Receivable 3,747
First Time Homebuyers Receivable 1,967
Emergency Medical Fee Receivable 2,077
Franchise Fee Receivable 493
CDBG Program Receivable 725
Highway Safety & Traffic Reduction Receivable 365
Other Grants Receivable 1,075
Other Receivables 4,086
Total Other Receivables 59,002
Allowance for Uncollectible Developer Loans (36,458)
Net Other Receivables on Governmental Fund Financial Statements $ 22,544
Other Receivables Reconciliation
Net Receivables -Governmental Activities $ 37,577
Net Receivables - Governmental Activities - Restricted 17,195
Net Receivable on Government-wide Financial Statements 54,772
Taxes Receivable on Governmental Fund Financial Statements (32,228)
Net Other Receivables on Governmental Fund Financial Statements $ 22,544
b. Developer Loans
Loans made to developers to construct or rehabilitate certain facilities under
deferred loan agreements total $36,458,000 at year-end. These loans are
allowed until a future event occurs. Loans to the Low and Moderate Income
Housing Asset Fund total $25,008,000 and loans made under the Home Program
total $11,450,000. Interest rates on these loans range from 0% to 6.5%. The
allowance for uncollectible developer loans is $36,458,000 due to the terms of the
agreement to forgive the balance of loans after a specified time period if all the
conditions of loan forgiveness are met.
HB -74 3- Item 13. - 233
City of Huntington Beach
Notes to Financial Statements
.n
For the Year Ended September 30, 2013
3. OTHER RECEIVABLES (Continued)
c. Emerald Cove Loan
On June 15, 2010, the former Redevelopment Agency loaned Emerald Cove, LP
$8,000,000 to acquire and rehabilitate Emerald Cove Senior Apartments. The
loan has an interest rate of 3% and is to be repaid annually from residual receipts
over 60 years. The loan was transferred to the Low and Moderate Income
Housing Asset Fund in fiscal year 2011-12. The loan balance as of September 30,
2013 is $8,009,000.
d. Housing Rehabilitation Loans
Loans made to qualified homeowners and landlords in the City of Huntington
Beach to rehabilitate certain single-family homes or multifamily rental housing
under deferred loan agreements total $3,747,000 at year-end. These loans are
deferred until a future event occurs. The interest rates on these loans range from
0% to 6%.
e. Deferred Loans — First Time Homebuyers
Loans made for down payment assistance of qualified first time homebuyers
under deferred loan agreements total $1,967,000 at year-end. These loans are
deferred until a future event occurs.
Item 13. - 234 HB -744-
City of Huntington Beach
} . x Notes to Financial Statements
For the Year Ended September 30, 2013
4. DEFERRED REVENUE
Certain revenues in governmental funds are deferred until received. All revenues
including property and sales tax are recognized in the year earned or levied in the
government-wide financial statements, but are recorded as deferred revenue in the
fund financial statements to the extent they are not collected within 60 days after
year-end. The amounts are as follows (in thousands):
Total Major
Grants Special Governmental
General Fund Revenue LMIHAF Funds
Property Taxes $ 14,789 $ - $ - $ 14,789
Sales Tax 5,398 - - 5,398
Grants - 499 - 499
Deferred Loans:
Emerald Cove - - 8,009 8,009
Housing Rehabilitation - 3,747 - 3,747
First Time Homebuyers - - 1,967 1,967
Other Deferred Revenue 1,259 - - 1,259
Total $ 21,446 $ 4,246 $ 9,976 $ 35,668
Other
Governmental Total Deferred
Funds Revenue
Property Taxes $ - $ 14,789
Sales Tax - 5,398
Grants 102 601
Deferred Loans: -
Emerald Cove - 8,009
Housing Rehabilitation - 3,747
First Time Homebuyers - 1,967
Other Deferred Revenue 621 1,880
Total $ 723 $ 36,391
Deferred Loans to developers and qualified individuals for housing rehabilitation and
to first time homebuyers are discussed in Note 3.
RB -74-5- Item 13. - 235
City of Huntington Beach
Notes to Financial Statements
^ For the Year Ended September 30, 2013
5. RETIREMENT PLAN — NORMAL
a. Plan Description
The City contributes to the Miscellaneous Plan and the Safety Plan of the City of
Huntington Beach, which are agent multiple-employer defined benefit plans
administered by the California Public Employees' Retirement System (CalPERS).
These retirement plans provide retirement and disability benefits, annual cost-of-
living adjustments, and death benefits to plan members and beneficiaries.
CalPERS acts as a common investment and administrative agent for participating
public entities within California. Benefit provisions and all other requirements are
established by state statute and City ordinance. Copies of CalPERS' annual
financial report may be obtained from their executive office: 400 P Street,
Sacramento, CA, 95814 or on their website: www.calpers.ca.gov.
b. Employer and Employee Contribution Obligations
The City makes two types of contributions for covered employees. The first
contribution represents the amount the City is required to make (the employer
rate). The second represents an amount, which is made by the employee, but is
partially reimbursed to the employee by the City (the member rate). The member
rate is set by contract and state law.
The employer rate is an actuarially established rate, set by CalPERS, and
changes from year to year. The employer rates for the fiscal year ended
September 30, 2013 are:
10/1/2012 - 7/1/2013 -
6/30/2013 9/30/2013*
Local Miscellaneous 16.306% 21.395%
Local Safety 35.012% 38.841%
* The City opted to use the no phase-in CalPERS employer contribution rates.
The member rates are as follows:
Rate
Local Miscellaneous 8.000%
Local Safety 9.000%
Item 13. - 236 HB -746-
City of Huntington Beach
_ Notes to Financial Statements
>° For the Year Ended September 30, 2013
5. RETIREMENT PLAN — NORMAL (Continued)
c. Annual Pension Cost
The City's annual pension cost of $25,535,000 was equal to the City's required
and actual contributions. The required contributions for the October 2012 - June
2013 and July - September 2013 periods are determined by the June 30, 2010
and 2011 actuarial valuations, respectively, using the entry age normal actuarial
cost method. The actuarial assumptions used to determine the required
contribution for both the Miscellaneous and Safety Plans for fiscal year ended
September 30, 2013 were as follows:
• Average remaining amortization periods - 22 years for the Miscellaneous Plan
and 32 years for the Safety Plan
• Asset valuation method - 15 years smoothed market
• Investment Rate of Return — 7.75% for October 2012 to June 2013 and 7.5%
for July to September 2013
• Projected salary increases - 3.30% to 14.20% (Miscellaneous and Safety)
depending on age, service, and type of employment
• Inflation — 2.75%
• Payroll growth - 3.00%
• Individual salary growth - A merit scale varying by duration of employment
coupled with an assumed annual inflation component of 2.75% and an annual
production growth of 0.25%.
CalPERS conducted an actuarial valuation using the entry-age actuarial cost
method using a level percent of payroll to determine the City's funded status as of
June 30, 2012. Significant assumptions for the June 30, 2012 valuation are as
follows:
• Average remaining amortization periods - 19 years for the Miscellaneous Plan
and 29 years for the Safety Plan
• Asset valuation method - 15 years smoothed market
• Investment Rate of Return - 7.50%
• Projected salary increases - 3.30% to 14.20% (Miscellaneous and Safety)
depending on age, service, and type of employment
• Inflation - 2.75%
• Payroll growth - 3.00%
• Individual salary growth - A merit scale varying by duration of employment
coupled with an assumed annual inflation component of 2.75% and an annual
production growth of 0.25%.
NB -747- Item 13. - 237
City of Huntington Beach
Notes to Financial Statements
F For the Year Ended September 30, 2013
5. RETIREMENT PLAN — NORMAL (Continued)
Initial unfunded liabilities are amortized over a closed period that depends on the
plan's date of entry into CaIPERS. Subsequent plan amendments are amortized
as a level percent of pay over a closed 20-year period. All new gains and losses
that occur in the operation of the plan are amortized over a rolling 30 year period
with the exception of special gains and losses in fiscal years 2008-2009, 2009-
2010 and 2010-2011. Each of these years special gains or losses will be isolated
and amortized over fixed and declining 30 year periods (as opposed to the current
rolling 30 year amortization). If the plan's accrued liability exceeds the actuarial
value of the assets, then the amortization payment on the total unfunded liability
may not be lower than the payment calculated over a 30-year amortization period.
The corridor limits for the actuarial value of assets were increased from 80%-
120% of market value to 60%-140% of market value in the actuarial valuations as
of June 30, 2010 and 2011. The temporary change to the asset smoothing
method and the amortization of gains and losses were adopted by the CaIPERS
Board to phase in the impact of significant investment losses experienced by
CaIPERS in fiscal year 2008-2009.
d. Trend Information
Local Miscellaneous
Annual Pension
Cost (in Percentage of Net Pension
Fiscal Year thousands) APC Funded Obligation
9/30/2011 $ 8,163 100% $ -
9/30/2012 $ 8,542 100% $ -
9/30/2013 1 $ 9,381 1 100% $ -
Local Safety
Annual Pension
Cost (in Percentage of Net Pension
Fiscal Year thousands) APC Funded Obligation
9/30/2011 $ 15,200 100% $ -
9/30/2012 $ 15,806 100% $ -
9/30/2013 $ 16,154 100% $ -
Item 13. - 238 11B -749-
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
5. RETIREMENT PLAN — NORMAL (Continued)
e. Funded Status and Funding Progress
Below is the funding progress based on the June 30, 2012 actuarial valuations for
the miscellaneous and the safety plans (in thousands):
Entry Age
Normal UL as a
Actu a ri a I Percentage
Accrued Actuarial Value Unfunded Funded Covered of Covered
Plan Liability(AAL) of Assets Liability(UL) Ratio Payroll Payroll
Safety 1 $ 552,5361 $ 420,519 $ (132,017)1 76.1% $ 39,241 -336.4%
Miscellaneous 1431,1751 357,911 (73,264)1 83.0% 43,228 -169.5%
Total I $ 983,7111 $ 778,430 $ (205,281)1 79.1% $ 82,469 -248.9%
The schedule of funding progress presented as Required Supplementary
Information (RSI) following the notes to the basic financial statements, presents
multi-year trend information about whether the actuarial value of plan assets is
increasing or decreasing over time relative to the actuarial accrued liability for
benefits.
Log -749- Item 13. - 239
City of Huntington Beach
Notes to Financial Statements
Wr For the Year Ended September 30, 2013
6. RETIREMENT PLAN — SUPPLEMENTAL
a. Plan Description
The City administers a supplemental single-employer defined benefit retirement plan
for all employees hired prior to 1997 (exact dates are different for various
associations). The supplemental plan will pay the retiree an additional amount to his
or her CaIPERS retirement benefit for life. The amount will cease upon the
employee's death. Benefit provisions are established and may be amended through
negotiations between the City and employee bargaining associations during each
bargaining period, which are then approved through resolutions of the City Council.
The amount that is computed as a factor of an employee's normal retirement
allowance is computed at retirement and remains constant for his or her life. Of the
1,001 active employees reported on the September 30, 2011 data, only 319 were
eligible for plan benefits. No separately prepared financial statements are prepared
for this plan and it is not included in the financial report of any other pension plan.
Prior to fiscal year 2008-09, the City had prefunded these benefits and recorded the
amounts in a fiduciary fund. In fiscal year 2008-09, the City established the
Supplemental Employee Retirement Plan and Trust, and transferred $24,918,000 to
an irrevocable trust from the prefunded amounts. The plan and trust are reported as
a pension trust fund in the City's financial statements.
Below is the plan participant data as of September 30, 2011*-.
Retirees and beneficiaries receiving benefits 643
Active Plan Members 319
Total Plan Participants 962
* Actuarial valuation as of September 30, 2011 provides the most
recent information available.
Effective in 1998 (exact dates are different for various associations), new City
employees are ineligible to participate in the Supplemental Employee Retirement
Plan.
b. Employer Obligations and Funding Status and Progress
The City annually transfers amounts from the various City funds to the pension
trust fund. The City is required to contribute the actuarially determined rate of
5.4% of total payroll for all permanent employees for the year ended September
30, 2013. Administrative costs of this plan are financed through investment
earnings.
Item 13. - 240 HB -750-
g City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
F
6. RETIREMENT PLAN — SUPPLEMENTAL (Continued)
c. Annual Pension Cost and Net Pension Obligation
The City's annual pension cost and net pension obligation for this plan fiscal year
2012/13 were (in thousands):
Annual required contribution $ 4,607
Interest on net pension obligation 213
Adjustment to annual required contribution (385)
Annual pension cost 4,435
Contributions made (4,607)
Decrease in net pension obligation (172)
Net Pension Obligation— Beginning of Year 3,613
Net Pension Obligation — End of Year $ 3,441
The annual required contribution was determined as part of an independent
actuarial valuation as of September 30, 2011 using the Entry Age Normal
Actuarial Cost Method, which is a projected benefit full-cost method which takes
into account those benefits that are expected to be earned in the future as well as
those already accrued. The actuarial assumptions used were:
• Rate of return on present and future assets - 5.5% per annum
• Projected salary increases for covered employees due to inflation — aggregate
increases of 3.25% per annum
• Projected salary increases due to merit - 0%
• Inflation rate - 3.0%
• Postemployment benefit increases - 0%
• Amortization of unfunded liability - level percentage of pay ending in 2027
(closed)
• Actuarial value of assets - market value
d. Trend Information
Below is the required three-year trend information (dollar amounts in thousands):
Annual Percentage Net
Pension of APC Pension
Fiscal Year Cost Funded Obligation
9/30/2011 $3,812 104% $4,031
9/30/2012 $4,482 109% $3,613
9/30/2013 $4,435 104% $3,441
HB -751- Item 13. - 241
ry City of Huntington Beach
(Votes to Financial Statements
For the Year Ended September 30, 2013
6. RETIREMENT PLAN — SUPPLEMENTAL (Continued)
e. Funded Status and Funding Progress
Below is the funding progress as of September 30, 2011, the most recent actuarial
valuation date (dollar amounts in thousands):
Entry Age
Normal Actuarial UAAL as a %
Accrued Value of Unfunded AAL Covered of Covered
Liability Assets (UAAL) Funded Ratio Payroll Payroll
$ 64,382 $ 27,639 $ (36,743) 42.9% $ 34,098 -107.8%
The assumptions and actuarial methods for the September 30, 2011 actuarial
valuation are disclosed in note 6c. The schedule of funding progress presented as
Required Supplementary Information following the notes to the basic financial
statements, presents multiyear trend information about whether the actuarial value
of plan assets is increasing or decreasing over time relative to the actuarial
accrued liability for benefits.
f. Accounting for Plan
Since the City is required to adopt GASB Statement Nos. 27 and 50 for the
supplemental pension plan, the difference between the ARC and the amount of
pension cost funded for the years must be recorded as a liability in the
government-wide financial statements. The amount of this liability is $3,441,000
(see Note 10). Contributions are recognized when due and payable. Benefits are
recognized when due and payable under plan provisions.
7. POSTEMPLOYMENT MEDICAL INSURANCE
a. Plan Description
The City agreed, via contract, with each employee association to provide
postemployment medical insurance to retirees. These Other Postemployment
Benefits (OPEB) are based on years of service and are available to all retirees
who meet all three of the following criteria:
At the time of retirement, the employee is employed by the City.
® At the time of retirement, the employee has a minimum of ten years of service
credit or is granted a service connected disability retirement.
® Following official separation from the City, CaIPERS grants a retirement
allowance.
Item 13. - 242 xB -752-
City of Huntington Beach
Notes to Financial Statements
=a For the Year Ended September 30, 2013
7. POSTEMPLOYMENT MEDICAL INSURANCE (Continued)
The City's obligation to provide the benefits to a retiree ceases when either of the
following occurs:
• During any period the retiree is eligible to receive health insurance at the
expense of another employer; and/or
• The retiree becomes eligible to enroll automatically or voluntarily in Medicare.
The subsidy a retiree is entitled to receive is based on the retiree's years of
service credit and is limited to $344 per month after 25 years of service. If a
retiree dies, the benefits that would be payable for his or her insurance are
provided to the spouse or family for 18 months. The retiree may use the subsidy
for any of the medical insurance plans that the City's active employees may enroll
in.
b. Accounting and Funding
The City utilizes the California Employers' Retiree Benefit Trust (CERBT), an
agent multiple-employer plan, for the postemployment medical insurance benefit.
Benefits paid from the CERBT were $827,000 for fiscal year 2012-13. The assets
of the CERBT are excluded from the accompanying financial statements since
they are in an irrevocable trust administered by CaIPERS. Copies of CaIPERS'
annual financial report may be obtained from their executive office: 400 P Street,
Sacramento, CA, 95814 or on their website: www.calpers.ca.gov. The City's
policy is to make 100% of each year's ARC. Actuarial assumptions for the June
30, 2011 valuation were:
• Entry age normal — 30 year amortization of unfunded liabilities
• Discount rate — 6.25%
• All other retirement assumptions equivalent to CaIPERS' assumptions used for
the City's normal retirement plans (refer to Note 5c)
• The medical trend rate represents the long-term expected growth of medical
benefits paid by the plan, due to non-age-related factors such as general
medical inflation, utilization, new technology, and the like. The following table
sets forth the inflation trend assumption used for the valuation:
Year Annual Rate Year Annual Rate
2013/14 8.5% 2017/18 6.5%
2014115 8.0% 2018/19 6.0%
2015116 7.5% 2019/20 5.5%
2016/17 7.0% 2020/21+ 5.0%
xB -753- Item 13. - 243
.mow
a City of Huntington Beach
Notes to Financial Statements
„WR y For the Year Ended September 30, 2013
7. POSTEMPLOYMENT MEDICAL INSURANCE (Continued)
The City's actual contributions, annually required contribution (ARC), Net OPEB
asset (NOA), and Annual OPEB Cost (AOC) were computed as follows (in
thousands):
Employer Contribution
Direct Contributions - City health plan contributions $ 2,259
Implicit subsidy 424
Total Employer Contributions $ 2,683
Development of Annual OPEB Cost(AOC)
Amortization of Actuarially Accrued Liability $ 663
Normal Cost 898
Total Annual Required Contribution (ARC) 1,561
Interest on Net OPEB Assets (NOA) (597)
Adjustment to the Annual Required Contribution (ARC) 520
Total Annual OPEB Cost(AOC) $ 1,484
Development of Net OPEB Asset (NOA)
Net OPEB Asset(NOA), beginning of year $ (9,359)
Annual OPEB Cost (AOC) 1,484
Employer Contribution (2,683)
Net OPEB Asset (NOA), end of year $ (10,558)
The City's actual contributions of $2,683,000 are greater than the annual required
contribution. The Annual OPEB Cost is reported as expenses in the non-
departmental governmental activities program.
c. Other Disclosures
Three-year trend information is disclosed below (in thousands):
Annual OPEB Actual Percentage of Net OPEB Asset
Fiscal Year Cost(AOC) Contribution AOC Contributed (NOA)
9/30/2011 $1,428 $1,559 109.20% $8,792
9/30/2012 $1,438 $2,005 139.40% $9,359
9/30/2013 $1,484 $2,683 180.80% $10,558
Item 13. - 244 HB -754-
an City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
7. POSTEMPLOYMENT MEDICAL INSURANCE (Continued)
d. Funded Status and Funding Progress
As of June 30, 2011, the most recent actuarial valuation date, the plan was 47.7%
funded. The actuarial accrued liability for benefits was $20.2 million, and the
actuarial value of assets was $9.6 million, resulting in an unfunded accrued
liability (UAAL) of $10.6 million. The covered payroll (annual payroll of active
employees covered by the plan) was $82.4 million, and the ratio of the UAAL to
the covered payroll was 12.8%.
The annual required contribution was determined as part of an independent
actuarial valuation as of June 30, 2011 using the assumptions as noted in Note
7b.
Actuarial valuations of an ongoing plan involve estimates of the value of reported
amounts and assumptions about the probability of occurrence of events far into
the future. Examples include assumptions about future employment, mortality,
and the healthcare cost trend. Amounts determined regarding the funded status
of the plan and the annual required contributions of the City are subject to
continual revision as actual results are compared with past expectations and new
estimates are made about the future. The schedule of funding progress,
presented as Required Supplementary Information following the notes to the
financial statements, presents multiyear trend information about whether the
actuarial value of plan assets is increasing or decreasing over time relative to the
actuarial accrued liability for benefits.
Projections of benefits for financial reporting purposes are based on the
substantive plan (the plan as understood by the City and plan members) and
include the types of benefits provided at the time of each valuation. The actuarial
methods and assumptions used include techniques that are designed to reduce
the effects of short-term volatility in actuarial accrued liabilities and the actuarial
value of assets, consistent with the long-term perspective of the calculations.
NB -755- Item 13. - 245
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
8. RISK MANAGEMENT
The City is exposed to various risks of losses related to torts; theft of, damage to and
destruction of assets; errors and omissions; injuries to employees, and natural
disasters. The City records all of these claims as expenditures in the General Fund.
The liability for these claims is recorded as part of long-term obligations in the
government-wide financial statements. The City records the amount of claims
payable at year-end that is due and payable at year-end in the fund financial
statements. The full amount of claims is reported as a liability in the government-
wide financial statements. Liabilities include amounts incurred, but not reported.
Liability Claims
Claims of up to $1,000,000 are paid from the General Fund. The City is also a
participant in the Big Independent Cities Excess Pool Joint Powers Authority (BICEP),
which purchases insurance for the layer between $1,000,000 and $2,000,000. It also
provides general liability insurance of $25,000,000 above the City's retention of
$1,000,000. BICEP was created by a joint powers agreement between the City of
Huntington Beach and four other local entities for the purpose of providing joint
insurance coverage and related risk management services for member cities. BICEP
allows member entities to finance a claims payment pool for certain liability claims in
excess of $1,000,000 million to a limit of $27,000,000. BICEP's governing board has
one representative from each city (either a member of the City Council or designate).
Current members must approve any changes to the board. Each participating city
pays an insurance premium to BICEP that is used to fund the operating and debt
service requirements. Payments for claims beyond what is covered by BICEP, from
$27,000,000 to $37,000,000, are paid by excess insurance coverage. There were no
liability claims in the last three years that exceeded the coverage limit.
The City of San Bernardino, a member of BICEP, filed for bankruptcy on August 1,
2012. While there continues to be uncertainty with the San Bernardino bankruptcy,
the city continues to operate and it is anticipated that they will emerge a viable entity
albeit under a new court established financial structure. In any event, there is
currently no impact on the City's equity position in BICEP.
Workers' Compensation Claims
Workers' compensation claims of up to $1,000,000 per claim are paid from the
General Fund. The BICEP is a member of CSAC-Excess Insurance Authority for
excess workers' compensation coverage. Payments for claims from $1,000,000 to
statutory limits are covered by CSAC-Excess Insurance Authority.
Item 13. - 246 HB -756-
w _ City of Huntington Beach
Notes to Financial Statements
«, For the Year Ended September 30, 2013
8. RISK MANAGEMENT (Continued)
Claims activity and liabilities relating to the current and prior year are (in thousands):
Workers' Liability
Compensation Insurance Total
Balance September 30, 2011 $ 7,015 $ 10,120 $ 17,135
Additions 9,262 2,836 12,098
Reductions (5,393) (4,968) (10,361)
Net Increase (Decrease) 3,869 (2,132) 1,737
Balance September 30, 2012 10,884 7,988 18,872
Additions 10,367 1,020 11,387
Reductions (5,068) (2,203) (7,271)
Net Increase (Decrease) 5,299 (1,183) 4,116
Balance September 30, 2013 $ 16,183 $ 6,805 $ 22,988
HB -757- Item 13. - 247
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
9. INTERFUND TRANSACTIONS
a. Due To/From Other Funds
The amounts at year-end were (in thousands):
Due to (Payable):
Highway Safety
&Traffic
Reduction
Due from (Receivable):
Other Governmental Fund
Traffic Congestion Relief $ 209
These outstanding balances result mainly from year-end accruals for payments for
goods and services.
b. Advances to/from Other Funds
The amounts at year-end were (in thousands):
Advances to
(Payable):
Redevelopment
Agency Private
Purpose Trust
Advances from (Receivable):
Major Governmental Funds
LMIHAF Capital Projects $ 5,290
There is a $5,290,000 advance from the LMIHAF Capital Projects Fund to the
Redevelopment Agency Private Purpose Trust Fund as of September 30, 2013
that consists of the following advances prior to the dissolution of the
Redevelopment Agency on February 1, 2012:
There was a $1,362,000 advance from the Low-Income Housing Fund to the
Redevelopment Agency Capital Projects Fund for Main Pier property acquisitions.
There was a $3,928,000 advance from the Low-Income Housing Fund to the
Redevelopment Agency Debt Service Fund for Supplemental Education Revenue
Augmentation Fund (SERAF) contributions.
Item 13. - 248 IHB -758-
City of Huntington Beach
Notes to Financial Statements
i
j. k For the Year Ended September 30, 2013
9. INTERFUND TRANSACTIONS (Continued)
c. Transfers In/Out
The amounts at year-end were (in thousands):
Transfers Out
Hazmat
LMIHAF Other Total Service
Capital Governmental Governmental Enterprise Total
Transfers In General Fund Projects Funds Funds Fund Transfers In
General Fund $ - $ $ 900 $ 900 $ 13 $ 913
Grants Special Revenue 455 - 455 - 455
LMIHAF - - -
Other Governmental Funds 7,728 405 8,133 8,133
Total Governmental Funds 8,183 405 900 9,488 13 9,501
Refuse Enterprise Fund 51 - - 51 - 51
Workers'Comp Internal Service Fund 800 - - 800 800
Total Transfers Out $ 9,034 $ 405 $ 900 $ 10,339 $ 13 $ 10,352
The following is a summary of the significant transfers:
• $7,728,000 was transferred from the General Fund to Other Governmental
Funds for debt service payments of $6,088,000 and an infrastructure fund
transfer of$1,640,000 primarily for a new Senior Center.
• $405,000 was transferred from the Low and Moderate Income Housing Asset
Fund to Other Governmental Funds for debt service payments.
• $900,000 was transferred from Other Governmental Funds to the General
Fund for General Fund expenditures of Gas Tax Fund related projects.
• $455,000 was transferred from the General Fund to the Grants Special
Revenue Fund to comply with local match requirements and to close out grant
funds that are no longer active.
• $800,000 was transferred from the General Fund to the Self Insurance
Workers' Compensation Internal Service Fund to provide additional funds to
offset the workers' compensation claim liabilities.
• $51,000 was transferred from the General Fund to the Refuse Enterprise Fund
to fund the senior citizen rate reduction on refuse charges.
• $13,000 was transferred from the Hazmat Service Enterprise Fund to the
General Fund for administrative overhead charges.
xB -759- Item 13. - 249
} City of Huntington Beach
Notes to Financial Statements
m �E For the Year Ended September 30, 2013
10. LONG-TERM OBLIGATIONS
Below is a schedule of changes in long-term governmental obligations for the year
(in thousands):
September September 30, Accrued Due Within One
Governmental Activities: 30,2012 Additions Retirements 2013 Interest Year
Judgment Obligation Bonds $ 4,339 $ $ (865) $ 3,474 $ 81 $ 900
Public Financing Authority:
2010(a)Lease Revenue Bonds 12,565 (655) 11,910 47 680
2011(a)Lease Revenue Bonds 34.155 (2,960) 31,195 106 3,030
Total Public Financing Authority 46,720 (3,615) 43,105 153 3,710
Other Long-Term Obligations:
Leases Payable 290 (290) - - -
Corrpensated Absences 10,985 (99) 10,886 3,532
Net Pension Obligation 3,613 4.435 (4,607) 3,441 -
Claims Payable 18,872 11,387 (7,271) 22.988 8,091
Pollution Remediation 2,000 - 2.000 -
PARS Payable 4,517 (4,461) 56 - 56
Section 108 Loan City 1,285 (150) 1,135 5 160
Total Other Long-Term Obligations 41,562 15,822 (16,878) 40,506 5 11,839
Total Long-Term Obligations-
Governmental Activities 92,621 15,822 (21,358) 87,085 239 16,449
Below are reconciliations from amounts in the above table to amounts in the
accompanying governmental fund financial statements (in thousands):
Decrease in Net Pension Obligation $ (172)
Decrease in Compensated Absences (99)
Increase in Claims Payable 4,116
Increases in Above Schedule 3,845
Increase in Current Portion of Claims Payable reported in the Go\,ernmental
Fund Financial Statement (629)
Changes in Long-term Obligations reported in the Reconciliation to the
Government-wide Financial Statements $ 3,216
Principal Paid in Go\,ernmental Fund Financial Statements $ 9,381
Decreases in Above Schedule $ 9,381
Item 13. - 250 IJB -760-
`Y City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
10. LONG-TERM OBLIGATIONS (Continued)
a. Judgment Obligation Bonds
Year of Issuance 2004
Type of Debt Jud ment Obligation Bonds
Original Principal Amount $12,500,000
Security Council Appropriations*
Interest Rates 2.00% to 4.20%
Interest Payment Dates February 1 S and August 1 S
Principal Payment Dates Februa 1 S
Purpose of Debt Pay claims on court judgment
*Payable from any source of legally available funds of the City. The Bonds are not secured by a
pledge of or lien any specific revenues, income, or funds of the City.
Debt service requirements to maturity are (in thousands):
Year Ending principal Interest Total
September 30
2014 $ 900 $ 121 $ 1,021
2015 940 84 1,024
2016 975 46 1,021
2017 659 13 672
Total $ 3,474 $ 264 $ 3,738
xB Item 13. - 251
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
10. LONG-TERM OBLIGATIONS (Continued)
b. Public Financing Authority
(1) 2010(a) Public Financing Authority Lease Revenue Bonds
Year of Issuance 2010
Type of Debt Lease Revenue Bonds
Original Principal Amount $14,745,000
Security Lease with City
Interest Rates 2.0% to 5.0%
Interest Payment Dates M`arch 1 s , September 1 s
Principal Payment Dates September 1"
Purpose of Debt Defease 1997 Leasehold Revenue Bonds
(Construct Pier Plaza and Purchase 800
MHz System) and 2000 Lease Revenue
Bonds (Capital Improvements and
defeasance of Emerald Cove Certificates of
Participation)
Debt service requirements to maturity are (in thousands):
Year Ending principal Interest Total
September 30
2014 $ 680 $ 559 $ 1,239
2015 705 532 1,237
2016 730 503 1,233
2017 765 474 1,239
2018 795 444 1,239
2019-2023 3,725 1,647 5,372
2024-2028 3,340 810 4,150
2029-2030 1,170 89 1,2591
Total $ 11,910 $ 5,058 $ 16,968
Item 13. - 252 1�B -762-
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
10. LONG-TERM OBLIGATIONS (Continued)
(2) 2011(a) Public Financing Authority Lease Revenue Bonds
Year of Issuance 2011
Type of Debt Lease Revenue Bonds
Original Principal Amount $36,275,000
Security Lease with City
Interest Rates 2.0% to 5.0%
Interest Payment Dates March 1S, September 1S
Principal Payment Dates September 1 S
Purpose of Debt Defease 2001(a) Leasehold Revenue
Bonds (Construct Sports Complex and
South Beach Phase II Improvements) and
2001(b) Lease Revenue Bonds (Defease
Civic Improvement Corporation
Certificates
Debt service requirements to maturity are (in thousands):
Year Ending Principal Interest Total
September 30
2014 $ 3,030 $ 1,272 $ 4,302
2015 3,180 1,121 4,301
2016 3,335 962 4,297
2017 1,915 862 2,777
2018 1,965 804 2,769
2019-2023 6,535 2,978 9,513
2024-2028 6,600 1,822 8,422
2029-2031 4,635 411 5,046
Total $ 31,195 $ 10,232 $ 41,427
NB -76' Item 13. - 253
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
10. LONG-TERM OBLIGATIONS (Continued)
c. Other Long-Term Obligations
(1) Leases Payable
The City entered into capital leases for various items:
Years of Issuance 2001 through 2007
Type of Debt —Capital Leases
Original Principal Amount Various $10,000 to $1,800,000
Secu rity Asset
Interest Rates 4.2% to 6.9%
Interest Payment Dates Monthly, Quarterly, Semi-Annually
Principal Payment Dates Monthly, Quarterly, Semi-Annuall
Purpose of Debt Equipment Financing
All capital leases were fully paid and ended as of September 30, 2013.
(2) Compensated Absences
There is no repayment schedule to pay the compensated absences amount
of $10,886,000 relating to governmental operations. The General Fund
typically liquidates the vacation and sick leave liability.
(3) Net Pension Obligation
There is no fixed repayment schedule to fund the liability for the unfunded
net pension obligation totaling $3,441,000 for the City's Pension Trust Fund
- Retirement Supplemental Plan described in Note 6. The amount will be
funded by contributions to the City's Retirement Supplemental Fund from
all funds, at a contribution rate determined by an independent actuarial
study (see note 6).
Item 13. - 254 FIB -764-
City of Huntington Beach
Notes to Financial Statements
' For the Year Ended September 30, 2013
10. LONG-TERM OBLIGATIONS (Continued)
(4) Claims Payable
There is no repayment schedule for the claims payable of $22,988,000
described in Note 8. The City pays the claims upon final settlement.
(5) Pollution Remediation
The City plans to remediate hazardous materials contamination of land
located within Huntington Central Park used as a gun range facility prior to
its close in 1997. The City is voluntarily planning to remediate the site in
order to use the area for park purposes. The cost of the gun range
remediation is estimated to be $2,000,000 and is reported as a long-term
liability in the government-wide financial statements. The liability was
measured by estimating a reasonable range of potential outlays and
multiplying those outlays by their probability of occurring.
(6) Public Agency Retirement Systems (PARS) Notes Payable
In May 2010, the City Council approved a retirement incentive program to
eligible employees, under the condition the program meets the fiscal,
managerial, and operational goals of the City to help mitigate declining
General Fund revenues and institute long-term structural changes to avert
future budget shortfalls and ensure that the City remains financially sound.
The following were the eligibility requirements for the program:
• City miscellaneous (non-safety) and marine safety employees only
Employed by the City as of May 3, 2010
• 50 years of age or older as of September 30, 2010
• Have at least five years of City service as of September 30, 2010
® Resign from City employment no later than September 30, 2010
• Retire under PERS no later than October 1, 2010
A total of 103 people participated and were approved by the Council for the
retirement incentive program through the Public Agency Retirement
Systems (PARS) Supplemental Retirement Program (SRP). The SRP
offered through PARS allowed the City to map its own strategy with respect
to payment for the program, backfilling of positions — both number and
timing, and program cost. The participants of this program selected from a
number of benefit options, the basic program in which one twelfth of 7% of
the individual employee's base annual salary as of July 1, 2010 would be
paid monthly over the lifetime of the participant commencing on October 1,
xa -765- Item 13. - 255
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
10. LONG-TERM OBLIGATIONS (Continued)
2010. Alternative payments are present value equivalents to the basic
program and include the following:
• Joint-and-survivor payments
• Payments made for the life of the participant subject to a ten year
minimum
• Fixed term payments from five to fifteen years. These payments are
guaranteed to the participant for the full term selected
The City is funding the cost of this program through an annuity that requires
a one-time payment of $82,000 in September 2010 and $1,587,000 fixed
annual payments over five years due in October of each year starting in
2010. During the fiscal year ended September 20, 2013, the City made a
lump-sum accelerated payment to reduce the City's liability for this benefit.
In accordance with GASB Statement No. 47, Accounting for Termination
Benefits, a liability of the accrual cost for this benefit has been recognized
in the amount of $ 7,231,000 in September 2010 and the balance as of
September 30, 2013 is $56,000 as noted in the table below (in thousands).
Year Ending principal Interest Total
September 30
2014 56 - 56
Tota I $ 56 $ - $ 56
Item 13. - 256 IJB -766-
'hµ City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
10. LONG-TERM OBLIGATIONS (Continued)
(7) Section 108 Loan City
Year of Issuance and Refinance Original 2000
Refinanced 2010
Type of Debt Loan from Federal Government
Principal Amount Original $2,570,000
Refinanced $1,560,000
Security Loan Agreement with Federal
Government
Interest Rates Original 3.8% to 3.9%
Refinanced 1.1% to 1.7%
Interest Payment Dates February 1S and August 1s'
Principal Payment Dates August 1 S
Purpose of Debt Capital Improvements. Section
108 Loan
Debt service requirements to maturity are (in thousands):
Year Ending principal Interest Annual
September 30 Payments
2014 $ 160 $ 31 $ 191
2015 170 28 198
2016 180 24 204
2017 195 19 214
2018 210 14 224
2019 220 7 227
Total $ 1,135 1 $ 123 $ 1,258
HB -767- Item 13. - 257
City of Huntington Beach
(Votes to Financial Statements
3�
For the Year Ended September 30, 2013
10. LONG-TERM OBLIGATIONS (Continued)
e. Long-Term Obligations — Business-Type Activities
Below is a schedule of the long-term obligations of business-type activities (in
thousands):
Long-Term Obligations-Business-Type September September 30, Due Within
Activities: 30,2012 Additions Retirements 2013 One Year
Compensated Absences $ 1,055 $ 238 $ (181) $ 1,112 $ 304
Total Long-Term Obligations-
Business-Type Activities $ 1,055 $ 238 $ (181) $ 1,112 $ 304
(1) Compensated Absences
There is no repayment schedule for the compensated absences amount of
$1,112,000 relating to business-type activities.
f. Long-Term Conduit Debt Obligations
Below is a schedule of the conduit debt obligations for which the City is not liable
in any manner (in thousands):
Community Facilities Districts: September September 30,
(in thousands) 30,2012 Additions Retirements 2013
Community Facilities District No. 1990-1
Special Tax Refunding Bonds $ 1,140 $ - $ (120) $ 1,020
Corrnnunity Facilities District No. 2000-1
Special Assessment Tax Bonds 13,330 (13,330) -
Community Facilities District No. 2002-1
2013 Special Tax Refunding Bonds - 12,965 - 12,965
Community Facilities District No.2002-1
Special Assessment Tax Bonds 4,670 - (65) 4,605
Community Facilities District No. 2003-1
Special Assessment Tax Bonds 21,595 - (21,595) -
Community Facilities District No. 2003-1
2013 Special Tax Refunding Bonds - 20,915 - 20,915
Total Community Facilities Districts 40,735 33,880 (35,110) 39,505
Residential Redevelopment Bonds 9,500 - - 9,500
Total Obligations Not Recorded in
Financial Statements $ 50,235 $ 33,880 $ (35,110) $ 49,005
Item 13. - 258 HB -768-
City of Huntington Beach
Notes to Financial Statements
E For the Year Ended September 30, 2013
10. LONG-TERM OBLIGATIONS (Continued)
(1) Community Facilities District 1990-1 2001 Special Tax Refunding
Bonds
Year of Issuance 2001
Type of Debt Community Facilities District
Assessment Bonds
Original Principal Amount $2,155,000
Security Special Tax Levies
Interest Rates 4.00% to 5.40%
Interest Payment Dates Aril 1S and October 1S
Principal Payment Dates October 1 s
Debt service requirements to maturity are (in thousands):
Year Ending principal Interest Total
September 30
2014 $ 120 $ 52 $ 172
2015 130 45 175
2016 140 38 178
2017 145 30 175
2018 155 22 177
2019-2020 330 19 349
Total $ 1,020 $ 206 1 $ 1,226
(2) Community Facilities District 2000-1 2001 Special Tax Bonds
Year of Issuance 2001
Type of Debt Community Facilities District
Assessment Bonds
Original Principal Amount $16,000,000
Security S ecial Tax Levies
Interest Rates 3.80% to 6.40%
Interest Payment Dates September 1 S and March 1 s
Principal Payment Dates September 1s'
Purpose of Debt Public Improvements for Grand
Coast Resort
Bonds were refunded by the Community Facilities District 2000-1 2013
Special Tax Refunding Bonds on July 31, 2013.
B -769- Item 13. - 259
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
10. LONG-TERM OBLIGATIONS (Continued)
(3) Community Facilities District 2000-1 2013 Special Tax Refunding Bonds
Year of Issuance 2013
Type of Debt Community Facilities District
Assessment Bonds
Original Principal Amount $12,965,000
Security Special Tax Levies
Interest Rates 2.00% to 5.125%
Interest Payment Dates September 1S and March 1S
Principal Payment Dates September 1S
Purpose of Debt Defease Community Facilities
District 2000-1 Special Tax
Assessment Bonds
Debt service requirements to maturity are (in thousands):
Year Ending principal Interest Total
September 30
2014 $ 475 $ 614 $ 1,089
2015 535 556 1,091
2016 545 545 1,090
2017 560 529 1,089
2018 575 512 1,087
2019-2023 3,250 2,193 5,443
2024-2028 4,065 1,377 5,442
2029-2031 2,960 306 3,266
Total $ 12,965 $ 6,632 $ 19,597
Item 13. - 260 x -;70-
City of Huntington Beach
Notes to Financial Statements
g; For the Year Ended September 30, 2013
�u
10. LONG-TERM OBLIGATIONS (Continued)
(4) Community Facilities District 2002-1 Special Tax Bonds
Year of Issuance 2002
Type of Debt Community Facilities District
Assessment Bonds
Original Principal Amount $4,900,000
Security Special Tax Levies
Interest Rates 3.80% to 6.20%
Interest Payment Dates March 1" and September 1S
t I
Principal Payment Dates Se tember 1s'
Debt service requirements to maturity are (in thousands):
Year Ending principal Interest Total
September 30
2014 $ 80 $ 284 $ 364
2015 90 280 370
2016 100 275 375
2017 . 115 269 384
2018 130 263 393
2019-2023 905 1,179 2,084
2024-2028 1,460 834 2,294
2029-2032 1,725 282 2,007
Total $ 4,605 $ 3,666 $ 8,271
HB -771- Item 13. - 261
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
10. LONG-TERM OBLIGATIONS (Continued)
(5) Community Facilities District 2003-1 Special Tax Bonds
Year of Issuance 2003
Type of Debt Community Facilities District
Assessment Bonds
Original Principal Amount $25,000,000
Security Special Tax Levies
Interest Rates 2.65% to 5.85%
Interest Payment Dates March 1" and September 1S
t I
Principal Payment Dates Se tember 1st
Bonds were refunded by the Community Facilities District 2003-1 2013
Special Tax Refunding Bonds on August 20, 2013.
(6) Community Facilities District 2003-1 2013 Special Tax Refunding Bonds
Year of Issuance 2013
Type of Debt Community Facilities District
Assessment Bonds
Original Principal Amount $20,915,000
Security Special Tax Levies
Interest Rates 2.00% to 5.375%
Interest Payment Dates March 1st and September 1 S
Principal Payment Dates September 1st
Debt service requirements to maturity are (in thousands):
Year Ending principal Interest Total
September 30
2013 $ 670 $ 1,002 $ 1,672
2014 715 959 1,674
2015 740 938 1,678
2016 765 916 1,681
2017 790 885 1,675
2018-2022 4,455 3,923 8,378
2023-2027 5,590 2,796 8,386
2028-2032 7,190 1,194 8,384
Total $ 20,915 $ 12,613 $ 33,528
Item 13. - 262 FIB -77-2-
Q", 111
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
10. LONG-TERM OBLIGATIONS (Continued)
(7) Residential Development Bonds
The City is involved in various bond issues where the City or
Redevelopment Agency issued bonds to assist in the financing of
residential developments. A trustee holds all funds and payment cannot be
made from any other source than the mortgages received.
These bond issues are (in thousands):
Outstanding Original Issue
Bond Issue Year-end Amount
Five Points Senior Project Multi-Family Housing
Revenue Bonds—Series A— 1991 $9,500 $9,500
HB -773- Item 13. - 263
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
11. CAPITAL ASSETS
a. Changes in Capital Assets
Capital asset activity for the year was (in thousands):
September 30, September 30,
Governmental Activities 2012(Restated) Additions Dispositions 2013
Capital Assets, Not Depreciated:
Land $ 352,833 $ - $ - $ 352,833
Construction in Progress 3,776 2,042 (2,168) 3,650
Joint Ventures 2,310 109 - 2,419
Total Capital Assets-Not Depreciated 358,919 2,151 (2,168) 358,902
Capital Assets Being Depreciated
Buildings 183,252 1,912 - 185,164
Machinery and Equipment 46,921 2,448 (1,199) 48,170
Infrastructure 344,110 8,751 (2,016) 350,845
Total Capital Assets Being Depreciated 574,283 13,111 (3,215) 584,179
Less Accumulated Depreciation:
Buildings (52,697) (3,793) - (56,490)
Machinery and Equipment (37,272) (2,334) 1,169 (38,437)
Infrastructure (181,873) (6,790) 2,016 (186,647)
Total Accumulated Depreciation (271,842) (12,917) 3,185 (281,574)
Total Depreciated-Net 302,441 194 (30) 302,605
Total Capital Assets 933,202 15,262 (5,383) 943,081
Total Accumulated Depreciation (271,842) (12,917) 3,185 (281,574)
Capital Assets of Governmental Activitites-Net $ 661,360 $ 2,345 $ (2,198) $ 661,507
September 30, September 30,
Business-Type Activities: 2012(Restated) Additions Dispositions 2013
Capital Assets, Not Depreciated:
Land $ 3,907 $ - $ - $ 3,907
Construction in Progress 21,111 6,111 (11,470) 15,752
Total Capital Assets-Not Depreciated 25,018 6,111 (11,470) 19,659
Capital Assets Being Depreciated
Buildings 54,081 11,471 - 65,552
Machinery and Equipment 9,872 193 (82) 9,983
Infrastructure 141,091 2,320 (22) 143,389
Total Capital Assets Being Depreciated 205,044 13,984 (104) 218,924
Less Accumulated Depreciation:
Buildings (15,403) (1,567) - (16,970)
Machinery and Equipment (7,458) (556) 81 (7,933)
Infrastructure (65,270) (2,546) 22 (67,794)
Total Accumulated Depreciation (88,131) (4,669) 103 (92,697)
Total Depreciated- Net 116,913 9,315 (1) 126,227
Total Capital Assets 230,062 20,095 (11,574) 238,583
Total Accumulated Depreciation (88,131) (4,669) 103 (92,697)
Capital Assets of Business Activitites-Net $ 141,931 $ 15,426 $ (11,471) $ 145,886
Item 13. - 264 HB -774-
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
11. CAPITAL ASSETS (continued)
b. Depreciation Expense
Depreciation in governmental activities was charged to the following
functions/programs in the Statement of Activities (in thousands):
Department:
City Manager $ 9
Fire 604
Police 245
Economic Development 20
Community Services 1,456
Library Services 285
Public Works 9,067
Non-Departmental 1,231
Total $ 12,917
Depreciation in business-type activities was charged to the following
functions/programs in the Statement of Activities (in thousands):
Fund:
Water $ 3,436
Sewer Service 1,233
Total $ 4,669
c. Capital Assets Acquired via Capital Leases
At year-end, the City's assets acquired through outstanding capital leases (see
Note 10) were (in thousands):
Governmental
Activities
Machinery and Equipment $ 1,869
Buildings 3,449
Less: Accumulated Depreciation (1,967)
Total $ 3,351
d. Joint Ventures
The City participates in two joint powers agreements with neighboring Cities. The
Public Cable Television Authority (PCTA) manages the cable television and video
provider franchising for the Cities of Huntington Beach, Fountain Valley, Stanton
and Westminster. The Central Net Operations Authority (CNOA) is a firefighter
training center shared with the City of Fountain Valley. The City of Huntington
Beach records 66.32% of PCTA and 76.00% of CNOA net assets as Joint Venture
capital assets.
HB -775- Item 13. - 265
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
12. SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER
REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH
a. General Discussion
On December 29, 2011, the California Supreme Court upheld ABX1 26 that provided
for the dissolution of all redevelopment agencies in the State of California. This
action impacted the reporting entity of the City of Huntington Beach that previously
had reported a redevelopment agency within the reporting entity of the City as a
blended component unit.
ABX1 26 provides that upon dissolution of a redevelopment agency, either the city or
another unit of local government will agree to serve as the "successor agency" to
hold the assets until they are distributed to other units of state and local government.
On January 9, 2012, the City Council elected to become the Successor Agency for
the former Redevelopment Agency in accordance with ABX1 26 as part of City
resolution number 2012-01.
After enactment of the law, effective June 28, 2011, redevelopment agencies in the
State of California generally cannot enter into new projects, obligations or
commitments. Subject to the control of a newly established oversight board,
remaining assets can only be used to pay enforceable obligations in existence at the
date of dissolution (including the completion of any unfinished projects that were
subject to legally enforceable contractual commitments).
In future fiscal years, successor agencies will only be allocated revenue in the
amount that is necessary to pay the estimated annual installment payments on
enforceable obligations of the former redevelopment agency until all enforceable
obligations of the prior redevelopment agency have been paid in full and all assets
have been liquidated.
ABX1 26 directs the State Controller of the State of California to review the propriety
of any transfers of assets between redevelopment agencies and other public bodies
that occurred after January 1, 2011. If the public body that received such transfers is
not contractually committed to a third party for the expenditure or encumbrance of
those assets, the State Controller is required to order the available assets to be
transferred to the public body designated as of successor agency by ABX1 26.
Item 13. - 266 14B -776-
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
12. SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER
REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH
(Continued)
b. Land Held for Resale
As of September 30, 2013, the Successor Agency has properties for redevelopment
purposes for resale to developers at a carrying value of $5,978,000.
c. Capital Assets
Capital Assets of the Successor Agency for the year ended September 30, 2013,
consisted of the following:
September 30, September 30,
2012 Additions Dispositions 2013
Capital Asset-Land $ 15,033 $ - $ - $ 15,033
d. Long-Term Debt
Below is a schedule of changes in long-term obligations of the Successor Agency
for the year (in thousands):
September September 30, Accrued Due Within One
30,2012 Additions Retirements 2013 Interest Year
Bonds Payable
1999 Tax Allocation
Refunding Bonds $ 5,730 $ $ (465) $ 5,265 $ 43 $ 490
2002 Tax Allocation
Refunding Bonds 12,530 (1,040) 11.490 93 1,080
Total Bonds Payable 18,260 (1,505) 16,755 136 1,570
Other Long-Term Obligations
Mayer DDA $ 5,433 $ - $ (390) $ 5.043 $ - $ 370
Bella Terra OPA(Parking) 13,546 150 (548) 13,148 500
CM DDA(Parking&Infrastructure) 7,120 - (179) 6,941 179
CM DDA(Additional Parking) 429 (7) 422 - 7
Section 108 Loan RDA 3,025 (350) 2,675 12 375
Pollution Rernediation 200 (85) 115 - -
Conpensated Absences 78 - (28) 50 - 14
Total Other Long-Term Obligations 29,831 150 (1,587) 28,394 12 1,445
Total Long-Term Obligations $ 48,091 $ 150 $ (3,092) $ 45,149 $ 148 $ 3,015
HB -777- Item 13. - 267
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
12. SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER
REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH
(Continued)
(1) 1999 Tax Allocation Refunding Bonds
Year of Issuance 1999
Type of Debt Tax Allocation Refunding Bonds
Original Principal Amount $10,835,000
Secu rity Tax Increment
Interest Rates 3.00% to 5.05%
Interest Payment Dates February 1 S and Au ust 1 S
Principal Payment Dates August 1 S
Purpose of Debt Prepay Agency's 1992 Loans to
Public Financing Authority
Debt service requirements to maturity are (in thousands):
Year Ending Principal Interest Total
September 30
2014 $ 490 $ 257 $ 747
2015 515 234 749
2016 540 211 751
2017 565 185 750
2018 595 157 752
2019-2023 2,200 402 2,602
2024 360 1 18 378
Total $ 5,265 1 $ 1.,4641 $ 6,729
Item 13. - 268 11B -778-
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
12. SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER
REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH
(Continued)
(2) 2002 Tax Allocation Refunding Bonds
Year of Issuance 2002
Type of Debt Tax Allocation Refunding Bonds
Original Principal Amount $20,900,000
Security Tax Increment
Interest Rates 2.00% to 5.00%
Interest Payment Dates February 1S and Au ust 1S
Principal Payment Dates August 1"
Purpose of Debt Prepay Agency's 1992 Loans to
Public Financing Authority and
fully defease 1992 Public
Financing Authority bonds
Debt service requirements to maturity are (in thousands):
Year Ending principal Interest Total
September 30
2014 $ 1,080 $ 558 $ 1,638
2015 1,115 512 1,627
2016 1,180 464 1,644
2017 1,235 405 1,640
2018 1,295 344 1,639
2019-2023 4,805 875 5,680
2024 7801 39 819
Total $ 11,490 1 $ 3,197 $ 14,687
Pledged Revenues
The Successor Agency will repay a total of $21,416,000, principal and
interest, for the outstanding 1999 and 2002 Tax Allocation Refunding
Bonds as of September 30, 2013 from semi-annual Redevelopment
Property Tax Trust Fund (RPTTF) revenue allocations.
The 1999 and 2002 Tax Allocation Refunding Bonds are not a debt of the
City of Huntington Beach, the State of California, nor any of its political
subdivisions, and neither the City, the State nor any of its political
subdivision is liable therefore, not in any event shall the bonds be payable
out of funds or properties other than those of the Redevelopment Agency
as set forth in the bond indenture.
NB -779- Item 13. - 269
f City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
12. SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER
REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH
(Continued)
(3) Mayer Disposition and Development Agreement
In fiscal year 1996-97, the Agency entered into a disposition and
development agreement (DDA) with Robert Mayer Corporation
(Corporation) concerning additional development adjacent to the Waterfront
Hotel. Under the agreement, the Corporation would advance payments for
the project costs with the Agency reimbursing up to $16,750,000 of the
costs. As of year-end, the Successor Agency obligation under the
agreement amounted to $5,043,000. Project-generated revenues as
available will repay these amounts over the time needed to fully amortize
the advance. The interest rate of this obligation is 6.32%. DOF has
approved this liability as an enforceable obligation. The DDA has been
approved as an enforceable obligation by the DOF.
(4) Bella Terra Parking Structure
In fiscal year 2005-06, the Agency entered into an owner participation
agreement with Bella Terra Associates, LLC (formerly Huntington Center
Associates, LLC). Under the agreement, the Corporation would construct
various public improvements, including a parking structure, which would
then be deeded to the City. The Agency would reimburse $15,000,000 of
the costs of the public improvements. As of year-end, the Successor
Agency obligation under the agreement amounted to $13,148,000. Project-
generated revenues as available will repay these amounts over the time
needed to fully amortize the advance. The interest rate of this obligation is
6.94%. The agreement has been approved as an enforceable obligation by
the DOF.
(5) CIM/Huntington Disposition and Development Agreement — Strand
Parking Structure and Infrastructure
Year of Issuance 2009
Type of Debt Loan from CIM Group, LLC
Original Principal Amount $7,900,000
Security Tax Increment
Interest Rates 7.0%
Interest Payment Dates September 30
th
Principal Payment Dates September 30
Purpose of Debt Strand Parking Structure and
Infrastructure
Item 13. - 270 HB -780-
City of Huntington Beach
Notes to Financial Statements
. r For the Year Ended September 30, 2013
12. SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER
REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH
(Continued)
As of year-end, the Successor Agency obligation under the agreement
amounted to $6,941,000. Repayment shall be made solely from
Redevelopment Property Tax Trust Fund (RPTTF) revenues received by
the Huntington Beach Redevelopment Successor Agency Private Purpose
Trust Fund in the amounts included in the Oversight Board approved
Recognized Obligation Payment Schedule (ROPS) to the County Auditor
Controller (CAC) and the Department of Finance (DOF) no fewer than 90
days prior to the semiannual RPTTF property fund (Redevelopment
Property Tax Trust Fund) distribution (or October 4th for the January 2nd
distribution and March 1 st for the June 1 st distribution) (Section 34177(m)).
The DDA has been approved as an enforceable obligation by the DOF.
(6) CIMIHuntington Disposition and Development Agreement — Additional
Strand Parking
Year of Issuance 2009
Type of Debt Loan from CIM Group, LLC
Original Principal Amount $950,000
Security Tax Increment
Interest Rates 10.0%
Interest Payment Dates September 30
th
I Principal Payment Dates September 30
th
Purpose of Debt Additional Strand Parking
Structure and Infrastructure
As of year-end, the Successor Agency obligation under the agreement
amounted to $422,000. Repayment shall be made solely from
Redevelopment Property Tax Trust Fund (RPTTF) revenues received by
the Huntington Beach Redevelopment Successor Agency Private Purpose
Trust Fund in the amounts included in the Oversight Board approved
Recognized Obligation Payment Schedule (ROPS) to the County Auditor
Controller (CAC) and the Department of Finance (DOF) no fewer than 90
days prior to the semiannual RPTTF property fund (Redevelopment
Property Tax Trust Fund) distribution (or October 4 for the January 2
distribution and March 3 for the June 1 distribution) (Section 34177(m)).
The DDA has been approved as an enforceable obligation by the DOF.
HB -781- Item 13. - 271
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
12. SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER
REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH
(Continued)
(7) Section 108 Loan Redevelopment Agency
Year of Issuance and Refinance Original 2000
Refinanced 2010
Type of Debt Section 108 Loan from Federal
Government
Principal Amount Original $6,000,000
Refinanced $3,665,000
Security Loan Agreement with Federal
Government
Interest Rates Original 7.7%
Refinanced 2.3% to 3.3%
Interest Payment Dates February 1" and August 1s
Principal Payment Dates I August 1s
Purpose of Debt I Capital improvements.
Debt service requirements to maturity are (in thousands):
Year Ending principal Interest Total
September 30
2014 $ 375 $ 73 $ 448
2015 400 66 466
2016 430 57 487
2017 460 46 506
2018 490 32 522
2019 520 17 537
Total $ 2,675 $ 291 $ 2,966
(8) Pollution Remediation — Redevelopment Agency
The Redevelopment Agency purchased property on Edinger Avenue to
consolidate land for redevelopment on January 28, 2009. The Agency
plans on remediating hazardous materials on this site. The estimated cost
of cleanup is $115,000. The cleanup cost will not exceed the estimated
amount as an environmental insurance policy taken by the Agency will
indemnify itself against further liability. This liability has been approved as
an enforceable obligation by the DOF.
Item 13. - 272 118 -782-
u
City of Huntington Beach
Notes to Financial Statements
a For the Year Ended September 30, 2013
12. SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER
REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH
(Continued)
e. Advances from the City Housing Fund
The Successor Agency has recorded advances from the City Housing Fund
totaling $5,290,000 for the following:
There was a $1,362,000 advance from the Low-Income Housing Fund to the
Redevelopment Agency Capital Projects Fund for Main Pier property acquisitions.
There was a $3,928,000 advance from the Low-Income Housing Fund to the
Redevelopment Agency Debt Service Fund for Supplemental Education Revenue
Augmentation Fund (SERAF) contributions.
f. Legislation Dissolving California Redevelopment Agencies
On June 29, 2011, the Governor of the State of California signed ABX1 26 and
ABX1 27 as part of the State's budget package. ABX1 26 requires each California
redevelopment agency to suspend nearly all activities except to implement
existing contracts, meet already-incurred obligations, preserve its assets and
prepare for the impending dissolution of the agency. ABX1 27 provides a means
for redevelopment agencies to continue to exist and operate by means of a
voluntary alternative redevelopment program.
The League of California Cities and the California Redevelopment Association
(CRA) filed a lawsuit on July 18, 2011 on behalf of cities, counties and
redevelopment agencies petitioning the California Supreme Court (Court) to
overturn ABX1 26 and ABX1 27 on the grounds that these bills violate the
California Constitution.
On December 29, 2011, the Court ruled that ABX1 26, the dissolution measure, is
largely upheld and is a proper exercise of the legislative power vested in the
Legislature by the State Constitution. A different conclusion was rendered with
respect to ABX1 27, which was invalidated in its entirety by the Court.
Accordingly, the Agency is required to dissolve in fiscal year 2011/12 and the
guidelines for dissolution are set forth in ABX1 26.
During the City Council's January 9, 2012 meeting, the City approved two
resolutions designating the City as a Successor Agency to the Redevelopment
Agency, and the Huntington Beach Housing Authority as the Successor Agency
for housing-related items. As of February 1, 2012, the Redevelopment Agency
was dissolved pursuant to Health and Safety Code Section 34172(a) and ABX1
26. As of this date, the City began implementing its duties as Successor Agency
under the direction of an Oversight Board, the California State Controller's Office,
and the California Department of Finance.
xB -78;_ Item 13. - 273
City of Huntington Beach
Notes to Financial Statements
y; For the Year Ended September 30, 2013
12. SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER
REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH
(Continued)
The following is a summary of the significant provisions of ABX1 26:
Assembly Bill X1 26
Suspends Redevelopment Activity - As of June 29, 2011, the Agency cannot incur
new obligations and debt. More specifically, the Agency cannot enter into or
amend contracts, renew or extend leases or other agreements, and dispose of or
transfer real property or other assets. Agencies are required to continue to make
scheduled payments on bonds and other legally binding agreements, and to
manage existing contracts, projects, and other agreements.
Dissolves Redevelopment Agencies - ABX1 26 dissolves all redevelopment
agencies and community development agencies. All assets and responsibilities for
closing out the activities of the former agency are transferred to a "Successor
Agency."
Creates Successor Agencies - The Successor Agency is presumed to be the
sponsoring community of the redevelopment agency. The City has been
designated the Successor Agency. The responsibility of a Successor Agency
includes making payments and performing obligations of the former
redevelopment agency in accordance with a schedule of enforceable obligations.
Enforceable obligations include; bonds, loans, legally required payments,
including payments for pension obligations, judgments or settlements, and other
legally binding and enforceable agreements. A Successor Agency is required to
dispose of the former agency's assets in an expeditious fashion, to transfer the
housing functions to its sponsoring community, to wind down the affairs of the
former agency (including the payment of debt and completion of obligated
projects), to prepare administrative budgets, and to provide support to the
Oversight Board.
Transfer of Housing Functions - The sponsoring community may choose to
assume the housing functions and the housing assets of the dissolved agency.
Should the sponsoring community choose not to assume these responsibilities, all
assets and functions would be transferred to the local housing authority. The City
has elected to continue to administer the housing functions and assets of the
former agency.
Item 13. - 274 xIB -784-
. City of Huntington Beach
Notes to Financial Statements
=R For the Year Ended September 30, 2013
12. SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER
REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH
(Continued)
Creation of Oversight Boards - The Oversight Board, which is comprised of seven
member representatives from local government bodies, is tasked with reviewing
and approving the actions of the Successor Agency. Two of the seven members
would be City representatives appointed by the Mayor--one of which must be an
employee from the recognized employee organization representing the largest
number of employees working for the redevelopment agency as of the date of
dissolution. The remaining members are appointed by the County (2), the County
Superintendent of Education (1), the Chancellor of California Community Colleges
(1), and the largest special district taxing entity in the territorial jurisdiction of the
former redevelopment agency which is eligible to receive property tax revenues
pursuant to Section 34188. The Successor Agency's Oversight Board has been
established.
Additional Legislation Related to Assembly Bill X1 26
As part of the fiscal year 2012/13 state budget package, on June 27, 2012, the
Legislature passed and the Governor signed AB 1484, the primary purpose of
which was to make technical and substantive amendments to the Dissolution Act
based on experience to-date at the state and local level in implementing the act.
As a budget "trailer bill", AB 1484 took immediate effect upon signature by the
Governor. A summary of AB 1484 is provided briefly below:
Affordable Housing — AB 1484 modified and provided clarification to the treatment
of housing assets under the Dissolution Act. It clarified the definition of the
Housing Assets, set forth explicit procedures with respect to transfer of housing
assets to occur by August 1, 2012, provided greater flexibility and procedural
steps regarding the use of housing bond proceeds and established a new Low
and Moderate Income Housing Asset Fund (LMIHAF) to be administered by the
Housing Successor and clarified that no future deposits are required to be made
to the Low-Income Housing Capital Projects Fund (the "Low-Income Housing
Fund"). Once approved, the LMIHAF will consist of all housing assets. All funds
generated by the Housing Successor are to be placed in the LMIHAF. All
payments made to repay amounts previously borrowed from, or owed to, the Low-
Income Housing Fund, as of February 1, 2012 shall be placed in the LMIHAF. In
addition, twenty percent (20%) of all loan repayments made by the Successor
Agency to the City will be deducted from the repayment and transferred to the
LMIHAF. All monies in the LMIHAF must be used in accordance with the
applicable housing-related provision of the Community Redevelopment law.
HB -785- Item 13. - 275
City of Huntington Beach
Notes to Financial Statements
„ For the Year Ended September 30, 2013
12. SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER
REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH
(Continued)
AB 1484 clarified the legal status of the Successor Agency. AB 1484 declares
that "a successor agency is a separate legal entity from the public agency that
provides for its governance." AB 1484 established the role and status of the
Oversight Board and their ability to enter into agreements.
AB 1484 had numerous substantive changes to the definition of the term
"enforceable obligation". In addition, AB 1484 established that amounts borrowed
from and payments owing to the Low-Income Housing Fund are enforceable
obligation and are payable to the Housing Successor Agency. It grants the DOF
additional authority and time to review and approve the Recognized Obligation
Payment Schedule (ROPS and established new timeframes.
AB 1484 also created a "Meet and Confer" process for disputes with
interpretations of the ROPS and the required submittals.
AB 1484 created a Fiscal Year 2011 true-up payment to pass through agencies
from the first ROPS period of January through June 2012.
AB 1484 created two reviews: (1) housing and (2) all other funds. The reviews
requires a licensed accountant to provide an accounting of cash and cash
equivalents, all transfers, general ledger and separate accounting review, legally
restricted accounts and bond proceeds. Both reviews are to determine if there are
any current balances that needed to be transferred to the taxing agencies. AB
1484 also provided a "claw-back" provision for payment of the amount owed to
taxing agencies. If in the case of nonpayment by the Successor Agency, DOF
can request that the Board of Equalization hold back sales tax from the Successor
Agency. This issue is currently under litigation.
AB 1484 creates a Finding of Completion and the ability to create a Long Range
Property Management Plan to dispose of Agency real property assets.
In addition, AB 1484 allows for the Successor Agency to pay back recognized
loans between the Successor Agency and City once they receive a Finding of
Completion.
Item 13. - 276 HB -786-
'. City of Huntington Beach
Notes to Financial Statements
8.
.a ; For the Year Ended September 30, 2013
12. SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER
REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH
(Continued)
Due Diligence Reviews Required by AB 1484
As mentioned in the note above, AB 1484 placed additional requirements on
successor agencies. Health and Safety Code Section 34179.5, as amended by
AB 1484, requires each successor agency to retain the services of a licensed
accountant to conduct due diligence reviews to determine the balances available
for distribution to taxing entities for (1) the Low and Moderate Income Housing
Fund, and (2) all other former Redevelopment Agency funds.
The first review for the Low and Moderate Income Housing Fund was submitted to
the Department of Finance (DOF) on November 16, 2012, which showed zero
balances to be remitted to taxing agencies. After the receipt of an initial
determination letter and meet and confer, the DOF sent a letter on January 17,
2013 indicating that $4,861,000 was due to be distributed to taxing agencies from
the Low and Moderate Income Housing Fund. The Agency responded to the
letter on January 22, 2013, vigorously disputing the DOF's determination. The
Agency retained a total of $3,650,000 for use in meeting certain long-term
obligations relating to housing activities. The remaining balance due of
$1,211,000 was remitted to the Orange County Auditor-Controller under protest
on January 25, 2013. On March 15, 2013, a petition for writ of mandate was filed
with the Superior Court challenging the results of the determination letter issued
by the DOF. On January 29, 2014, the Superior Court provided a tentative ruling
against the Successor Agency on its writ of mandate. The final ruling has not
been signed, the Successor Agency will be reviewing options, once the ruling has
been issued.
The review for all other former Redevelopment Agency funds was submitted to
DOF on January 15, 2013, which showed zero balances available to be remitted
to taxing agencies. On August 15, 2013, the Successor Agency received DOF's
determination letter regarding the other Agency funds. The City conducted a Meet
and Confer on September 4, 2013 and DOF provided the final determination letter
on September 20, 2013. DOF did not agree with the zero balances avaialbe for
remittance. The Agency and City distributed $11,071,092 to the County
Auditor/controller for distribution to other taxing entities on November 19, 2013.
See Note 15 for additional details.
The State Controller's Office has audited the Successor Agency and all field work
has been completed. The City is waiting for the Controller's Audit review letter.
xB -787- Item 13. - 277
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
13. COMMITMENTS AND CONTINGENCIES
a. Legal Actions
There are legal actions pending against the City resulting from normal operations. In
the opinion of management and the City Attorney, the financial resolution of these
actions should not have a significant impact on these financial statements.
b. Sales Tax Sharing Agreements
City Council agreed to provide sales tax rebates to various companies. The sales
tax rebates serve to attract and retain various companies in the City of Huntington
Beach. The City of Huntington Beach has two sales tax sharing agreements that
extend until 2020. Sales tax rebates totaled $505,469 in fiscal year ended
September 30, 2013. One of the two agreements is currently being reviewed.
c. Cooperation and Owner Participation Agreements
On September 2, 2003, the Redevelopment Agency Approved a Cooperation
Agreement Regarding Capital Improvements in the Southeast Coastal
Redevelopment Project with the City. This agreement commits the
Redevelopment Agency to reimburse the City for a number of capital improvement
projects to be undertaken as part of the Five Year Capital Improvement Program
in the Southeast Redevelopment project area starting in FY 2003/04 as they are
undertaken. Based on the DOF's opinion, this agreement is null and void. Once
the Successor Agency receives a Finding of Completion (FOC), loans between
the city and former Redevelopment Agency can begin to be re-paid, at the LAIF
rate. It is estimated that in Fiscal Year 2014/15 the Successor Agency will begin
repayment of all loans.
Item 13. - 278 HB -788-
;y •V City of Huntington Beach
Notes to Financial Statements
e vao For the Year Ended September 30, 2013
13. COMMITMENTS AND CONTINGENCIES (Continued)
Bella Terra Phase II
On October 4, 2010, the Agency approved the affordable housing agreement with
BTDJM Phase II Associates (DJM). The agreement will facilitate the construction
of a 467 mixed-use unit project, including 43 moderate units and 28 very low units.
This agreement will reimburse DJM for construction of the affordable units only up
to $17 million plus 4% interest. The agreement also includes payment from DJM
to the City for up to $250,000 for the pedestrian access crossing between the
Levitz site and the Village at Bella Terra if construction is within 10 years of the
affordable housing agreement. The reimbursement of the affordable units will be
based upon the site-generated tax increment for the mixed use project as well as
the 20% housing fund from the site-generated Bella Terra I. Construction is
underway. DMJ transferred the site to UDR and opened the project in May 2013.
The first residential units were leased commencing in May 2013. All residential
units are leased, including the very-low and moderate units. The reimbursement of
the loan will commence in FY 2013/14.
The Agency is still paying on the following Disposition and Development
Agreements and Owner Participation Agreements: Waterfront, Bella Terra 1 and
CIM/The Strand.
As of September 30, 2013, the City has no outstanding obligations related to the
cooperation and owner participation agreements discussed above.
FIB -789- Item 13. - 279
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
13. COMMITMENTS AND CONTINGENCIES (Continued)
d. Redevelopment Successor Agency Debt to City
The City has advanced money to the Redevelopment Agency for major capital
improvements, economic development projects, and operations. In January 2011,
the City Council and Redevelopment Agency Board approved a revised
Cooperation Agreement, which included a Promissory Note that memorialized
indebtedness previously incurred by the Agency and owed to the City from a
series of loans made from the City to the Agency from 1982 to present. The City
and Successor Agency have not recorded the advances in the accompanying
financial statements due to uncertainties related to Health and Safety Code
Section 34191.4, which establishes certain restrictions and limitations on the
repayment of city-agency loans. Below is a schedule of the activity for the year (in
thousands):
September September
30, 2012 Additions Reductions 30, 2013
General Fund
Direct Advances $ 2,312 $ - $ - $ 2,312
Indirect Advances 6.567 - - 6,567
Land Sales 32,833 - - 32,833
Interest 25,126 184 - 25,310
Total General Fund 66,838 184 - 67,022
Sewer Fund
Direct Advances 275 - - 275
Deferred Development Fees 171 1 - 172
Total Sewer Fund 446 1 - 447
Drainage Fund
Direct Advances 665 2 - 667
Deferred Development Fees 183 1 - 184
Total Drainage Fund 848 3 - 851
Park Acquisition and Development Fund
Direct Advances 5,489 14 - 5,503
Deferred Development Fees 408 1 - 409
Total Park Acquisition and Development Fund 5,897 15 - 5,912
Water Fund
Direct Advances 4,130 11 - 4,141
Total Water Fund 4,130 11 - 4,141
Total All Funds $ 78,159 $ 214 $ - $ 78,373
Item 13. - 280 uB -790-
City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
13. COMMITMENTS AND CONTINGENCIES (Continued)
e. Low Moderate Income Housing Asset Fund Debt to City
In May 2009, a Promissory Note was issued by the Redevelopment Agency to the
City to pay for outstanding bonded debt related to the Emerald Cove Housing
Project. The note is secured by a pledge of Set-Aside Funds. Based on the
Promissory Note, the interest rate for the loan is 0% and the loan is scheduled to
be repaid by 2021. The City has not recorded the advances in the accompanying
financial statements due to uncertainties surrounding ABX1 26 and Assembly Bill
1484 and related litigation (see Note 12f). Below is a schedule of the activity for
the year (in thousands):
September September
30, 2012 Additions Reductions 30, 2013
General Fund
Emerald Co\e $ 3,650 $ - $ (405) $ 3,245
14. OTHER INFORMATION
a. Fund and Accumulated Deficits
The following funds have total fund deficits at year-end (in thousands):
Special Revenue Fund
Highway Safety & Traffic Reduction $ 210
The City has established plans to reduce and eliminate deficits in these Funds.
Highway Safety & Traffic Reduction will be receiving sufficient revenues in fiscal
year 2013/14 to eliminate the deficit balance.
15. EXTRAORDINARY ITEM
On February 1, 2012, Statewide all former redevelopment agencies were
dissolved. In June 2012, Assembly Bill 1484 (AB 1484) was approved which set
forth new requirements for the Successor Agency to the former Redevelopment
Agency. AB 1484 required Due Diligence Reviews (DDR) of both Housing and
Non-Housing Funds. On September 20, 2013, the City received the final
determination and demand letter from the Department of Finance (DOF) for the
Non-Housing DDR. The Demand was for a total of $11,071,000, which includes
$4,669,000 in disallowed transfers from the former Redevelopment Agency to the
City's General Fund. As a result, City's General Fund transferred the $4,669,000
to the Successor Agency to ultimately pay the $11,071,000 demand payment.
The $4,669,000 transfer was reported as an extraordinary item on the Statement
of Activities, General Fund Statement and on the Successor Agency Private
Purpose Trust Statement.
FIB -79 t- Item 13. - 281
y ` v City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2013
1
16. PRIOR PERIOD ADJUSTMENT
The City conducted an inventory evaluation of Capital Assets during the fiscal
year. The adjustments made as a result are recorded as a prior period
adjustment to Capital Assets (in thousands):
September 30,
September 30, Prior Period Prior Period 2012
2012 Additions Dispositions (Restated)
Governmental Activities
Capital Assets, Not Depreciated:
La nd 352,833 - - 352,833
Construction in Progress 3,776 - - 3,776
Joint Ventures 2,310 - - 2,310
Total Capital Assets-Not Depreciated 358,919 - - 358,919
Capital Assets Being Depreciated
Buildings 183,252 - - 183,252
Machinery and Equipment 49,649 1,821 (4,550) 46,920
Infrastructure 344,110 - - 344,110
Total Capital Assets Being Depreciated 577,011 1,821 (4,550) 574,282
Less Accumulated Depreciation:
Buildings (52,697) - - (52,697)
Machinery and Equipment (40,719) (1,094) 4,542 (37,271)
Infrastructure (181,873) - - (181,873)
Total Accumulated Depreciation (275,289) (1,094) 4,542 (271,841)
Total Depreciated-Net 301,722 727 (8) 302,441
Total Capital Assets 935,930 1,821 (4,550) 933,201
Total Accumulated Depreciation (275,289) (1,094) 4,542 (271,841)
Capital Assets of Governmental Activities-Net 660,641 727 (8) 661,360
Business Activities
Capital Assets, Not Depreciated:
Land 3,907 - - 3,907
Construction in Progress 21,111 - - 21,111
Total Capital Assets-Not Depreciated 25,018 - - 25,018
Capital Assets Being Depreciated
Buildings 54,081 - - 54,081
Machinery and Equipment 10,193 157 (478) 9,872
Infrastructure 133,366 7,725 - 141,091
Total Capital Assets Being Depreciated 197,640 7,882 (478) 205,044
Less Accumulated Depreciation:
Buildings (15,403) - - (15,403)
Machinery and Equipment (7,856) (80) 478 (7,458)
Infrastructure (65,270) - - (65,270)
Total Accumulated Depreciation (88,529) (80) 478 (88,131)
Total Depreciated-Net 109,111 7,802 - 116,913
Total Capital Assets 222,658 7,882 (478) 230,062
Total Accumulated Depreciation (88,529) (80) 478 (88,131)
Capital Assets of Business Activities-Net 134,129 7,802 - 141,931
The City determined that the value of the capitalized assets reporting under
Governmental and Business-Type Activities was understated by $719,000 and
$7,802,000, respectively as of October 1, 2012.
Item 13. - 282 HB -792-
< City of Huntington Beach
Notes to Financial Statements
gg - For the Year Ended September 30, 2013
17. SPECIAL ITEM, SELF INSURANCE WORKERS' COMP FUND
Special items are significant transactions that are within the control of
management and are either unusual in nature or infrequent in nature. City
Council approved the creation of the Self Insurance Workers' Comp Internal
Service Fund to provide proper tracking, planning, and transparency of workers'
compensation expenses. The assets and liabilities related to workers'
compensation were transferred to the newly created fund from the General Fund.
$11,355,000 was reported as a current year expense in the Self Insurance
Workers' Comp Fund to record the long term portion of the workers' compensation
liability transferred from the General Fund.
HB -793- Item 13. - 283
REQUIRE® SUPPLEMENTARY INFORMATION
Item 13. - 284 FIB -794-
THIS PAGE INTENTIONALLY LEFT BLANK
HB -795- Item 13. - 285
City of Huntington Beach
x„ £; Required Supplementary Information
r For the Year Ended September 30, 2013
Budgetary Information
The City Council must annually adopt a budget by September 30 of the prior fiscal year.. The
budgeted expenditures become the appropriations to the various departments. The budget
includes estimates for revenue that, along with the appropriations, compute the budgetary fund
balance. The appropriated budget covers substantially all governmental fund expenditures with the
exception of capital improvement projects (capital projects funds) carried forward from prior years,
which constitute a legally authorized non-appropriated budget. The City Council may amend the
budget at any time. The City Manager may transfer funds from between object purposes (personal
services, operating expenditures, or capital outlay expenditures) within the same department
without changing the total departmental budget. Department heads, with the Director of Finance's
approval, may transfer funds from like object categories of the same department. The City Council
must approve any changes to departmental budgets. Expenditures may not exceed appropriations
at the departmental level. All unused appropriations lapse at year-end. During the year the City
Council made several supplemental appropriations which included carryovers of prior year
encumbrances all of which were within available fund balance and estimated revenue amounts.
The City Council adopts governmental fund budgets consistent with generally accepted principles
as legally required. There are no significant non-budgeted financial activities. Revenues for special
revenue funds are budgeted by entitlements, grants and estimates of future development and
economic growth. Expenditures and transfers are budgeted based upon available financial
resources.
On or before May 31 of each year, each department submits data to the City Administrator for
budget preparation. Staff prepares the budget by fund, function, and activity. The budget includes
information on past years, current year estimates and requested appropriations for the next fiscal
year. Before August 1, the City Council receives the proposed budget. The City Council holds
public hearings and may amend the budget by a majority vote. Changes to the budget must be
within the available revenues and reserves.
These financial schedules show budgetary data for the General and Special Revenue. The
original budget, revised budget, actual expenditures, and variance amounts are shown.
The City uses an encumbrance system as an aid in controlling expenditures. When the City issues
a purchase order for goods or services, it records an encumbrance until the vendor delivers,the
goods or performs the service. At year-end, the City reports all outstanding encumbrances as
restricted, committed, or assigned fund balance in governmental fund types. The City
reappropriates these encumbrances into the new fiscal year.
The following pages present schedules of budget to actual comparison of the General and Grant
Special Revenue Fund's Revenues, and Expenditures and Changes in Fund Balance (in
thousands).
Item 13. - 286 xB -7g6-
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES-BUDGET AND ACTUAL
FOR THE YEAR ENDED SEPTEMBER 30,2013
(In Thousands)
General Fund
Variance with
Final Budget
Positive
REVENUES Original Budget Final Budget Actual (Negative)
Property Taxes $ 67,433 $ 71,812 $ 73,423 $ 1,611
Sales Taxes 25,451 27,209 27,199 (10)
Utility Taxes 20,300 20,773 20.764 (9)
Other Taxes 13,539 14,568 14.568 -
Licenses and Permits 7,187 8,982 8,983 1
Fines, Forfeitures and Penalties 4,620 4,058 4,058 -
Use of Money and Property 14,032 15,280 14,981 (299)
Intergovernmental 4,232 4,795 5,453 658
Charges for Current Service 24,142 26,695 26,374 (321)
Other 952 2.530 2,074 (456)
Total Revenues 181,888 196,702 197,877 1,175
EXPENDITURES
Current:
City Council 281 292 260 32
City Manager 1,390 1,429 1,341 88
City Treasurer 130 133 132 1
City Attorney 2,126 2,219 2,221 (2)
City Clerk 903 944 797 147
Finance 4,954 5,171 4,825 346
Human Resources 4,752 4,798 5,442 (644)
Planning&Building 6,067 6,948 6,155 793
Fire 34,300 34,925 35,497 (572)
Information Services 5,867 6,173 6,096 77
Police 58,725 60,713 59,274 1,439
Economic Development 1,619 1,922 1,556 366
Community Services 13,128 14,186 13,050 1,136
Library Services 3,677 4,310 3,547 763
Public Works 20,869 20,867 20,209 658
Non-Departmental 19,435 19,900 19,671 229
Debt Service:
Principal 2,043 5,157 4,751 406
Interest - - 191 (191)
Total Expenditures 180,266 190,087 185,016 6,072
Excess of Revenues
Over Expenditures 1,622 6,615 12,862 6,247
OTHER FINANCING SOURCES(USES)
Transfers In 1,320 1,103 913 (190)
Transfers Out (6,213) (9,092) (9,034) 58
Total Other Financing Sources(Uses) (4,893) (7,989) (8,121) (132)
EXTRAORDINARY ITEM:
Dissolution of Redevelopment Agency (4,669) (4,669) -
Net Change In Fund Balances (3,271) (6,043) 72 6,115
Fund Balance-Beginning Of Year 54,435 54,435 54,435 -
Fund Balance-End Of Year $ 51,164 $ 48,392 $ 54,507 $ 6,115
Hg -797- Item 13. - 287
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES -BUDGET AND ACTUAL
FOR THE YEAR ENDED SEPTEMBER 30,2013
(In Thousands)
Grants Special Revenue
Variance with
Final Budget
Positive
REVENUES Original Budget Final Budget Actual (Negative)
Use of Money and Property $ 200 $ 200 $ 364 $ 164
Intergo\ernmental 1,404 3,998 6,928 2,930
Other 5 5 - (5)
Total Revenues 1,609 4,203 7,292 3,089
EXPENDITURES
Current:
City Manager - 601 233 368
Planning& Building - 210 219 (9)
Fire - 510 411 99
Police 582 2,154 1,177 977
Economic De\elopment 1,679 2,426 575 1,851
Community Services - 463 269 194
Library Services - 49 41 8
Public Works (75) 516 238 278
Capital Outlay 2,472 6,943 2,299 4,644
Debt Service:
Principal - 150 150 -
Interest - 33 43 (10)
Total Expenditures 4,658 14,055 5,655 8,400
Excess (Deficiency)of Re\enues O\er(Under)
Expenditures (3,049) (9,852) 1,637 11,489
OTHER FINANCING USES
Transfers In 439 455 16
Transfers Out - (56) - 56
Total Other Financing Uses 383 455 72
Net Change In Fund Balances (3,049) (9,469) 2,092 11,561
Fund Balance -Beginning Of Year 514 514 514 -
Fund Balance -End Of Year $ (2,535) $ (8,955) $ 2,606 $ 11,561
Item 13. - 288 HB -798-
CITY OF HUNTINGTON BEACH
REQUIRED SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED SEPTEMBER 30,2013
SCHEDULE OF FUNDING PROGRESS
RETIREMENT PLAN-NORMAL
(In Thousands)
Entry Age Normal Unfunded Liability
Actuarial Accrued Actuarial Value of as a Percentage of
Actuarial Valuation Date Liabilih(AAL) Assets UnfundedLiaNlit-v Funded Ratio Covered Payroll Covered Pavroll
6/30/2010
Safetv $ 500.725 $ 384.956 $ (115,769) 76.9% $ 41,015 -282.3%
Non Safety 382.671 334.778 (47,893) 87.5% 47,596 -100.6%
Total S 883,396 $ 719,734 S (163,662) 81.5% S 88,611 -184.7%
6/30/2011
Safety $ 531,801 $ 402.867 $ (128934) 75.8% $ 39,337 -327.8%
Non Safety 415,178 347,820 (67.358) 83.890 42.063 -160.1°io
Total S 946,979 S 750,687 S (196,292) 79.3% S 81,400 -241.1%
6/30/2012
Safely $ 552,536 $ 420,519 $ (132-017) 76.1% $ 39.241 -336.4%
Non Safety 431.175 357.911 (73 264) 83.0% 43,228 -169.5%
Total S 983,711 S 778,430 S (205,281) 79.1% S 82,469 -248.9%
xB -799- Item 13. - 289
CITY OF HUNTINGTON BEACH
REQUIRED SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED SEPTEMBER 30,2013
(Continued)
SCHEDULE OF FUNDING PROGRESS
RETIREMENT PLAN -SUPPLEMENTAL
(In Thousands)
Entry Abe Normal Actuarial Value of Unfunded AAL UAAL as a% of
Actuarial Valuation Date Accrued Liabilitv Assets (UAAL) Funded Ratio Covered PavrolI Covered Payroll
9/30,2006 Update $ 43.066 $ 16.821 $ (26,245) 39.1% $ 40,563 -64.7%
9,'3Q%3007 Actual 51,028 20.452 (30;576) 40.14/0 43,516 70.3%
9.30/2008 Update 52,777 22.722 (30.055) 43.1% 44.822 -67.1%
9/30,/2009 Actual* IA576t 24.980 (34.596) 41.9% 44,978 -76.9%
9.",W2010 Update* 61,448 28,467 (32,981) 46.3% 42,827 -77.0%
9/30i2011 Actual*.*** 619261 31146 (30.780) 51.1% 34.098 -90.3%
9./30.2011 Revised"*** 64.3821 27,639 (36,743) 42.90,/o 34,098 -107.80ro
OTHER POST EMPLOYMENT BENEFITS -MEDICAL INSURANCE
SCHEDULE OF FUNDING PROGRESS
(In Thousands)
Unfunded
Actuarial Value of Actuarial Accrued Actuarial accrued U_'AL as a% of
.Actuarial Valuation Date Assets Liability liability Funded Ratio Covered Payroll Covered Payroll
9/30r2009Actual" $ 8.727 $ 19,474 $ (1O,747) 44.8% $ 88,923 -12.1%
9/30,/2010 Update* 9,157 20.608 (11 451) 444% 90.465 -12.7%
6,30/2011 Actual*"` *** 9.639 22.447 (12,808)1 42.9% 82.443 -15.5%
6/30/2011 Revised**_*** 9,626 2Q179 (]0;553) 47.740 82,443
*Actuarial v aluation for each fiscal year ending September 30th was performed as of March 31 st of the same year using actual values at M arch 31 si projected
forward to fiscal year end
**Actuarial valuation date changed to Jute 30th to conform with CalPERS pear-end in accordance with GASB Statement No.57
***The City chanucd actuarial firms duringPY 2011/12. As a result,amounts for September 30,2011 and June 30,2011 were revised due to
chan«es in actuarial assumptions used.
SCHEDULE OF EMPLOYER CONTRIBUTIONS
RETIREMENT PLAN -SUPPLEMENTAL
(In Thousands)
Annual Required Percentage
Near Ended Contribution Contributed
9/30/2008 $3,419 106.08%
9/30/2009 3,476 100.000/0
9/30/2010 3.967 100.00°/u
9/30/2011 3,957 100.00%
9/30/2012 4.646 105.47%
9/30/2013 1 4.607 100.00%,
Item 13. - 290 xB -800-
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HB _801- Item 13. - 291
SUPPLEMENTARY INFORMATION
Item 13. - 292 uB -so22-
THIS PACE INTENTIONALLY LEFT BLANK
I IB -say- Item 13. - 293
City of Huntington Beach
Other Governmental Funds
Special Revenue Funds account for revenues and expenditures legally constrained to a specific purpose.
• The Air Quality Fund accounts for revenues from the local agencies used to improve local air quality.
• The Development Impact Fee Fund accounts for fees collected for new developments to be used for
transportation, park land acquisition and development, library and other public facilities in an effort to mitigate
the impacts of those new developments.
• The Disability Access Fund accounts for the State Mandated Disability Access Fee (SB 1186) to fund
increased training certified access specialist (CASp) services for the public and to facilitate compliance with
construction related accessibility requirements.
• The Drainage Fund accounts for fees received from developers to construct and maintain the City's drainage
system.
• The Fourth of July Parade Fund accounts for the activities of the City's annual parade.
• The Gas Tax Fund accounts for moneys allocated under the Streets and Highways Code of California.
Expenditures may be made for any street related purpose allowed under the code.
• The Highway Safety & Traffic Reduction Fund accounts for moneys used to fund transportation projects,
improve the movement of goods, improve air quality, and enhance the safety and security of the transportation
system under the Highway Safety, Traffic Reduction, Air Quality, and Port Security Bond Act of 2006.
• The Housing Residual Receipt Fund accounts for residual receipts received for housing activities
• The Park Acquisition and Development Fund accounts for fees received from developers to develop and
maintain the City's park system.
• The Safe and Sane Fireworks Fund accounts for activities involved in the regulation of safe and sane
fireworks within the City.
• The Self Insurance Liability Claim Fund accounts for activities involved in general liability claims losses.
• The Traffic Congestion Relief Fund accounts for moneys allocated for roadway maintenance as established
by Assembly Bill 2928.
• The Traffic Impact Fee Fund accounts for moneys received from the traffic impact fee levied on new
developments in the City.The Transportation Fund accounts for moneys received from the countywide half
cent sales tax and other specific sources to be spent on transportation related expenditures.
Debt Service Funds account for the receipts for and payment of general long-term debt.
• The Property Tax Refund Fund records the payment of claims for repayment of the Judgment Obligation
Bonds.
• The Public Financing Authority accounts for the activity of the Huntington Beach Public Financing Authority.
Capital Projects Funds account for the acquisition and construction of capital assets other than those financed
by proprietary fund types.
• The Affordable Housing In-Lieu Fund accounts for the Affordable Housing In-Lieu Fee from developers of
housing projects who have elected to pay the fee in-lieu of building the affordable housing in their project.
• The Energy Efficiency Fund records activities to implement energy efficiency and infrastructure measures. .
• The Infrastructure Fund records activity for certain designate infrastructure related expenditures.
• The Parking in-lieu Fund records construction activity from developers who pay fees in-lieu of directly
providing parking facilities to the City.
• The Sewer Development Fund accounts for fees received from developers to construct and maintain sewer
facilities.
Item 13. - 294 HB -804-
CITY OF HUNTINGTON BEACH
COMBINING BALANCE SHEET
OTHER GOVERNMENTAL FUNDS
September 30,2013
(In Thousands)
SPECIAL REVENUE FUNDS
Development Fourth of July
ASSETS Air Quality Impact Fee Disability Access Drainage Parade Gas Tax
Cash and Investments $ 735 $ 932 $ 9 $ 42 $ 97 $ 2,091
Cash and Investments with Fiscal Agent - - - - -
Taxes Receivable - - 285
Other Receivables 64 2 88
Due from Other Funds - - -
Other Assets - - - - "
Total Assets $ 799 $ 934 $ 9 $ 42 $ 97 $ 2,464
LIABILITIES
Accounts Payable $ 9 $ $ 2 $ $ 2 $ 235
Accrued Payroll - - - 1
Due to Other Funds -
Deposits Payable -
Deferred Revenue 63 - 84
Total Liabilities 72 2 2 320
FUND BALANCES
Restricted
Pollution Remediation - - -
Debt Service
Highways,Streets and Transportation 2,144
Low Income Housing -
Air Quality 727
Parks - -
Other Capital Projects 934 42
Other Purposes - 7 -
Committed
Other Capital Projects -
Assigned
Capital Projects
Other Purposes 95
Unassigned - - "
Total Fund Balances 727 934 7 42 95 2,144
Total Liabilities and Fund Balances $ 799 $ 934 $ 9 $ 42 $ 97 $ 2,464
11B -805- Item 13. - 295
CITY OF HUNTINGTON BEACH
COMBINING BALANCE SHEET
OTHER GOVERNMENTAL FUNDS
September 30,2013
(In Thousands)
(continued)
SPECIAL REVENUE FUNDS
Highway Safety Housing Park Acquisition Traffic
&Traffic Residual and Safe and Sane Self Insurance Congestion
Reduction Receipt Development Fireworks Liability Claim Relief
$ $ 108 $ 4,152 $ 74 $ 1,019 $ 2,461
_ 252
365 7 5
_ _ 209
- - 1,266 -
$ 365 $ 108 $ 5,425 $ 74 $ 1,019 $ 2,927
$ - $ - $ 32 $ - $ - $ 1,506
1
209 - -
- 1,266
366 -
575 1.298 1,507
- 336 -
_ 1,420
108
3,791
1,019
- 74
(210) - - -
(210) 108 4,127 74 1,019 1,420
$ 365 $ 108 $ 5,425 $ 74 $ 1,019 $ 2,927
Item 13. - 296 xB -906-
CITY OF HUNTINGTON BEACH
COMBINING BALANCE SHEET
OTHER GOVERNMENTAL FUNDS
September 30,2013
(In Thousands)
(continued)
SPECIAL REVENUE FUNDS DEBT SERVICE FUNDS
Public
Traffic Impact Total Special Property Tax Financing Total Debt
ASSETS Fee Transportation Revenue Funds Refund Authority Service Fund
Cash and Imestments $ 1,503 $ 3,229 $ 16.452 $ 1 $ 19 $ 20
Cash and Investments with Fiscal Agent - - - 1 4,330 4,331
Taxes Receivable - 242 779
Other Receivables 2 215 748 2 2
Due from Other Funds - - 209
Other Assets - - 1,266
Total Assets $ 1,505 $ 3,686 $ 19,454 $ 2 $ 4,351 $ 4,353
LIABILITIES
Accounts Payable $ - $ 794 $ 2,580 $ 2 $ 1 $ 3
Accrued Payroll 2 4 -
Due to Other Funds - 209
Deposits Payable - 1,266
Deferred Revenue 210 723 -
Total Liabilities 1,006 4,782 2 1 3
FUND BALANCES
Restricted
Pollution Remediation 336
Debt Service - - - 4,350 4,350
Highways,Streets and Transportation 1,505 2,680 7,749 -
Low Income Housing - - 108
Air Quality 727
Parks 3,791
Other Capital Projects 976
Other Purposes 1,026
Committed
Other Capital Projects -
Assigned
Capital Projects
Other Purposes 169
Unassigned - - (210)
Total Fund Balances 1,505 2,680 14,672 - 4,350 4,350
Total Liabilities and Fund Balances $ 1,505 $ 3,686 $ 19,454 $ 2 $ 4,351 $ 4,353
HB -807- Item 13. - 297
CITY OF HUNTINGTON BEACH
COMBINING BALANCE SHEET
OTHER GOVERNMENTAL FUNDS
September 30,2013
(In Thousands)
(continued)
CAPITAL PROJECT FUNDS
Total Other
Affordable Energy Sewer Total Capital Governmental
Housing In-Lieu Efficiency Infrastructure Parking in lieu Development Projects Funds Funds
$ 873 $ 279 $ 5.663 $ 910 $ 4,485 $ 12,210 $ 28,682
- 4,331
- - 779
1 8 2 30 41 791
- - 209
- 1,266
$ 873 $ 280 $ 5,671 $ 912 $ 4,515 $ 12,251 $ 36,058
$ $ 133 $ - $ - $ - $ 133 $ 2,716
4
- 209
754 754 2,020
- 723
754 133 887 5,672
336
4,350
- 7,749
119 119 227
- 727
3,791
976
- 1,026
- 5,671 912 4.515 11,098 11,098
147 - - - 147 147
- 169
- - (210)
119 147 5,671 912 4,515 11,364 30,386
$ 873 $ 280 $ 5,671 $ 912 $ 4,515 $ 12,251 $ 36,058
Item 13. - 298 HB -808-
CITY OF HUNTINGTON BEACH
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30,2013
(In Thousands)
SPECIAL REVENUE FUNDS
Development Disability Fourth of July
REVENUES Air Quality Impact Fee Access Drainage Parade Gas Tax
Property Taxes $ $ $ $ $ $
Sales Taxes
Licenses and Permits 15
Use of Money and Property - 31
Intergovernmental 230 86 3,111
Charges for Current Service - 934 317 172 -
Other - - - - 150 -
Total Revenues 230 934 15 317 439 3,111
EXPENDITURES
Current:
Fire - - - -
Police "
Community Services - 400 -
Public Works 184 - - 213
Non-Departmental - 8
Capital Outlay 5 - 2,215
Debt SeMce:
Principal - -
Interest - - -
Total Expenditures 189 8 400 2,428
Excess Of Revenues Over
(Under)Expenditures 41 934 7 317 39 683
Other Financing Sources(Uses):
Transfers In - - - - -
Transfers Out (900)
Total Other Financing Sources
Sources(Uses) - - - - -
(900)
Net Change in Fund Balances 41 934 7 317 39 (217)
Fund Balances-Beginning Of Year 686 - - (275) 56 2,361
Fund Balances-End Of Year $ 727 $ 934 $ 7 $ 42 $ 95 $ 2,144
HB -809- Item 13. - 299
CITY OF HUNTINGTON BEACH
COMBINING STATEMENT OF REVENUES,EXPENDITURES
AND CHANGES IN FUND BALANCES
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30,2013
(In Thousands)
(continued)
SPECIAL REVENUE FUNDS
Highway Safety Housing Park Acquisiton Traffic
&Traffic Residual and Safe and Sane Self Insurance Congestion
Reduction Receipt Development Fireworks Liability Claim Relief
$ $ $ $ $ 1,019 $
12
10 - 95 1,804
- - - 69 -
96 341 - - -
10 108 436 69 1,019 1,804
- - - 12 - -
9
- 233 - -
100 - 291
103 2,915
100 - 336 21 3,206
(90) 108 100 48 1,019 (1,402)
(90) 108 100 48 1,019 (1,402)
(120) - 4,027 26 - 2,822
$ (210) $ 108 $ 4,127 $ 74 $ 1,019 $ 1,420
Item 13. - 300 HB -810-
CITY OF HUNTINGTON BEACH
COMBINING STATEMENT OF REVENUES,EXPENDITURES
AND CHANGES IN FUND BALANCES
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30,2013
(In Thousands)
(continued)
SPECIAL REVENUE FUNDS DEBT SERVICE FUNDS
Public
Traffic Impact Total Special Property Tax Financing Total Debt
REVENUES Fee Transportation Revenue Funds Refund Authority Tervice Funds
Property Taxes $ $ - $ 1,019 $ $ $
Sales Taxes 2,564 2,564
Licenses and Permits - 15 -
Use of Money and Property - 43 86 86
Intergovernmental 1 30 5,367 - -
Charges for Current Sermce 1,065 - 2,557
Other 339 - 926 - -
Total Revenues 1,405 2,594 12,491 86 86
EXPENDITURES
Current:
Fire - - 12 - -
Police 9
Community Services - - 633
Public Works 166 600 1,554 - -
Non-Departmental - - 8 3 2 5
Capital Outlay 2,131 7,369 - - -
Debt Service:
Principal - - 865 3,615 4,480
Interest - - - 156 1,931 2,087
Total Expenditures 166 2,731 9,585 1,024 5,548 6,572
Excess Of Revenues Over
(Under)Expenditures 1,239 (137) 2,906 (1,024) (5,462) (6,486)
Other Financing Sources(Uses):
Transfers In - - - 1,024 5,469 6,493
Transfers Out (900) - - -
Total Other Financing Sources
Sources(Uses) - - (900) 1,024 5,469 6,493
Net Change in Fund Balances 1,239 (137) 2,006 7 7
Fund Balances-Beginning of Year 266 2,817 12,666 4,343 4,343
Fund Balances-End of Year $ 1,505 $ 2,680 $ 14,672 $ $ 4,350 $ 4,350
HB -811- Item 13. - 301
CITY OF HUNTINGTON BEACH
COMBINING STATEMENT OF REVENUES,EXPENDITURES
AND CHANGES IN FUND BALANCES
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30,2013
(In Thousands)
(continued)
CAPITAL PROJECT FUNDS
Tota I Other
Affordable Energy Sewer Total Capital Governmental
Housing In-Lieu Efficiency Infrastructure Parking In-Lieu Development Projects Funds Funds
$ $ $ $ $ $ 1,019
2,564
119 40 723 882 .897
- - - - 129
25 25 5,392
249 1,969 2,218 4,775
_ _ - - - 926
119 249 40 2,717 3,125 15,702
- _ - - 12
9
_ - 633
168 168 1,722
- - - 13
952 111 14 1,077 8,446
- - 4,480
_ - - 2,087
- 952 111 - 182 1,245 17,402
119 (952) 138 40 2,535 1,880 (1,700)
- - 1,640 - 1,640 8.133
_ - (900)
- 1,640 - - 1,640 7,233
119 (952) 1,778 40 2,535 3,520 5,533
- 1,099 3,893 872 1,980 7,844 24,853
$ 119 $ 147 $ 5,671 $ 912 $ 4,515 $ 11,364 $ 30,386
Item 13. - 302 FIB -812-
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES,EXPENDITURES,AND
CHANGES IN FUND BALANCES -BUDGET AND ACTUAL
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30,2013
(In Thousands)
Air Quality
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Use of Money and Property $ 6 $ 6 $ - $ (6)
Intergo\,ernmental 240 240 230 (10)
TOTAL REVENUES 246 246 230 (16)
EXPENDITURES:
Current:
Public Works 172 228 184 44
Capital Outlay 135 361 5 356
TOTAL EXPENDITURES 307 589 189 400
NET CHANGE IN FUND BALANCE (61) (343) 41 384
Fund Balance -Beginning of Year 686 686 686 -
Fund Balance -End of Year $ 625 $ 343 $ 727 $ 384
Development Impact Fee
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Charges for Current Service $ $ - $ 934 $ (934)
Fund Balance -Beginning of Year - - -
Fund Balance -End of Year $ $ - $ 934 $ 934
Disability Access
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Licenses and Permits $ - $ 21 $ 15 $ 6
EXPENDITURES:
Current:
Non-Departmental - 21 8 13
NET CHANGE IN FUND BALANCE - - 7 7
Fund Balance -Beginning of Year - - -
Fund Balance -End of Year $ $ $ 7 $ 7
HB -813- Item 13. - 303
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES,AND
CHANGES IN FUND BALANCES -BUDGET AND ACTUAL
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30,2013
(In Thousands)
Drainage
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Charges for Current SerHce $ 90 $ 90 $ 317 $ 227
Fund Balance -Beginning of Year (275) (275) (275) -
Fund Balance -End of Year $ (185) $ (185) $ 42 $ 227
Fourth of July Parade
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Use of Money and Property $ - $ - $ 31 $ 31
Intergo\,ernmental - - 86 86
Charges for Current SerHce - - 172 172
Other 400 400 150 (250)
TOTAL REVENUES 400 400 439 39
EXPENDITURES:
Current:
Community SerHces 400 400 400 -
NET CHANGE IN FUND BALANCE - - 39 39
Fund Balance-Beginning of Year 56 56 56 -
Fund Balance -End of Year $ 56 $ 56 $ 95 $ 39
Gas Tax
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Use of Money and Property $ 11 $ 11 $ - $ (11)
Intergo\,ernmental 3,146 3,146 3,111 (35)
Other 1 1 - (1)
TOTAL REVENUES 3,158 3,158 3,111 (47)
EXPENDITURES:
Current:
Public Works 700 832 213 619
Capital Outlay 1,152 3,537 2,215 1,322
TOTAL EXPENDITURES 1,852 4,369 2,428 1,941
EXCESS OF REVENUES OVER
(UNDER)EXPENDITURES 1,306 (1,211) 683 1,894
OTHER FINANCING SOURCES (USES):
Transfers Out (900) (900) (900) -
NET CHANGE IN FUND BALANCE 406 (2,111) (217) 1,894
Fund Balance -Beginning of Year 2,361 2,361 2,361 -
Fund Balance -End of Year $ 2,767 $ 250 $ 2,144 $ 1,894
Item 13. - 304 HB -814-
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES,AND
CHANGES IN FUND BALANCES -BUDGET AND ACTUAL
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30,2013
(In Thousands)
Highway Safety&Traffic Reduction
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Use of Money and Property $ - $ - $ - $ -
Intergovernmental 1,100 1,100 10 (1,090)
TOTAL REVENUES 1,100 1,100 10 (1,090)
EXPENDITURES:
Current:
Public Works - 100 100 -
CapitalOutlay 1,133 1,033 - 1,033
TOTAL EXPENDITURES 1,133 1,133 100 1,033
NET CHANGE IN FUND BALANCE (33) (33) (90) (57)
Fund Balance -Beginning of Year (120) (120) (120) -
Fund Balance -End of Year $ (153) $ (153) $ (210) $ (57)
Housing Residual Receipt
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Use of Money and Property $ - $ - $ 12 $ 12
Other - - 96 96
TOTAL REVENUES - - 108 108
Fund Balance -Beginning of Year - - -
Fund Balance -End of Year $ - $ - $ 108 $ 108
Park Acquisition and Development
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Use of Money and Property $ - $ - $ - $ -
Intergovernmental - - 95 95
Charges for Current Service 1,000 1,000 - (1,000)
Other - - 341 341
TOTAL REVENUES 1,000 1,000 436 (564)
EXPENDITURES:
Current:
Community Services 155 580 233 347
Capital Outlay 748 928 103 825
TOTAL EXPENDITURES 903 1,508 336 1,172
NET CHANGE IN FUND BALANCE 97 (508) 100 608
Fund Balance -Beginning of Year 4,027 4,027 4,027 -
Fund Balance -End of Year $ 4,124 $ 3,519 $ 4,127 $ 608
11B -815- Item 13. - 305
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES,AND
CHANGES IN FUND BALANCES -BUDGET AND ACTUAL
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30,2013
(In Thousands)
Safe and Sane Fireworks
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Charges for Current Service $ $ 31 $ 69 $ 38
EXPENDITURES:
Current:
Fire 23 12 11
Police 32 9 23
Public Works 1 - 1
TOTAL EXPENDITURES 56 21 35
NET CHANGE IN FUND BALANCE (25) 48 73
Fund Balance -Beginning of Year 26 26 26
Fund Balance -End of Year $ 26 $ 1 $ 74 $ 73
Self Insurance Liability Claims
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Property Taxes $ $ $ 1,019 $ 1,019
Fund Balance -Beginning of Year - -
Fund Balance -End of Year $ $ - $ 1,019 $ 1,019
Traffic Congestion Relief
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Use of Money and Property $ 20 $ 20 $ - $ (20)
Intergmernmental 2,323 2,323 1,804 (519)
TOTAL REVENUES 2,343 2,343 1,804 (539)
EXPENDITURES:
Current:
Public Works 227 526 291 235
Capital Outlay 2,100 4,000 2,915 1,085
TOTAL EXPENDITURES 2,327 4,526 3,206 1,320
NET CHANGE IN FUND BALANCE 16 (2,183) (1,402) 781
Fund Balance-Beginning of Year 2,822 2,822 2,822 -
Fund Balance-End of Year $ 2,838 $ 639 $ 1,420 $ 781
Item 13. - 306 xB -816-
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES,AND
CHANGES IN FUND BALANCES -BUDGET AND ACTUAL
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2013
(In Thousands)
Traffic Impact Fee
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Use of Money and Property $ 2 $ 2 $ - $ (2)
Intergovernmental - - 1 1
Charges for Current Service 60 60 1,065 .1,005
Other - - 339 339
TOTAL REVENUES 62 62 1,405 1,343
EXPENDITURES:
Current:
Public Works 60 238 166 72
Capital Outlay 89 89 - 89
TOTAL EXPENDITURES 149 327 166 161
NET CHANGE IN FUND BALANCE (87) (265) 1,239 1,504
Fund Balance -Beginning of Year 266 266 266 -
Fund Balance - End of Year $ 179 $ 1 $ 1,505 $ 1,504
Transportation
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Sales Taxes $ 2,760 $ 2,760 $ 2,564 $ (196)
Use of Money and Property 11 11 - (11)
Intergovernmental - - 30 30
TOTAL REVENUES 2,771 2,771 2,594 (177)
EXPENDITURES:
Current:
Public Works 1,069 954 600 354
Capital Outlay 1,232 4,202 2,131 2,071
TOTAL EXPENDITURES 2,301 5,156 2,731 2,425
NET CHANGE IN FUND BALANCE 470 (2,385) (137) 2,248
Fund Balance -Beginning of Year 2,817 2,817 2,817 -
Fund Balance - End of Year $ 3,287 $ 432 $ 2,680 $ 2,248
xB -817- Item 13. - 307
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES,AND
CHANGES IN FUND BALANCES -BUDGET AND ACTUAL
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30,2013
(In Thousands)
Property Tax Refund
Variance with
Final Budget
Original Positive
Budget Final Budget Actual (Negative)
EXPENDITURES:
Current:
Non-Departmental - 2 3 (1)
Debt Service:
Principal 865 865 865 -
Interest 156 157 156 1
TOTAL EXPENDITURES 1,021 1,024 1,024 -
EXCESS OF REVENUES OVER
(UNDER)EXPENDITURES (1,021) (1,024) (1,024) -
OTHER FINANCING SOURCES (USES):
Transfers In 1,021 1,021 1,024 3
NET CHANGE IN FUND BALANCE - (3) - 3
Fund Balance-Beginning of Year - - - -
Fund Balance-End of Year $ - $ (3) $ - $ 3
Public Financing Authority
Variance with
Final Budget
Original Positive
'REVENUES: Budget Final Budget Actual (Negative)
Use of Money and Property $ $ - $ 86 $ 86
EXPENDITURES:
Current:
Non-Departmental 2 2 -
Debt Service:
Principal 3,615 3,615 3,615
Interest 1,931 1,931 1,931
TOTAL EXPENDITURES 5,546 5,548 5,548 -
EXCESS OF REVENUES OVER
(UNDER)EXPENDITURES (5,546) (5,548) (5,462) 86
OTHER FINANCING SOURCES (USES):
Transfers In 5,546 5,546 5,469 (77)
NET CHANGE IN FUND BALANCE - (2) 7 9
Fund Balance-Beginning of Year 4,343 4,343 4,343 -
Fund Balance-End of Year $ 4,343 $ 4,341 $ 4,350 $ 9
Item 13. - 308 HB -818-
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES,AND
CHANGES IN FUND BALANCES -BUDGET AND ACTUAL
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30,2013
(In Thousands)
Affordable Housing In-Lieu
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Licenses and Permits $ - $ - $ 119 $ 119
Fund Balance -Beginning of Year - - - -
Fund Balance -End of Year $ - $ $ 119 $ 119
Energy Efficiency
Variance with
Final Budget
Original Positive
Budget Final Budget Actual (Negative)
EXPENDITURES:
Capital Outlay 1,091 952 139
NET CHANGE IN FUND BALANCE - (1,091) (952) 139
Fund Balance -Beginning of Year 1,099 1,099 1,099 -
Fund Balance -End of Year $ 1,099 $ 8 $ 147 $ 139
Infrastructure
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Use of Money and Property $ $ $ - $ -
Charges for Current Service - 249 249
Other 2,000 2,000 - (2,000)
TOTAL REVENUES 2,000 2,000 249 (1,751)
EXPENDITURES:
Capital Outlay 2,250 2,759 111 2,648
EXCESS OF REVENUES OVER
(UNDER)EXPENDITURES (250) (759) 138 897
OTHER FINANCING SOURCES(USES):
Transfers In 600 1,640 1,640 -
NET CHANGE IN FUND BALANCE 350 881 1,778 897
Fund Balance -Beginning of Year 3,893 3,893 3,893 -
Fund Balance -End of Year $ 4,243 $ 4,774 $ 5,671 $ 897
xs -819- Item 13. - 309
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES,AND
CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30,2013
(In Thousands)
Parking in-Lieu
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Licenses and Permits $ - $ - $ 40 $ 40
Use of Money and Property 61 61 - (61)
TOTAL REVENUES 61 61 40 (21)
EXPENDITURES:
Capital Outlay 50 50 - 50
NET CHANGE IN FUND BALANCE 11 11 40 29
Fund Balance -Beginning of Year 872 872 872 -
Fund Balance-End of Year $ 883 $ 883 $ 912 $ 29
Sewer Development
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Licenses and Permits $ $ $ 723 $ 723
Use of Money and Property - -
Intergovemmental 25 25
Charges for Current Service 87 87 1,969 1,882
TOTAL REVENUES 87 87 2,717 2,630
EXPENDITURES:
Current:
Public Works - 129 168 (39)
Capital Outlay 400 1,303 14 1,289
TOTAL EXPENDITURES 400 1,432 182 1,250
NET CHANGE IN FUND BALANCE (313) (1,345) 2,535 3,880
Fund Balance-Beginning of Year 1,980 1,980 1,980 -
Fund Balance-End of Year $ 1,667 $ 635 $ 4,515 $ 3,880
Item 13. - 310 IiB -820-
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES,AND
CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
MAJOR GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2013
(In Thousands)
LMIHAF Capital Projects Fund
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Use of Money and Property $ $ $ 572 $ 572
Intergovernmental 464 464
Other - 1 1
Total Revenues 1,037 1,037
EXPENDITURES:
Current:
Economic Development - 4,883 4,881 2
Excess of Revenues Over(Under)Expenditures (4,883) (3,844) 1,039
OTHER FINANCING SOURCES (USES):
Transfers In - - -
Transfers Out (405) (405) -
Total Other Financing Sources (Uses) (405) (405) -
Net Change in Fund Balance (5,288) (4,249) 1,039
Fund Balance -Beginning of Year 9,886 9,886 9,886 -
Fund Balance -End of Year $ 9,886 $ 4,598 $ 5,637 $ 1,039
HB -82 1- Item 13. - 311
PHIS PAGE INTENTIONALLY LEFT BLANK
Item 13. - 312 uB -8221-
THIS PAGE INTENTIONALLY LEFT BLANK
HB -823- Item 13. - 313
¥` City of Huntington Beach
j} Fiduciary Funds
Fiduciary Funds account for assets held by the City as an agent for other organizations or individuals.
• The General Deposit Fund accounts for the deposit of general monies held by the City for private
individuals and businesses.
• The Community Facilities Districts Funds accounts for the debt service activity of the City's community
facilities district.
® The Huntington Beach Business Improvement District Fund accounts for the activities of the City's
business improvement district.
• The Central Net Fund accounts for the activity of the Central Net Operations Authority.
• The Parking Structures Fund accounts for the activities of the Bella Terra Parking Structure and Strand
Parking Structure.
® The West Orange County Water Board Fund accounts for the activities of the West Orange County
Water Board.
Item 13. - 314 11B -s�a-
THIS PAGE INTENTIONALLY LEFT BLANK
HB -825- Item 13. - 315
CITY OF HUNTINGTON BEACH
COMBINING STATEMENT OF FIDUCIARY FUND ASSETS AND LIABILITIES
FIDUCIARY FUNDS
SEPTEMBER 30,2013
Agency Funds
Community Business Central Net West Orange
Facilities Improvement Operations Parking County Water Total Agency
Assets: General Deposit Districts Districts Authority Structures Board Funds
Cash and investments $ 390 $ 70 $ 259 $ 1,061 $ 2,571 $ 226 $ 4,577
Cash with Fiscal Agent - 3,476 - - - - 3,476
Accounts Receivable, Net 996 10 - 5 - 1,011
Total Assets $ 390 $ 4,542 $ 269 $ 1,061 $ 2,576 $ 226 $ 9,064
Liabilities:
Accounts Payable $ - $ 6 $ 269 S 10 $ 455 $ 6 $ 746
Due to Bondholders - 4,536 - - - - 4,536
Held for others 390 - 1,051 2,121 220 3,782
Total Liabilities $ 390 $ 4,542 $ 269 $ 1,061 $ 2,576 $ 226 $ 9,064
Item 13. - 316 ITB -826-
CITY OF HUNTINGTON BEACH
COMBINING STATEMENT OF CHANGES IN FIDUCIARY ASSETS AND LIABILITIES
ALL AGENCY FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2013
Balance Balance
September30,2012 Additions Deletions September30.2013
General Deposit
Assets:
Cash and Investments $ 239 $ 803 $ (652) $ 390
Total Assets $ 239 $ 803 $ (652) $ 390
Liabilities:
Accounts Payable $ 5 $ - $ (5) $ -
Held for others 234 206 (50) 390
Total Liabilities $ 239 $ 206 $ (55) $ 390
Community Facilities Districts
Assets:
Cash and Investments $ 706 $ 8,223 $ (8,859) $ 70
Cash with Fiscal Agent 3,738 2,974 (3,236) 3,476
Accounts Receivable, Net 1,030 - (34) 996
Total Assets $ 5,474 $ 11,197 $ (12,129) $ 4,542
Liabilities:
Accounts Payable $ 145 $ 6,328 $ (6,467) $ 6
Due to Bondholders 5,329 - (793) 4,536
Total Liabilities $ 5,474 $ 6,328 $ (7,260) $ 4,542
Business Improvement Districts
Assets:
Cash and Investments $ 220 $ 1,814 $ (1,775) $ 259
Accounts Receivable, Net 6 252 (248) 10
Total Assets $ 226 $ 2,066 $ (2,023) $ 269
Liabilities:
Accounts Payable $ 226 $ 2,118 $ (2,075) $ 269
Total Liabilities $ 226 $ 2,118 $ (2,075) $ 269
Central Net Operations Authority
Assets:
Cash and Investments $ 1,178 $ 1,259 $ (1,376) $ 1,061
Accounts Receivable, Net - 45 (45) -
Total Assets $ 1,178 $ 1,364 $ (1,421) $ 1,061
Liabilities:
Accounts Payable $ 15 $ 305 $ (310) $ 10
Held for others 1,163 - (112) 1,051
Total Liabilities $ 1,178 $ 305 $ (422) $ 1,061
HB -827- Item 13. - 317
CITY OF HUNTINGTON BEACH
COMBINING STATEMENT OF CHANGES IN FIDUCIARY ASSETS AND LIABILITIES
ALL AGENCY FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2013
(CONTINUED)
Balance Balance
Septem her 30,2012 Additions Deletions September30.2013
Parking Structures
Assets:
Cash and Investments $ 1,626 $ 2,524 $ (1,579) $ 2,571
Accounts Receivable, Net 4 52 (51) 5
Total Assets $ 1,630 $ 2,576 $ (1,630) $ 2,576
Liabilities:
Accounts Payable $ 221 $ 1,599 $ (1,365) $ 455
Held for others 1,409 712 - 2,121
Total Liabilities $ 1,630 $ 2,311 $ (1,365) $ 2,576
West Orange County Water Board
Assets:
Cash and Investments $ 262 $ 1;073 $ (1,109) $ 226
Accounts Receivable, Net - 83 (83) -
Total Assets $ 262 $ 1,156 $ (1,192) $ 226
Liabilities:
Accounts Payable $ 7 $ 121 $ (122) $ 6
Held for others 255 - (35) 220
Total Liabilities $ 262 $ 121 $ (157) $ 226
Total -All Agency Funds
Assets:
Cash and Investments $ 4,231 $ 15,696 $ (15,350) $ 4,577
Cash with Fiscal Agent 3,738 2,974 (3,236) 3,476
Accounts Receivable, Net 1,040 432 (461) 1,011
Total Assets $ 9,009 $ 19,102 $ (19,047) $ 9,064
Liabilities:
Accounts Payable $ 619 $ 10,471 $ (10,344) $ 746
Due to Bondholders 5,329 - (793) 4,536
Held for others 3,061 918 (197) 3,782
Total Liabilities $ 9,009 $ 11,389 $ (11,334) $ 9,064
3.Item 1 - 318 HB -828-
THIS PACE INTENTIONALLY LEFT BLANK
HB -829- Item 13. - 319
City of Huntington Beach
.� �
,f Statistical Section
This part of the City of Huntington Beach's Comprehensive Annual Report presents detailed information
as a context for understanding what the information in the financial statements, note disclosures, and
required supplementary information say about the City's overall financial health.
Financial Trends - contain trend information to aid the reader understand how the City's
financial performance has changed over time.
Revenue Capacity — contain information to help the reader assess the City's most significant
local revenue source, the property tax.
Debt Capacity — present information to assess the affordability of the City's current levels of
outstanding debt and the City's ability to issue additional debt in the future.
Demographic and Economic Information - offers information to help the reader
understand the environment within which the City's financial activities take place.
Operating Information - contains service and infrastructure data to help the reader
understand how the City's financial report relates to the services the City provides and the
activities it performs.
Unless otherwise noted, the information in these schedules is derived from the comprehensive annual
financial reports for the relevant year.
Item 13. - 320 xB -830-
CITY OF HUNTINGTON BEACH
NET POSITION BY COMPONENT-LAST TEN FISCAL YEARS
(In Thousands)
Fiscal Year Ended September 30,
Governmental Activities 2013 2012 2011 2010 2009
Net investment in capital assets $ 617,267 $ 612,346 $ 569,497 $ 567,351 $ 559,059
Restricted 51,867 44,220 51,195 49,100 48,198
Unrestricted 54,076 53,098 41,239 33,135 36,319
Total Governmental Activities Net Position $ 723,210 $ 7099664 $ 661,931 $ 649,586 $ 6439576
Business-Type Activities
Net investment in capital assets $ 145,886 $ 134,129 $ 134,882 $ 121,576 $ 118,059
Restricted 27,488 27,804 27,988 30,512 30,794
Unrestricted 65,595 63,686 59,260 61,723 59,810
Total Business-Type Activities Net Position $ 238,969 $ 225,619 $ 222,130 $ 213,811 $ 208,663
Primary Government
Net investment in capital assets $ 763,153 $ 746,475 $ 704,379 $ 688,927 $ 677,118
Restricted 79,355 72,024 79,183 79,612 78,992
Unrestricted 119,671 116,784 100,499 94,858 96,129
Total Primary Government Net Position $ 962,179 $ 935,283 $ 8849061 $ 863,397 $ 852,239
CITY OF HUNTINGTON BEACH
CHANGES IN NET POSITION -LAST TEN FISCAL YEARS
(In Thousands)
Expenses: Fiscal Year Ended September 30,
Governmental Activities: 2013 2012 2011 2010 2009
City Council $ 271 $ 310 $ 300 $ 301 $ 295
City Manager 1,583 1,767 1,502 1,674 1,861
City Treasurer 132 141 1,274 1,532 1,308
City Attorney 2,221 2,313 2,354 2,772 2,877
City Clerk 797 689 813 883 1,099
Administrative Services - - - - -
Finance 4,825 4,573 3,423 4,309 4,479
Human Resources 5,032 4,743 4,792 5,284 4,749
Planning& Building' 6,155 6,123 6,036 3,170 3,232
Building - - - 4,608 9,549
Fire 36,323 35,336 35,393 33,545 33,942
Information Services 6,096 5,857 5,909 6,812 7,377
Police 60,466 60,690 60,192 59,049 60,551
Economic Development 8,395 3,703 10,876 11,891 15,758
Community Services 15,521 15,586 16,104 16,147 17,110
Library Services 3,873 3,777 3,838 4,519 4,574
Public Works 28,500 26,508 27,232 26,483 29,514
Non-Departmental 25,563 19,190 19,595 24,303 21,196
Interest on Long-Term Debt 2,289 2,376 6,287 6,146 5,232
Total Governmental Activities 208,042 193,682 205,920 2139428 2249703
Business-type Activities:
Water Utility 38,446 37,437 31,712 34,902 34,290
Sewer Service 7,253 7,623 6,338 6,575 7,306
Refuse Collection 10,882 10,785 10,690 10,585 10,623
Emerald Cove Housing - - - - 306
Emergency Fire Medical - - - - -
Hazmat Service 220 216 243 315 196
Ocean View Estates - - - - -
Total Business Type Activities 56,801 56,061 48,983 529377 529721
Total Business and Government Type Activities $ 264,843 $ 2499743 $ 254,903 $ 2659805 $ 277,424
Planning and Building departments were combined in the year ended September 30, 2011.
11B -831- Item 13. - 321
CITY OF HUNTINGTON BEACH
NET POSITION BY COMPONENT-LAST TEN FISCAL YEARS
(In Thousands)
(continued)
Fiscal Year Ended September 30,
Governmental Activities 2008 2007 2006 2005 2004
Net investment in capital assets $ 521,654 $ 486,552 $ 472,372 $ 479,897 $ 448,217
Restricted 69,126 73,541 68,381 39,227 61,051
Unrestricted 35,615 59,182 34,269 40,226 (9,278)
Total Governmental Activities Net Position $ 626,395 $ 619,275 $ 575,022 $ 559,350 $ 499,990
Business-Type Activities
Net investment in capital assets $ 118,671 $ 119,874 $ 111,651 $ 102,068 $ 92,890
Restricted 32,665 33,546 31,109 34,085 32,968
Unrestricted 57,704 54,822 53,020 41,563 33,664
Total Business-Type Activities Net Position $ 209,040 $ 208,242 $ 195,780 $ 177,716 $ 159,522
Primary Government
Net investment in capital assets $ 640,325 $ 606,426 $ 584,023 $ 581,965 $ 541,107
Restricted 101,791 107,087 99,490 73,312 94,019
Unrestricted 93,319 114,004 87,289 81,789 24,386
Total Primary Government Net Position $ 835,435 $ 827,517 $ 770,802 $ 737,066 $ 659,512
CITY OF HUNTINGTON BEACH
CHANGES IN NET POSITION -LAST TEN FISCAL YEARS
(In Thousands)
(continued)
Expenses: Fiscal Year Ended September 30,
Governmental Activities: 2008 2007 2006 2005 2004
City Council $ 295 $ 287 $ 271 $ 254 $ 280
City Manager 1,652 1,442 5,540 1,990 1,188
City Treasurer 1,408 1,088 1,479 1,568 1,541
City Attorney 2,914 2,534 2,317 2,852 2,775
City Clerk 1,020 950 756 685 717
Administrative Services - - - 5,554 6,348
Finance 4,944 4,454 3,306 2,501 -
Human Resources 4,725 4,202 - - -
Planning& Building 3,881 3,098 2,813 2,559 2,396
Building 5,747 4,899 3,930 3,321 2,858
Fire 27,299 27,247 24,787 23,365 20,000
Information Services 7,311 6,591 7;361 6,806 6,423
Police 58,378 56,988 50,877 47,029 40,686
Economic Development 18,031 9,209 4,977 4,199 19,372
Community Services 18,565 16,482 15,777 13,693 15,735
Library Services 5,607 5,586 4,829 4,394 4,138
Public Works 31,246 34,581 49,654 33,018 30,277
Non-Departmental 30,814 15,131 11,263 12,024 4,054
Interest on Long-Term Debt 5,291 5,875 5,575 6,810 6,001
Total Governmental Activities 229,128 200,644 195,512 172,622 164,789
Business-type Activities:
Water Utility 32,701 32,606 28,117 22,349 24,643
Sewer Service 7,120 5,766 3;855 5,924 4,042
Refuse Collection 10,561 10,542 10,289 9,826 9,806
Emerald Cove Housing 893 936 551 399 409
Emergency Fire Medical 6,933 5,347 5,637 5,497 5,605
Hazmat Service 249 194 163 141 204
Ocean View Estates 117 84 120 118 62
Total Business Type Activities 58,574 55,475 48,732 44,254 44,771
Total Business and Government Type Activities $ 287,702 $ 256,119 $ 244,244 $ 216,876 $ 209,560
Item 13. - 322 11B -832-
CITY OF HUNTINGTON BEACH
CHANGES IN NET POSITION -LAST TEN FISCAL YEARS
(In Thousands)
(continued)
Program Revenues: Fiscal Year Ended September 30,
Governmental Activities: 2013 2012 2011 2010 2009
Charges for Services
City Council $ 66 $ 65 $ 63 $ 62 $ 94
City Manager 134 130 127 126 370
City Treasurer 602 585 568 566 765
City Attorney 135 131 127 456 50
City Clerk 248 170 98 106 108
Finance 1,275 1,238 1,202 1.234 1,264
Human Resources 1,236 1,150 1,117 1,103 1,254
Planning&Building` 9,411 7,706 6,084 682 801
Building - - - 4,126 3,665
Fire 9,482 9,497 8,632 8,504 7,978
Information Services 786 763 741 731 674
Police 4,653 5,073 5,207 4,849 5,083
Economic Development 2,505 2,303 2,800 2,685 3,049
Community Services 17,832 17,792 15,345 15,470 15,278
Library Services 634 466 325 415 437
Public Works 7,315 5,482 5,638 4,850 4,328
Non-Departmental 306 281 273 269 216
Total Charges for Services 56,620 52,832 48,347 46,234 45,414
Operating Grants 7.303 5,088 8,914 7,069 4,181
Capital Grants 7,191 6,624 5,198 7,418 25,625
Total Governmental Activities Program Revenue 71,114 64,544 62,459 60,721 75,220
Business-Type Activities:
Water Utility 38,679 35,926 34,583 34,394 34,200
Sewer Service 12,267 11,546 10,532 10,565 10,535
Refuse Collection 10,950 10,786 10,631 10,506 10,386
Emerald Cove Housing - - - - 843
Emergency Fire Medical - - - - -
Hazmat Service 278 154 383 198 204
Ocean View Estates - - - - -
Total Business-Type Activities Program Revenues 62,174 58,412 56,129 55,663 56,168
Total Primary Government Program Revenue 133,288 122,956 118,550 116,346 138,563
Net(Expense)Revenue:
Governmental Activities: (136,928) (129,138) (143,499) (145,237) (142,308)
Business-Type Activities 5,373 2,351 7,146 6,680 3,791
Total Net(Expense)Revenue (131,555) (126,787) (136,353) (138,557) (138,517)
General Revenue and Other Changes in Net Position
Governmental Activities:
Property Taxes 74,795 74,856 86,056 85,552 84,010
Sales Taxes 30,276 30,051 25,339 23,646 21,427
Utility Taxes 20,764 20,152 19,135 19,757 20,616
Other Taxes 14,568 12,930 13,368 11,629 12,085
Use of Money and Property 2,816 3,434 3,239 4,043 5,002
From Other Agencies 6,003 6,585 5,647 4,184 8,500
Participation Payments - - - 4,496 -
Other 5,240 4,941 3,060 5,448 7,849
Transfers (38) (38) (38) (38) 7,175
Total Governmental Activities General Revenues 154,424 152,911 155,806 158,717 166,664
Business-Type Activities:
Use of Money and Property 137 1,100 1,135 1,824 3,351
Transfers 38 38 38 38 (7,175)
Total Business-Type Activities General Revenues 175 1,138 1,173 1,862 (3,824)
Total General Revenues and Transfers 154,599 154,049 157,017 160,617 155,665
Extraordinary Gain (4,669) 23,960 -
Changes in Net Position-Governmental Activities 12.827 47,733 12,345 13,518 17,181
Changes in Net Position-Business-Type Activities 5,548 3,489 8,319 8,542 (33)
Net Position-Beginning of Year(restated for 2013) 943,804 884,061 863,397 852,239 835,435
Net Position-End of Year $ 962,179 $ 935,283 $ 884,061 $ 874,299 $ 852,583
Planning and Building departments were combined in the year ended September 30, 2011.
uB -833- Item 13. 323
City of Huntington Beach
CHANGES IN NET POSITION -LAST TEN FISCAL YEARS
(In Thousands)
(continued)
Program Revenues: Fiscal Year Ended September 30,
Governmental Activities: 2008 2007 2006 2005 2004
Charges for Services
City Council $ 103 $ 99 $ 90 $ - $ -
City Manager 404 392 1,612 - -
City Treasurer 720 698 1,332 -
City Attorney 47 46 43 - -
City Clerk 168 210 95 111 -
Finance 1,354 1,312 325 - -
Human Resources 1,391 1,347 - - -
Planning& Building 1,987 4,223 825 1,024 1,403
Building 4,582 5,450 4,859 5,068 4,513
Fire 1,423 1,267 1,086 1,095 1,183
Information Services 697 675 641 - -
Police 5,159 4,890 5,355 5,254 1,605
Economic Development 3,001 2,944 505 385 5
Community Services 15,383 15,036 14,644 13,376 12,611
Library Services 851 835 714 714 4,290
Public Works 6,000 5,016 4,784 1,781 4,220
Non-Departmental 239 232 229 - 589
Total Charges for Services 43,509 44,672 37,139 28,808 30,419
Operating Grants 7,684 1,996 917 1,657 6,343
Capital Grants 14,284 5,154 6,893 43,341 7,384
Total Governmental Activities Program Revenue 65,477 51,822 44,949 73,806 44,146
Business-Type Activities:
Water Utility 35,751 37,%2 37,946 40,371 40,172
Sewer Service 9,906 7,242 7,873 8,512 6,373
Refuse Collection 10,521 10,550 10,292 9,985 10,412
Emerald Cove Housing 1,180 1,037 960 866 781
Emergency Fire Medical 6,762 6,068 6,145 5,725 5,650
Hazmat Service 185 210 182 110 187
Ocean View Estates 337 324 273 263 258
Total Business-Type Activities Program Revenues 64,642 63,393 63,671 65,832 63,833
Total Primary Government Program Revenue 139,713 115,215 108,620 139,638 107,979
Net(Expense)Revenue:
Govemmental Activities: (149,632) (177,306) (155,695) (121,706) (128,476)
Business-Type Activities 11,921 4,819 8,196 17,100 19,579
Total Net(Expense)Revenue (137,711) (172,487) (147,499) (104,606) (108,897)
General Revenue and Other Changes in Net Position
Governmental Activities:
Property Taxes 84,016 79,369 66,598 61,466 47,405
Sales Taxes 25,560 30,608 26,448 24,340 28,273
Utility Taxes 21,591 21,479 21,170 20,004 19,424
Other Taxes 15,065 13,776 13,226 14,952 11,365
Use of Money and Property 5,714 7,895 4,310 3,137 3,528
From Other Agencies 6,899 12,689 10,390 8,186 14,406
Participation Payments - 1,564 6,221 12,697 -
Other 2,332 2,6% 9,278 8,510 7,328
Transfers 9,594 491 464 4,884 -
Total Governmental Activities General Revenues 170,771 176,567 158,105 158,176 131,729
Business-Type Activities:
Use of Money and Property 4,324 5,035 3,589 1,500 1,085
Transfers (9,594) (491) (464) (4,884) -
Total Business-Type Activities General Revenues (5,270) 4,544 3,125 (3,384) 1,085
Total General Revenuesand Transfers 155,907 175,111 161,230 154,792 132,814
Extraordinary Gain - - - - -
Changes in Net Position-Governmental Activities 11,545 (6,739) 2,410 36,470 3,253
Changes in Net Position-Business-Type Activities 6,651 9,363 11,321 13,716 20,664
Net Position-Beginning of Year 827,517 793,310 745,196 659,512 628,279
Net Position-End of Year $ 845,713 $ 795,934 $ 758,927 $ 709,698 $ 652,196
Item 13. - 324 HB -834-
CITY OF HUNTINGTON BEACH
FUND BALANCES -GOVERNMENTAL FUNDS -LAST TEN FISCAL YEARS
(In Thousands)
(Modified Accrual Basis of Accounting)
Fiscal Year Ended September 30,
2013 2012 2011 2010 2009 (a)
General Fund:
Nonspendable $ 4,040 $ 4,633 $ 10,841 $ 4,605 $ 4,834
Restricted 1,878 1,387 1,304 1,452 1,921
Committed 24,011 - - 30,493 20,600
Assigned 24,578 48,415 42,411 4,802 11,733
Total General Fund $ 54,507 $ 54,435 $ 54,556 $ 41,352 $ 39,088
Other Governmental Funds:
Nonspendable $ - $ - $ - $ 6,576 $ 11,328
Restricted 27,425 27,722 32,519 33,319 11,509
Committed 11,098 6,745 4,049 1,755 7,545
Assigned 316 1,181 1,711 3,914 24,437
Unassigned (210) (395) (4,377) (4,319) (1,557)
Total Other Governmental Funds $ 38,629 $ 35,253 $ 33,902 $ 41,245 $ 53,262
Fiscal Year Ended September 30,
2008 2007 2006 2005 2004
General Fund:
Reserved $ 10,967 $ 10,679 $ 7,382 $ 5,915 $ 2,113
Unreserved 33,476 33,017 33,204 32,371 24,219
Total General Fund $ 44,443 $ 43,696 $ 40,586 $ 38,286 $ 26,332
Other Governmental Funds:
Reserved $ 35,445 $ 42,013 $ 25,472 $ 35,458 $ 30,143
Unreserved, Reported in:
Special Revenue Funds 11,307 13,500 20,631 17,833 11,810
Debt Service Funds 5,467 5,484 4,022 3,916 4,434
Capital Projects Funds 15,316 18,286 27,096 16,820 10,242
Total Other Governmental Funds $ 67,535 $ 79,283 $ 77,221 $ 74,027 $ 56,629
Notes:
(a)The City implemented GASB Statement No. 54 in the year ended September 30, 2009.
HB -835- Item 13. - 325
THIS PAGE INTENTIONALLY LEFT BLANK
Item 13. - 326 HB -836-
CITY OF HUNTINGTON BEACH
CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS-LAST TEN FISCAL YEARS
(In Thousands)
(Modified Accrual Basis of Accounting)
Fiscal Year Ended September 30,
2013 2012 2011 2010 2009
REVENUES:
Property Taxes $ 74,442 $ 74,554 $ 85,869 $ 85,072 $ 85,612
Sales Taxes 29,763 29,126 25,034 22,582 22,356
Utility Taxes 20,764 20,152 19,135 19,757 20,616
Other Taxes 14,568 12,930 13,368 11,629 12,085
Licenses and Permits 9,880 7,773 6,728 6,204 5,879
Fines and Forfeitures 4,058 4,252 4,334 3,965 4,144
From Use of Money and Property 16,046 16,855 15,660 16,330 17,285
From Other Agencies 18,237 18,537 17,659 19,893 21,152
Charges for Current Service/Other Revenue 34,150 30,051 26,996 26,401 24,894
TOTAL REVENUES 221,908 214,230 214,783 211,833 214,023
EXPENDITURES
Current:
City Council 260 310 300 301 295
City Manager 1,574 1,758 1,493 1,652 1,839
City Treasurer 132 141 1,274 1,532 1,308
City Attorney 2,221 2,313 2,354 2,772 2,877
City Clerk 797 689 798 868 1,084
Administrative Services - - - - -
Finance' 4,825 4,573 3,423 4,286 4,456
Human Resources 5,661 5,213 6,106 5,284 4,749
Planning& Building" 6,155 6,119 6,034 3,170 3,232
Building - - - 3,449 4,176
Fire 35,920 35,145 34,546 32,816 33,596
Information Systems 6,096 5,857 5,879 6,782 7,339
Police 60,460 60,249 59,546 58,566 59,686
Economic Development 7,012 3,389 13,784 14,704 11,086
Community Services 13,952 14,082 13,724 14,501 15,407
Library Services 3,588 3,492 3,546 4,158 4,336
Public Works 22,169 22,666 19,006 20,466 22,143
Non-Departmental 19,684 15,455 14,914 14,832 16,710
Capital Outlay 10,745 11,096 6,872 17,175 38,494
Debt Service:
Principal 9,381 6,012 9,446 7,351 11,480
Interest 2,321 2,564 6,397 6,368 5,383
TOTAL EXPENDITURES 212,953 201,123 209,442 221,033 249,676
EXCESS (DEFICIENCY)OF
REVENUES OVER(UNDER)
EXPENDITURES 8,955 13,107 5,341 (9,200) (35,653)
OTHER FINANCING SOURCES (USES):
Transfers In 9,501 18,904 27,385 20,850 27,125
Reclassification of Interfund Advances - - - - -
Proceeds of Long-Term Debt - 36,275 14,745 8,850
Issuance Premium - 1,884 707 -
Capital Assets Reclassification for Changes in Fund Type - -
Payments to Escrow (37,601) (15,967) -
Transfers Out (10,339) (18,942) (27,423) (20,888) (19,950)
TOTAL OTHER FINANCING SOURCES(USES) (838) (38) 520 (553) 16,025
Extraordinary Item -Dissolution of RDA (4,669) (11,839) - - -
INCREASE(DECREASE)IN FUND BALANCES $ 3,448 $ 1,230 $ 5,861 $ (9,753) $ (19,628)
DEBT SERVICE AS A PERCENTAGE OF
NON-CAPITAL EXPENDITURES 6.1% 4.7% 8.5% 7.2% 8.7%
Finance was included with Administrative Services prior to October 1, 2005
" Planning and Building departments were combined in the year ended September 30, 2011.
HB -837- Item 13. - 327
Fiscal Year Ended September 30,
2008 2007 2006 2005 2004
$ 82,138 $ 75,916 $ 69,065 $ 59,716 $ 43,501
26,377 26,271 26,448 24,340 28,273
21,591 21,479 21,170 20,004 19,424
15,065 13,776 13,226 13,068 11,365
7,924 10,131 7,432 7,457 7,736
4,060 4,165 4,288 4,365 4,342
18,221 19,796 16,461 12,733 11,856
19,231 19,304 16,611 20,179 26,321
20,645 23,270 27,237 33,950 17,553
215,252 214,108 201,938 195,812 170,371
295 287 271 254 280
1,588 1,490 5,508 1,917 1,165
1,357 1,060 1,446 1,547 1,519
2,881 2,526 2,313 2,848 2,771
992 932 828 679 712
- - - 5,731 6,295
4,792 4,400 3,283 2,501 -
4,725 4,202 - - -
3,859 3,092 2,800 2,548 2,382
3,957 4,670 3,729 3,291 2,938
27,146 26,438 24,334 22,365 19,018
6,741 6,437 6,540 5,726 5,315
56,535 55,461 50,151 45,778 39,414
16,228 8,292 4,172 2,866 5,132
15,666 14,744 14,382 12,321 11,718
4,962 5,097 4,359 3,969 3,745
23,528 25,248 28,448 21,535 16,756
21,519 12,977 13,831 13,039 23,809
21,525 16,142 30,174 9,065 29,484
8,234 10,453 9,406 8,474 8,718
5,345 5,514 6,512 5,999 5,987
231,875 209,462 212,487 172,453 187,158
(16,623) 4,646 (10,549) 23,359 (16,787)
24,278 16,313 21,531 20,890 30,274
35 15,579 1,102 13,236
(18,656) (15,822) (20,075) (16,006) (24,148)
5,622 526 17,035 5,986 19,362
$ (11,001) $ 5,172 $ 6,486 $ 29,345 $ 2,575
6.9% 9.0% 9.6% 9.7% 10.3%
Item 13. - 328 HB -838-
CITY OF HUNTINGTON BEACH
ASSESSED AND ACTUAL VALUATION
OF ALL TAXABLE PROPERTY(EXCLUDING REDEVELOPMENT AGENCY)
LAST TEN FISCAL YEARS
(In Thousands)
Common Total Assessed I Total Direct
Fiscal Year Property Public Utilities Total Secured Unsecured Valuation Tax Rate
2003-2004 17,987,861 2,876 17,990,737 911,027 18,901,764 0.15996
2004-2005 19,532,238 3,524 19,535,762 877,078 20,412,840 0.15996
2005-2006 20,925,190 1,522 20,926,712 790,513 21,717,225 0.15996
2006-2007 22,817,616 1,458 22,819,074 962,198 23,781,272 0.16282
2007-2008 24,294,404 305 24,294,709 1,066,668 25,361,377 0.16382
2008-2009 25,062,579 263 25,062,842 1,039,636 26,102,478 0.16482
2009-2010 25,324,857 263 25,325,120 1,086,770 26,411,890 0.17082
2010-2011 25,513,584 70,602 25,584,186 1,090,869 26,675,055 0.17082
2011-2012 25,480,770 72,602 25,553,372 1,170,004 26,723,376 0.17082
2012-2013 26,927,738 60,802 26,988,540 1,056,938 28,045,479 0.17082
Source: County of Orange Auditor Controller
PROPERTY TAX RATES
ALL DIRECT AND
OVERLAPPING GOVERNMENTS
TAX RATE 04-001
LARGEST AREA IN CITY
LAST TEN FISCAL YEARS
Direct Overlapping Total Direct
City Basic Rate Metro Water and
Fiscal Year (1), (2) City Other School Districts District Others Overlapping
2003-2004 0.15300 0.00696 0.54834 0.00610 0.31131 1.02571
2004-2005 0.15300 0.00696 0.56470 0.00520 0.33589 1.06575
2005-2006 0.15300 0.00696 0.57434 0.00520 0.32625 1.06575
2006-2007 0.15582 0.00700 0.57338 0.00470 0.32397 1.06487
2007-2008 0.15582 0.00800 0.57893 0.00450 0.32299 1.07024
2008-2009 0.15582 0.00900 0.57673 0.00430 0.32270 1.06855
2009-2010 0.15582 0.01500 0.58099 0.00430 0.32471 1.08082
2010-2011 0.15582 0.01500 0.58252 0.00370 0.32548 1.08252
2011-2012 0.15582 0.01500 0.58334 0.00370 0.32513 1.08299
2012-2013 0.15582 0.01500 0.60412 0.00350 0.30798 1.08642
Note: Rates are per$100 of assessed valuation
Source: County of Orange Auditor Controller
(1)Excludes rates associated with Mello-Roos Districts
(2)In 1978, California voters passed Proposition 13 which sets the propertytax rate at a 1%fixed amount. This 1% is shared by all
taxing agencies for which the subject property resides. In 1986, the State Constitution was amended to allow rates overthe 1%
base rate for voterapproved general obligation debt. Valuations of real property are frozen at the value of the property in 1975,
with an allowable adjustment upto2%peryearforinflation. However,property is assessed to its current value when a change of
ownership occurs. New construction,including tenant improvements,is assessed at its current value.
11B -839- Item 13. - 329
CITY OF HUNTINGTON BEACH
PROPERTY TAX LEVIES AND COLLECTIONS
LAST TEN FISCAL YEARS
(In Thousands)
Collected within the Fiscal
Year of the Levy Total Collections
Delinquent Delinquent
Percentage Tax Percentage Taxes Delinquency
Fiscal Year Total Levy Amount of Levy Collections Amount of Levy Receivable Percent
Secured Taxes
2003-2004 31,024 30,033 96.8% - 30,033 96.8% 441 1.4%
2004-2005 34,403 33,423 97.2% 434 33,857 98.4% 570 1.7%
2005-2006 36,556 35,318 96.6% 498 35,816 98.0% 795 2.2%
2006-2007 39,174 37,194 94.9% 622 37,816 96.5% 1,278 3.3%
2007-2008 42,269 40,001 94.6% 1,113 41,114 97.3% 1,734 4.1%
2008-2009 42,569 40,298 94.7% 1,789 42,087 98.9% 1,582 3.7%
2009-2010 43,892 36,992 84.3% 1,880 38,872 88.6% 1,038 2.4%
2010-2011 44,014 42,233 96.0% 1,339 43,572 99.0% 746 1.7%
2011-2012 44,304 42,611 96.2% 951 43,562 98.3% 660 1.5%
2012-2013 47,162 45,722 96.9% 855 46,577 98.8% 565 1.2%
Unsecured Taxes
2003-2004 1,507 1,382 91.7% - 1,382 91.7% 34 2.3%
2004-2005 1,606 1,474 91.8% 24 1,498 93.3% 40 2.5%
2005-2006 1,590 1,434 90.2% 23 1,457 91.6% 42 2.6%
2006-2007 1,842 1,600 86.9% 37 1,637 88.9% 150 8.1%
2007-2008 1,718 1,618 94.2% 60 1,678 97.7% 34 2.0%
2008-2009 1,783 1,606 90.1% 90 1,696 95.1% 49 2.7%
2009-2010 1,882 1,677 89.1% 44 1,721 91.4% 65 3.5%
2010-2011 1,940 1,739 89.6% 22 1,761 90.8% 75 3.9%
2011-2012 1,863 1,731 92.9% 28 1,759 94.4% 68 3 7%
2012-2013 1,882 1,653 87.8% 23 1,676 89.1% 62 3.3%
Reservoir Hill
2003-2004 191 190 99.5% - 190 99.5% 1 0.5%
2004-2005 - - 0.0% - - 0.0% 0.0%
2005-2006 - - 0.0% - - 0.0% - 0.0%
2006-2007 - - 0.0% - - 0.0% - 0.0%
2007-2008 - - 0.0% - - 0.0% - 0.0%
2008-2009 - - 0.0% - - 0.0% - 0.0%
2009-2010 - - 0.0% - - 0.0% - 0.0%
2010-2011 - - 0.0% - - 0.0% - 0.0%
2011-2012 - - 0.0% - - 0.0% - 0.0%
2012-2013 - - 0.0% - - 0.0% - 0.0%
Community Facilities Districts
2003-2004 1,797 1,789 99.6% - 1,789 99.6% 2 0.1
0/0
2004-2005 1,731 1,719 99.3% 4 1,723 99.5% 7 0.4%
2005-2006 4,085 4,069 99.6% 12 4,081 99.9% 11 0.3%
2006-2007 4,061 4,041 99.5% 22 4,063 100.0% 7 0.2%
2007-2008 41106 4,085 99.5% 21 4,106 100.0% 9 0.2%
2008-2009 4,053 4,034 99.5% 12 4,046 99.8% 7 0.2%
2009-2010 3,937 3,925 99.7% 11 3,936 100.0% - 0.0%
2010-2011 3,850 3,838 99.7% - 3,838 99.7% 1 0.0%
2011-2012 4,106 4,091 99.6% 3 4,094 99.7% 2 0.0%
2012-2013 4,093 4,077 99.6% 4 4,081 99.7% 4 0.1%
Source: County of Orange Auditor Controller's Office
" Delinquency tax collections information not available prior to fiscal year 2004-2005
Note: The levy and tax year is for July 1st through June 30th and does not include the Redevelopment Agency
Item 13. - 330 11B -840-
CITY OF HUNTINGTON BEACH
TOP TEN PROPERTY TAXPAYERS
CURRENT YEAR AND NINE YEARS AGO
2012-2013
Revenue Percent
(In Thousands) of Total
Mayer Financial LP $ 1,978 2.66%
Bella Terra Associates LLC 1,770 2.38%
CIM Huntington LLC 1,549 2.08%
OXY USA, Inc 944 1.27%
21002 HB, LLC 874 1.17•%
NF Huntington Plaza 533 0.72%
Bella Office Owner, LLC 506 0.68%
Waterfront Construction 452 0.61%
Essex Huntington Breakers 371 0.50%
Boeing/McDonnel Douglas 580 0.78%
Total Top Ten 9,557 10.18%
All Other Property Taxpayers 64,885 89.82%
City Total $ 74,442 100.00%
2004-2005
Revenue Percent
(In Thousands) of Total
Mayer Financial Limited Partnership $ 1,765 4.21%
McDonnel Douglas Corporation 798 1.90%
AES Huntington Beach LLC 450 1.07%
Huntington Center 437 1.04%
Water Construction 1A California LP 369 0.88%
Mullrock Mortgage LLC 324 0.77%
Essex Huntington Breakers 288 0.69%
Atlanta Huntington Beach LLC 264 0.63%
Pierside 234 0.56%
Liu Corporation 215 0.51%
Total Top Ten 5,144 12.27%
All Other Property Taxpayers 36,786 87.73%
City Total $ 41,930 100.001
Source: HdL Coren&Cone
Note:Information provided for the period from July 1st through June 30th
HB -841- Item 13. - 331
CITY OF HUNTINGTON BEACH
RATIOS OF OUTSTANDING DEBT BY TYPE
LAST TEN FISCAL YEARS
(In Thousands)
Fiscal Year Ended September 30,
Long-Tenn Indebtedness 1 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
GovemmentaI Activities:
Judgement Obligation Bonds $ 3,474 $ 4,339 $ 5,179 $ 5,989 $ 6,774 $ 10,050 $ 10,795 $ 11,525 $ 12,245 $ 12,500
Public Financing Authority:
1997 Leasehold Revenue Bond - - - 2,860 2,945 3,025 3,690 4,330 4,940
2000 Lease Revenue Bond 12,785 13,515 14.215 14,885 15.525 16,140
2001(a)Lease Revenue Bond 25,650 26,375 27,075 27,750 28,400 29,030 29,635
2001(b)Lease Revenue Bond 15,915 17,795 19,595 21.340 23,030 24,670 26,265
2010(a)Lease Revenue Bond 11,910 12,565 13,200 13,820 - - - - - -
2011(a)Lease Revenue Bond 31,195 34,155 36,275 - - - - - - -
Total Public Financing Authority 43,105 46,720 49,475 55,385 59,815 63,130 66,330 70,005 73,555 76,980
Civic Improvement Corporation:
Reservoir Hill Assessment Bonds - - - - - - - -
Total Civic Improvement Corporation - - - - -
Redevelopment Agency:
1999 Tax Allocation Refunding Bonds 6,180 6.610 7.020 7,410 7,790 8,155 8.505 8,840
2002 Tax Allocation Refunding Bonds 13,525 14,470 15,380 16,250 17,095 17,910 18,700 19,465
Mayer Disposition and Development Agreement 5,803 6,153 6.503 6,810 7,101 8,197 10,083 10,730
Bella Terra OPA(Parking) 13.922 14.076 14.227 14,532 14,855 15,000 - -
CIM DDA(Parking&Infrastructure) 7.288 7.444 7.768 - - -
CIM DDA(Additional Parking) 435 440 421 - - - -
Section 108 Loan RDA/Bowen Court 3,997 5.725 6.140 6,530 6,895 7,235 7,550 7,850
Total Redevelopment Agency - 51,150 54,918 57,459 51,532 53,736 56,497 44,838 46,885
Other Long-Term Obligations:
Notes Payable - - - - - - - - 116 337
Energy Financing Loan - - - - - -
Capital Leases Payable 290 572 857 1,161 1,681 2.281 2,975 3,461 4,885
Property Tax Claims - - - - - - -
PARS Payable 4,517 5,868 7,149
Section 108 Loan City 1,135 1,285 1,425 - - - - - -
Total Other Long-Term Obligations 1,135 6,092 7,865 8,006 1,161 1,681 2,281 2,975 3,577 5,222
Total Long-Term Obligations-Governmental Activities $ 47,714 $ 57,151 $ 113,669 $ 124,298 $ 125,209 $ 126,393 $ 133,142 $ 141,002 $ 134,215 $ 141,587
Long-Term Obligations-Business-Type Activities:
Leases Payable $ - $ - $ 3 $ 6 $ 9 $ 12 $ 40 $ 112 $ 183 $ 250
Total Long Term Obligations•Governmental Activities
and Business-Type Activities $ 47,714 $ 57,151 $ 113,669 $ 113,672 $ 124,304 $ 125,218 $ 126,405 $ 133,182 $ 141,114 $ 134,398
2013 2012 2012 2011 2010 2009 2008 2007 2006 2005
Population* 193,616 192,524 190.377 203,484 202,480 201,993 202,250 201,000 200,023 198,996
Debt Per Capita $ 246 $ 297 $ 300 $ 559 $ 578 $ 712 $ 619 $ 623 $ 705 $ 675
Total Personal Income(In Thousands)- $7,839,899 $7,573.894 $7,356.548 $8,440,720 $8,207.324 $8,000,943 $ 7,626,443 $7,436,799 $ 7,284,238 $ 7,246,837
Per Capita Personal Income- $ 40.492 $ 39,340 $ 38,642 $ 41,481 $ 40.534 $ 39,610 $ 37,70B $ 36,999 $ 36.417 $ 36,417
Unemployment Rate*"" 4.30% 6.30% 7.40% 7.80% 7.90% 4.70% 3.40% 2.70% 3,00% 3.20%
Total Employment- 119,600 115,100 110,600 112.100 114,100 119,300 121,100 121,400 119,600 117,200
Source:
State of California Department of Finance.FY 10111 population decrease primarily attributed to the US Census adjustment
Claritas,Inc.
State of California Employment Development Department
CITY OF HUNTINGTON BEACH
LEGAL DEBT MARGIN
LAST TEN FISCAL YEARS
(In Thousands)
Debt Limit-12% of Debt Applicable to
Assessed Valuation Assessed Valuation Limit Legal Debt Margin
2003-2004 18,901,764 2,268,212 2,268.212
2004-2005 20,412,840 2,449,541 2,449,541
2005-2006 21,717,225 2,606,067 2,606,067
2006-2007 23,781,272 2,853,753 2,853,753
2007-2008 25,361,377 3,043,365 3,043,365
2008-2009 26,102 478 3,132,297 3,132,297
2009-2010 26,411,890 3,169,427 3,169,427
2010-2011 26,675,055 3,201,007 3,201,007
2011-2012 26,723,376 3,206,805 3,206,805
2012-2013 28,045,479 3,365,457 3,365,457
Item 13. - 332 14B -842-
CITY OF HUNTINGTON BEACH
STATEMENT OF DIRECT AND
OVERLAPPING BONDED DEBT
SEPTEMBER 30, 2013
2012-13 Assessed Valuation$28,322,339,435(after deducting$1,744,092,986 of incremental redevelopment valuation)
Debt Repaid with Property Taxes(Tax and Assessment Debt):
Percent Debt Applicable
Overlapping Tax and Assessment Debt Applicable (1) to City
Metropolitan Water District 1.4290% $ 2,359,065
Coast Community College District 29.3850% 185,834,765
Huntington Beach Union High School District 72.9840% 150,985,649
Huntington Beach City School District 99.8380% 22,008,251
Westminster School District 26.1200% 18,822,958
Los Alamitos Unified School District School Facilities District No. 1 1.1480% 1,159,367
City of Huntington Beach Community Facilities Districts 100.0000% 39,630,000
Total Overlapping Tax and Assessment Debt $ 420,800,055
Ratios to 2012-2013 Assessed Valuation
Total Overlappng Tax and Assessment Debt 1.40%
Direct and Overlapping General Fund Debt
Orange County General Fund Obligations $ 11,998,272
Orange County Pension Obligations 20,420,226
Orange County Board of Education Certificates of Participation 1,108,316
MWDOC Facilities Corporation 654,733
North Orange County Regional Occupation Program Certificates of Participation 9,193
Huntington Beach Union High School District Certificates of Participation 43,732,808
Los Alamitos Unified School District Certificates of Participation 470,406
Fountain Valley School Districts Certificates of Participation 2,347,737
Huntington Beach City School District Certificates of Participation 16,297,875
Ocean View School District Certificates of Participation 5,192,410
Westminster School District Certificates of Participation 6,089,878
City of Huntington Judgement Obligation Bonds 3,474,000
City of Huntington Reporting Entity Beach General Fund Obligations: 43,105,000
Total Gross Direct and Overlapping General Fund Debt 154,900,854
Less Self Supporting Debt of MWDOC Water Facilities Corporation (654,733)
Total Net Direct and Overlapping General Fund Debt $ 154,246,121
Total Direct Debt $ 46,579,000
Total Gross Overlapping Debt 545,876,909
Total Net Overlapping Debt 545,222,176
Gross Combined Total Debt $ 592,455,909
Net Combined Total Debt 591,801,176
(1) Percentage of overlapping agency's assessed valuation located within boundaries of the City.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds
and non-bonded capital lease obligations.
Ratios to Adjusted Assessed Valuations
Combined Direct Debt ($46,579,000) 0.15%
Gross Combined Total Debt 1.97%
Net Combined Total Debt 1.97%
Source: California Municipal Statistics and City of Huntington Beach Finance Department
HB -843- Item 13. - 333
CITY OF HUNTINGTON BEACH
PRINCIPAL PRIVATE EMPLOYERS
CURRENT YEAR AND NINE YEARS AGO
2013 %of tota I
Boeing 5,178 4.33%
CambroMFG Co. 1,137 0.95%
Quiksilver 955 0.80%
Ensign United States Drilling 925 0.77%
Hyatt Regency Huntington Beach 641 0.541%
C&D Aerospace 555 0.46%
Huntington Beach Hospital 527 0.44%
Wal-Mart 462 0,39%
Rainbow Disposal 408 0.34%
Huntington Beach Healthcare 381 0.32%
Total of top 10 11,169 9.34%
All others 108,431 90,66%
Total employment(public and private) 119,600 100.00%
2004 %of total
Boeing 4,800 3.73%
Quiksilver 1,600 1.24%
Cambro Manufacturing 886 0.69%
Dynamic Cooking Systems 700 0.54%
C&D Aerospace 665 0.52%
Triad Financial 637 0.49%
E-Trade Mortgage 561 0.44%
Huntington Beach Hospital 513 0.40%
Rainbow Disposal 420 0.33%
Verizon 352 0.27%
Total of top 10 11,134 8.64°/
All others 117.706 91.36%
Total employment(public and private) 128,840 100.00%
Source: Economic Development Department, City of Huntington Beach
Note: Information on the principal private employers in not readily available for fiscal year
ending September 2003 and earlier. Until data is readily available, only the available
years will be presented.
CITY OF HUNTINGTON BEACH
FULL-TIME ACTUAL AND BUDGETED CITY EMPLOYEES BY FUNCTION/PROGRAM
LAST TEN FISCAL YEARS
Actual Budgeted
General Government: 2013 2012 2011 2010 2009 2008 2007 2006 2006 2004
City Council 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
City Manager 11.50 7.00 7.00 6,00 9.00 9.00 8.00 7.00 8.00 8.00
City Treasurer 1.50 1.50 1.50 10.00 10.00 10.00 10.00 10.00 16.00 16.00
City Attorney 11.00 11.00 11.00 17.00 18.00 18.00 18.00 17.00 17.00 15,00
City Clerk 4.00 4.00 4.00 8.00 8.00 8.00 7.50 7.50 7.50 7.50
Finance 29.50 29.50 29.50 32.00 33.00 33.00 33.00 31.00 22.00 18.00
Human Resources 14.50 15.00 15.00 20.50 20.50 20.50 20.00 22.00 21.00 22.00
Planning 42.75 42.75 43.75 26.00 28.00 28,00 28.00 28.00 26.50 25.00
Building* - - - 25.75 30.50 31.50 31.50 31.50 29.50 27.50
Information Systems 29.50 29.50 29.50 39.00 40.00 39,00 38.00 37.00 36.00 37.00
Economic Development** - 5.50 11.50 14.00 14.00 14.00 13.00 13.00 14.00 14.00
Library Services 27.75 27.75 29.75 32.25 37,25 37.25 37.25 37.25 37.25 37,25
Fire 176.50 176.50 176.50 176.00 185.00 185.00 184.00 157.00 156.00 155.00
Police 358.50 363.00 367.00 355.00 381.00 381.00 376.00 371.50 371,00 367.00
Community Services 56.00 61.00 61.00 65.75 69.75 69.75 69.75 66.50 62.25 63.25
Public Works 196.00 196.00 203.00 227.00 258.00 258.00 255.00 247,00 239.00 235.00
960.00 971.00 991.00 1,066.25 1,143.00 1,143.00 1,130.00 1,084.26 1,064.00 1,048.60
Source: Finance Department,City of Huntington Beach
Note:Actual full-time city employees by function/program data available only for fiscal year ended September 30, 2010,
Budgeted full-time employees provided for remaining years.
Building and Planning reported as a combined figure for fiscal year ended September 30, 2011 and subsequent years.
The Economic Development department was merged into the City Manager's Office for fiscal year ended September 30 2013 and subsequent years.
Item 13. - 334 xB -844-
CITY OF HUNTINGTON BEACH
OPERATING INDICATORS BY FUNCTION/ACTIVITY
LAST EIGHT FISCAL YEARS
Function/Program 2013 2012 2011 2010 2009 2008 2007 2006
Finance:
Water Bills Processed 628,207 646.229 630,268 640,351 641.602 642,883 630,228 626,903
Business Licenses Issued 21,127 22,304 21,903 21,045 20,841 21.129 20,670 19,746
Accounts Receivable Billings Processed 45,422 45,422 42,968 37,146 31,894 26,263 21,352 22,453
City Clerk:
Passports Issued 4,220 3,850 3,082 3,251 3,186 4,386 5,687 3,416
Planning:
Entitlements Processed 231 205 195 353 465 674 504 566
Plan Re\iews 1,575 1,184 1,524 2,216 1,447 1,941 1,456 2,105
Field Inspection Complaints 7,301 6,105 6,064 8,187 9,345 7,932 5,273 5,926
Code Violation Cases 2.385 2,573 2,521 3,315 3.876 3,385 2,231 3,580
Building:
Number of Permits Issued 8,970 8,444 8.413 8,037 8,114 9,254 4,355 11,210
Number of Inspections Completed 33,962 31,224 29,905 29,792 33,734 40,510 42,181 43.905
Value of Construction Permits(Thousands of Dollars) 248,246 190,992 104,238 91,049 72,727 123,843 141,277 196,453
Processed Number of Certificate of Occupancies 477 647 765 796 484 540 590 307
Automated Information Requests n/a n/a n/a n/a n/a n/a 78,243 77,006
Counter Visits 20,854 19,777 20,288 20,272 19,149 18,775 n/a n/a
Fire:
Inspections 5,087 6,974 7,858 7,450 6,375 6,203 4,900 4,300
Responses 15.608 15,040 15,940 15,629 14,130 13,879 12,400 12,100
Police:
Physical Arrests 4,237 5,774 6,457 5,695 6,380 6,930 5,576 6,368
Parking Violations 72,347 77,282 77,261 74,115 55,840 67,270 123,096 68,712
Traffic Violations 13,016 16,916 16,770 22,660 19,433 18,882 19,859 22,755
Community Services:
Acreage of Parks 1,062 1,062 998 1.003 999 1,001 999 999
Estimated Beach Visitors 11,016,615 8,906,592 7,840,968 8,208,477 9,922,165 10,452,461 10,363,719 10,085,358
Enrollment in Recreation Classes 20,318 32,817 32,565 31,743 32,906 35,537 34,932 25,447
Ocean Recues 4,195 4,669 3.845 2,822 6,047 n/a n/a n/a
Public Works:
Water Sold(Acre Feet) 28,354 27,784 26,868 27.268 30,537 30,518 31,128 29,246
Gallons of Sewage Pumped Per Day 22 million 22 million 22 million 22 million 23 million 23 million 23 million 23 million
Library:
Items in Collection 385,901 420,956 427,707 437,603 440,578 438.467 431,304 437,472
Kerns Borrowed 892,543 888,019 943,695 1,009,634 944,492 879,225 826,921 823,116
Source:Various departments of the City of Huntington Beach
CAPITAL ASSET STATISTICS BY FUNCTION/ACTIVITY
SEPTEMBER 30,2013
Library Services One Main Library and Four Branches
Fire:
Fire Stations 8
Police:
Stations One Main Station and Three Substations
Community Services:
Acreage of Parks 1062
Community Centers 6
Miles of Beach Maintained 4.7
Public Works:
Centerline Square Miles of Streets Maintained 443
Miles of Storm Drains Maintained 118
Miles of Sewer Maintained 360
Source:Various departments of the City of Huntington Beach
HB -845- Item 13. - 335
APPENDIX C
CITY INVESTMENT POLICY
CITY OF HUNTINGTON BEACH
STATEMENT OF INVESTMENT POLICY
FISCAL YEAR 2013/2014
TABLE OF CONTENTS
SECTION
1.0 Purpose.............................................:.......................................................................................................2
2.0 Policy.......................................................................................................................................................2
3.0 Scope........................................................................................................................................................2
4.0 Prudence...................................................................................................................................................3
5.0 Objective..................................................................................................................................................3
6.0 Investment Advisory Board.....................................................................................................................4
7.0 Delegation of Authority...........................................................................................................................4
8.0 Ethics and Conflicts of Interest................................................................................................................5
9.0 Authorized Financial Dealers& Institutions............................................................................................5
10.0 Authorized&Suitable Investments.........................................................................................................6
11.0 Portfolio Adjustment..............................................................................................................................10
12.0 Collateral ization.....................................................................................................................................10
13.0 Safekeeping and Custody.......................................................................................................................10
14.0 Diversification........................................................................................................................................11
15.0 Maximum Maturities..............................................................................................................................12
16.0 Internal Control......................................................................................................................................12
17.0 Performance Standards...........................................................................................................................12
18.0 Reporting................................................................................................................................................13
19.0 Investment Policy Adoption...................................................................................................................14
Glossary.................................................................................................................................................15
Appendix A—Investment Guidelines.....................................................................................................i
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Item 13. - 336 HB -846-
INTENTIONALLY
LEFT
BLANK
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NB -847- Item 13. - 337
1.0 Purpose:
This policy is intended to provide guidelines for the prudent investment of the city's cash balances, and
outline the policies to assist maximizing the efficiency of the city's cash management system while meeting
the daily cash flow demands of the city.
2.0 Policy:
The investment practices and policies of the City of Huntington Beach are based upon state law and
prudent money management. The primary goals of these practices are:
A. To assure compliance with all Federal, State, and local laws governing the investment of public
funds under the control of the City Treasurer.
i. Government Code Section 53646 previously mandated that annual investment policies
and quarterly reports be rendered to the legislative body. AB 2853 amended the Government Code
to remove the requirements and the rendering of these documents is pennissive rather than
mandated.
B. To protect the principal moneys entrusted to this office.
C. Achieve a reasonable rate of return within the parameters of prudent risk management while
minimizing the potential for capital losses arising from market changes or issuer default.
3.0 Scope:
This investment policy applies to all financial assets as indicated in 3.1 below of the City of Huntington
Beach.These funds are accounted for in the city's Comprehensive Annual Financial Report and include:
3.1 Funds:
The City Treasurer is responsible for investing the unexpended cash in the City Treasury for all funds,
except for the employee's pension funds, which are invested separately by CALPERS, those funds which
are invested separately by the City Treasurer under bond indenture agreements, and funds which are
invested separately by the City Treasurer or trustees under other agreements approved by Council such as
the Retiree Medical Trust and the Supplemental Pension Trust. The City Treasurer will strive to maintain
the level of investment of this cash as close as possible to 100%. These finds are described in the city's
annual financial report and include:
3.1.1 General Fund
3.1.2 Special Revenue Funds
3.1.3 Capital Project Funds
3.1.4 Enterprise Funds
3.1.5 Trust and Agency Funds
3.1.6 Debt Service Funds
3.1.7 Infrastructure Funds
3.1.8 Capital Improvement Reserve Funds
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Item 13. - 338 xB -848-
3.1.9 Any new fund created by the legislative body,unless specifically exempted
This investment policy applies to all transactions involving the financial assets and related activity of the
foregoing funds. It is the City's policy to pool funds for investment purposes to provide efficiencies and
economics of scale. Investing through a pooled account will provide for greater use of funds by allowing
for a more efficient cash floe, a reduction in transaction costs and a greater access to the market.
4.0 Prudence:
The standard of prudence to be used by the City Treasurer shall be the"prudent investor" standard. This
shall be applied in the context of managing an overall portfolio.
The "Prudent Investor Rule" provides, pursuant to California Government Code Section 53600.3, that
investments shall be made with judgment and care—under circumstances then prevailing—which persons
of prudence, discretion and intelligence exercise in the management of their own affairs, not for
speculation, but for investment. considering the probable safety of their capital as well as the probable
income to be derived.
4.1 The City Treasurer and the Deputy City Treasurer, as investment officers acting in accordance with written
procedures and the investment policy and exercising due diligence, shall be relieved of personal
responsibility for an individual security's credit risk or market price changes, provided deviations from
expectations are reported to the City Council in a timely fashion and appropriate action is taken to control
adverse developments.
5.0 Objective:
Consistent with this aim, investments are made under the terms and conditions of California Government
Code Section 53600,et seq. Criteria for selecting investments and the absolute order of priority are:
5.1 Safety:
Safety of principal is the foremost objective of the investment program. Investments of the City of
Huntington Beach shall be undertaken in a manner that seeks to ensure the preservation of capital in the
overall portfolio. To attain this objective, diversification is required in order that potential losses on
individual securities do not exceed the income generated from the remainder of the portfolio.
5.2 Liquidity:
The City of Huntington's Beach's investment portfolio will remain sufficiently liquid to enable the City of
Huntington Beach to meet all operating requirements which might be reasonably anticipated and to
maintain compliance with any indenture agreement, as applicable. Liquidity is essential to the safety of
principal. Furthermore, since all possible cash demands camnot be anticipated, the portfolio will invest
primarily in securities with active secondary and resale markets.
5.3 Return on Investments:
The City of Huntington Beach's investment portfolio shall be designed with the objective of attaining a
market-average rate of return throughout budgetary and economic cycles(market interest rates), within the
City of Huntington Beach's investment policy's risk parameters and the cash flow needs of the City. See
also Section 17.0.
6.0 Investment Advisory Board:
By City Charter, the City Treasurer is the custodian of all public funds of the City of Huntington Beach.
The City Council may appoint Huntington Beach residents, professional, and non professional people, to
C-4
I=1B -849- Item 13. - 339
serve on an investment Advisory Board for the purpose of advising the City Treasurer on the City's
investment program and at least quarterly,review the investment portfolio for compliance with the adopted
investment policy.
7.0 Delegation of Authority:
In accordance with the State of California Government Code § 53607, the City Council delegates
investment authority to the City Treasurer for a period of one year and such investment authority must be
renewed annually. Adoption of this policy constitutes delegation of investment authority to the City
Treasurer for the following year unless revoked in writing. Within the City Treasurer's office, the
responsibility for the day to day investment of the City funds will be the City Treasurer and is delegated to
the Deputy City Treasurer in the absence of the City Treasurer (as allowable per State of California
Government Code §41006). The City Treasurer shall be responsible for all transactions undertaken and
shall establish a system of controls to regulate the activities of subordinate officials.
8.0 Ethics and Conflicts of Interest:
In addition to state and local statutes relating to conflicts of interest, all persons involved in the investment
process shall refrain fi-om personal business activity that could conflict with proper execution of the
investment program,or which could impair their ability to make impartial investment decisions.Employees
and investment officers are required to file annual disclosure statements as required for "public officials
who manage public investments' (as defined and required by the Political Reform Act and related
regulations,being Government Code Sections 81000 and the Fair Political Practices Commission(FFPC)).
9.0 Authorized Financial Dealers and Institutions:
Tile Cit- Treasurer will maintain a list of the financial institutions and broker/dealers authorized to provide
investment and depository services and will perform an annual review of the financial condition and
registrations of qualified bidders and require annual audited financial statements to be on file for each
company. The City shall annually send a copy of the current investment policy to all financial institutions
and broker/dealers approved to do business with the City.
As far as possible, all money belonging to,or in the custody of,a local agency, including money paid to the
City Treasurer or other official to pay the principal, interest, or penalties of bonds, shall be deposited for
safekeeping in national banks or state chartered banks, savings associations, federal associations, credit
unions, or federally insured industrial loan companies in this state selected by the City Treasurer that are
qualified public depositories; or may be invested in the investments set forth in Section 10.0. To be eligible
to receive local agency money, a bank, savings association, federal association, or federally insured
industrial loan company shall have received an overall rating of not less than "satisfactory" in its most
recent evaluation by the appropriate federal financial supervisory agency of its record of meeting the credit
needs of California's communities, including low- and moderate-income neighborhoods.
To provide for the optimum yield in the investment of city funds, the city's investment procedures shall
encourage competitive bidding on transactions from approved brokers/dealers. In order to be approved by
the city, the dealer must be a "primary" dealer or regional dealer that qualifies under Securities and
Exchange Commission Rule 150-1 (Uniform Net Capitol Rule). The institution must have an office in
California. The dealer must be experienced in institutional trading practices and familiar with the California
Government Code as related to investments appropriate for the city; and, other criteria as may be
established in the investment procedures. All broker/dealers and financial institutions who desire to become
qualified bidders for investment transactions must submit a "Broker/Dealer Application" and related
documents relative to eligibility including a current audited annual financial statement, U4 form for the
broker, proof of state registration, proof of Financial Industry Regulatory Authority, inc. ("FiNRA")
certification and a certification of having read and understood the City's investment policy and agreeing to
comply with the policy. The City Treasurer shall determine if they are adequately capitalized(Le. minimum
capital requirements of$10,000..000 and five years of operation).
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10.0 Authorized& Suitable Investments: The City is authorized by California Government Code
Section 53600, et. seq. to invest in specific types of securities. Investments not specifically listed below
are deemed inappropriate and prohibited:
A. BANKERS ACCEPTANCES, maximum 25% of portfolio (up to 40% with Council
approval). Maximum term 180 days.
Banks must have a short term rating of at least Al/PI and a long-term rating of A or higher as
provided by Moody's Investors Service or Standard and Poor's Corp.No more than 30 percent of
the agency's money may be invested in the bankers acceptances of any one commercial bank
pursuant to this section.
B. NEGOTIABLE CERTIFICATES OF DEPOSIT, maximum 30% of portfolio. Maximum
term three(3)years,(Up to five(5)years with Council approval).
Banks must have a short term rating of AI/PI and a long term rating of at least a single A ,from a
nationally recognized authority on ratings.
C. COMMERCIAL PAPER,maximum 25% of portfolio. Maximum term 270 days.
Commercial paper of"prime" quality of the highest ranking or of the highest letter and number
rating as provided for by a nationally recognized statistical-rating organization (NRSRO). The
entity that issues the commercial paper shall meet all of the following conditions in either
paragraph(1)or paragraph(2):
(1) The entity meets the following criteria:
(A) Is organized and operating in the United States as a general corporation.
(B) Has total assets in excess of five hundred million dollars($500,000,000).
(C) Has debt other than commercial paper, if any, that is rated "A" or higher by a
nationally recognized statistical-rating organization(NRSRO).
(2) The entity meets the following criteria:
(A) is organized within the United States as a special purpose corporation, trust, or
limited liability company.
(B) Has programwide credit enhancements including, but not limited to,
overcollateralization, letters of credit,or surety bond.
(C) Has commercial paper that is rated "A-I" or higher, or the equivalent, by a
nationally recognized statistical-rating organization(NRSRO).
Split ratings (i.e. A2/Pl) are not allowable. No more than 10 percent of the outstanding
commercial paper of any single corporate issue may be purchased.
D. BONDS ISSUED BY THE CITY OR ANY LOCAL AGENCY WITHIN THE STATE OF
CALIFORNIA OR ANY OF THE OTHER 49 UNITED STATES.
Bonds must have an"A"rating or better
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E. OBLIGATIONS OF THE UNITED STATES TREASURY
United States Treasury Notes, bonds, bills or certificates of indebtedness, or those for which the
faith and credit of the United States are pledged for the payment of principal and interest. There is
no limit on the percentage of the portfolio that can be invested in this category.
F. FEDERAL AGENCIES
Debt instruments issued by agencies of the Federal government. Though not general obligations of
the U.S. Treasury, such securities are sponsored by the government or related to the government
and, therefore, have high safety ratings. The following are authorized Federal Intermediate Credit
Bank (FICB's), Federal Land Bank (FLB's), Federal Home Loan Bank (FHLB's), Federal
National Mortgage Association (FNMA's), Federal Home Loan Mortgage Corporation
(FHLMC's), Government National Mortgage Association (GNMA's), Tennessee Valley
Authorities (TVA's), Student Loan Association Notes (SLMA's) and Small Business
Administration(SBA's). There is no limit on the percentage of the portfolio that can be invested in
this category.
G. REPURCHASE AGREEMENT,maximum term 3 months.
Investments in repurchase agreements may be made, on any investment authorized in this section,
when the term of the agreement does not exceed 3 months.
A Master Repurchase Agreement must be signed with the bank or broker/dealer who is selling the
securities to the Citv.
H. REVERSE-REPURCHASE AGREEMENTS (Requires City Council approval for each
transaction)
Reverse repurchase agreements or securities lending agreements may be utilized only when all of
the following conditions are met:
(A) The security to be sold on reverse repurchase agreement or securities lending agreement
has been owned and fully paid for by the local agency for a minimum of 30 days prior to sale.
(B) The total of all reverse repurchase agreements and securities lending agreements on
investments owned by the local agency does not exceed 20 percent of the base value of the
portfolio.
(C) The agreement does not exceed a term of 92 days, unless the agreement includes a
written codicil guaranteeing a minimum earning or spread for the entire period between the sale of
a security using a reverse repurchase agreement or securities lending agreement and the final
maturity date of the same security.
(D) Funds obtained or finds within the pool of an equivalent amount to that obtained from
selling a security to a counterparty by way of a reverse repurchase agreement or securities lending
agreement,shall not be used to purchase another security with a maturity longer than 92 days from
the initial settlement date of the reverse repurchase agreement or securities lending agreement,
unless the reverse repurchase agreement or securities lending agreement includes a written codicil
guaranteeing a minunum earning or spread for the entire period between the sale of a security
using a reverse repurchase agreement or securities lending agreement and the final maturity date
of the same security.
Investments in reverse repurchase agreements, securities lending agreements, or similar
investments in which the local agency sells securities prior to purchase with a simultaneous
agreement to repurchase the security shall only be made with primary dealers of the Federal
Reserve Bank of New York or with a nationally or state-chartered bank that has or has had a
significant banking relationship with a local agency.
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(A) For purposes of this chapter, "significant banking relationship" means any of the
following activities of a bank:
(i) Involvement in the creation, sale, purchase, or retirement of a local agency's
bonds,warrants,notes,or other evidence of indebtedness.
(ii) Financing of a local agency's activities.
(iii) Acceptance of a local agency's securities or funds as deposits.
I. MEDIUM-TERM CORPORATE NOTES, maximum 20% of portfolio (30% with Council
approval),with a maximum remaining maturity of five years or less.
Notes eligible for investment shall be "A" rated or its equivalent or better as detennined by a
nationally recognized rating service.
J. TIME DEPOSITS-CERTIFICATES OF DEPOSIT (non-negotiable certificates of deposit)
(Maximum of years)
Deposits must be made with banks or savings & loan that have a short term rating of AI/PI or a
long term rating of at least a single A from a generally recognized authority on ratings.
K. OBLIGATIONS OF THE STATE OF CALIFORNIA
Obligations must be"A"rated or better from a nationally recognized authority on ratings.
L. MONEY MARKET FUNDS, maximum 15%of portfolio.
No more than 10 percent of the agency's surplus funds may be invested in shares of beneficial
interest of any one Money Market fund. Local agencies may invest in "shares of beneficial
interest" issued by diversified management companies which invest only in direct obligations in
US Treasury bills, notes and bonds,U. S.Government Agencies and repurchase agreements with a
weighted average of 60 days or less. They must have the highest rating from at least two
nationally recognized statistical-rating organizations (NRSRO), must maintain a daily principal
per share value of$1.00 per share and distribute interest monthly, and must have a minimum of
$500 million in assets under management. The purchase price of the shares may not include
commission.
M. THE LOCAL AGENCY INVESTMENT FUND(LAIF)
Is a special fund of the California State Treasury through which any local government may pool
investments. The city may invest up to $50,000,000 in this fund. investments in LAIF are highly
liquid and may be converted to cash within 24 hours.
10.1 Investment Pools/Money Market funds:
The City Treasurer or designee shall be required to investigate all local government investment pools and
money market mutual funds prior to investing and performing at least a quarterly review thereafter while
the City is invested in the pool or the money market fund. LAIF is authorized under provisions in Section
16429.1 of the California Government Code as an allowable investment for local agencies even though
some of the individual investments of the pool are not allowed as a direct investment by a local agency.
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11.0 Portfolio Adjustments:
Should any investment listed in section 10.0 exceed a percentage-of-portfolio limitation due to an incident
such as fluctuation in portfolio size, the affected securities may be held to maturity to avoid losses. When
no loss is indicated,the Treasurer shall consider reconstructing the portfolio basing his/her decision on the
expected length of time the portfolio will be unbalanced. If this occurs, the City Council shall be notified.
The City Treasurer will review the portfolio for such compliance no less than quarterly.
12.0 Collateralization:
Under provisions of the California Government Code, California banks, and savings and loan associations
are required to secure the city's deposits by pledging government securities with a value of I10 % of
principal and accrued interest. California law also allows financial institutions to secure city deposits by
pledging first trust deed mortgage notes having a value of 150% of city's total deposits. Collateral will
always be held by an independent third party. A clearly marked evidence of ownership (safekeeping
receipt)must be supplied to the city and retained. The market value of securities that underlay a repurchase
agreement shall be valued at 102 percent or greater of the funds borrowed against those securities and the
value shall be adjusted no less than quarterly. Since the market value of the underlying securities is subject
to daily market fluctuations, the investments in repurchase agreements shall be in compliance if the value
of the underlying-securities is brought'back up to 102 percent no later than the next business day. The City
Treasurer, at his/her discretion, may waive the collateral requirement for deposits that are fully insured
(current limit is $250,000) by the Federal Deposit Insurance Corporation. The right of collateral
substitution is granted. The City Treasurer or designee shall ensure that all demand deposits that exceed the
FDIC limit (currently $250,000) shall be fully collateralized with securities authorized under state law and
this Investment Policy.
13.0 Safekeeping and Custody:
All city investments shall have the City of Huntington Beach as its registered owner, and all interest and
principal payments and withdrawals shall indicate the City of Huntington Beach as the payee. All securities
will be held with a qualified financial institution, contracted by the city as a third party custodian with a
separate custodial agreement(does not apply to insured Certificates of Deposit, money market funds,or the
Local Agency Investment Fund). All agreements and statements will be subject to review annually by
external auditors in conjunction with their audit. All securities shall be acquired by the safekeeping
institution on a "Delivery-Vs-Payment" (DVP) basis. For Repurchase Agreements, the purchase may be
delivered by book entry, physical delivery or by third-party, custodial agreement consistent with the
Government Code. The transfer of securities to the counterparty bank's customer book entry account may
be used for book entry delivery. The City Treasurer or designee shall require a Broker Trade confinnation
for all trades.
14.0 Diversification:
The city's investment portfolio will be diversified to avoid incurring unreasonable and avoidable risks
associated with concentrating investments in specific security types, maturity segment, or in individual
financial institutions. With the exception of U.S. Treasury securities, Goverment Sponsored Agencies and
authorized pools no more than 50%of the investment portfolio will be invested in a single security type or
with a single financial institution. In addition, no more than 10% of the investment portfolio shall be in
securities of any one issuer except for U.S. Treasuries and US Government Agency issues. Investments
may be further limited by specific language relating to each type as state in Section 10.0 of the Policy.
A. Credit risk, defined as the risk of loss due to failure of the insurer of a security, shall be
mitigated by investing in those securities with an "A" or above rating and approved in the
investment policy and by diversifying the investment portfolio so that the failure of any one issuer
would not unduly harm the city's cash flow.
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B. Market risk,defined as the risk of market value fluctuations due to overall changes in the general
level of interest rates, shall be mitigated by structuring the portfolio so that securities mature at the
same time that major cash outflows occur,thus eliminating the need to sell securities prior to their
maturity. It is explicitly recognized herein, however, that in a diversified portfolio, occasional
measured losses are inevitable and must be considered within the context of overall investment
return. The eity's investment portfolio will remain sufficiently liquid to enable the city to meet all
operating requirements which might be reasonably anticipated.
15.0 Maximum Maturities:
To the extent possible,the City of Huntington Beach will attempt to match its investments with anticipated
cash flow requirements. Unless matched to a specific cash flow,the city will not directly invest in securities
maturing more than five (5) years from the date of purchase, unless, the legislative body has granted
express authority to make that investment either specifically, or as a part of an investment program
approved by the City Council. The City of Huntington Beach shall not permit more than 50% of its
investment portfolio to be invested in securities with maturities over four years.
16.0 Internal Control:
The City Treasurer shall establish a system of internal controls designed to prevent loss of public funds due
to fraud, employee error, misrepresentation by third parties, or unanticipated market changes. No
investment personnel may engage in an investment transaction except as provided for under the terms of
this policy and the procedure established by the City Treasurer.
The external auditors shall annually review the investments with respect to the investment policy. This
review will provide internal control by assuring compliance with policies and procedures for the
investments that are selected for testing. Additionally, account reconciliation and verification of general
ledger balances relating to the purchasing or maturing of investments and allocation of interest on
investments to fund balances shall be performed by the Finance Department and approved by the City
Treasurer. To provide further protection of city funds, written procedures prohibit the wiring of any city
funds without the authorization of at least two of the four designated city officials:
I. City Treasurer
2. Deputy City Treasurer
3. Director of Finance
4. Budget Manager
17.0 Performance Standards:
This investment policy shall be reviewed at least annually by the Investment Advisory Board and the City
Council to ensure its consistency with the overall objectives of preservation of principal, liquidity, and
return, and its relevance to current law and financial and economic trends. All financial assets of all other
funds shall be administered in accordance with the provisions of this policy.
The moneys entrusted to the City Treasurer will be a passively managed portfolio. However, the City
Treasurer will make best efforts to observe, review, and react to changing conditions that affect the
portfolio.
17.1 Market Yield(Benchmark):
The investment portfolio shall be managed to attain a market-average rate of return throughout budgetary
and economic cycles, taking into account the city's investment risk constraints and cash flow. Investment
Zn
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HB -855- Item 13. - 345
return becomes a consideration only after the basic requirements of investment safety and liquidity have
been met. Because the investment portfolio is designed to operate on primarily a 'hold-to-maturity"
premise, and because of the safety, liquidity, and yield priorities, the performance 'benchmark that will be
used by the Treasurer to determine whether market yields are being achieved shall be the average of the
monthly LAIF rate and the 12-month rolling average 2-Year Constant Maturity Treasury (CMT) rate.
However, since return on investment is the least important objective of the Investment Portfolio, the
benchmark will be used only as a reference tool.The reporting of a benchmark does not imply that the City
Treasurer will add additional risk to the Investment Portfolio in order to attain or exceed the benchmark.
While the city will not make investments for the purpose of trading or speculation as the dominant
criterion,the City Treasurer shall seek to enhance total portfolio return by means of ongoing portfolio and
cash management. The prohibition of highly speculative investments precludes pursuit of gain or profit
through unusual risk and precludes investments primarily directed at gains or profits from conjectural
fluctuations in market prices. The City Treasurer will not directly pursue any investments that are leveraged
or deemed derivative in nature. However, as long as the original investments can be justified by their
ordinary earning power, trading in response to changes in market value can be used as part of ongoing
portfolio management.
18.0 Reporting:
The City Treasurer shall submit a quarterly report to the City Council, City Administrator, and Director of
Finance and the Investment Advisory Board within 30 days following the end of the quarter. This report
will include the following elements pursuant to State law and Government Accounting Standard Board
(GASB)440:
18.1 Type of investment
18.2. Institution/Issuer
18.3 Purchase Date
18.4 Date of maturity
18.5 Amount of deposit or cost of the investment
18.6 Face value of the investment
18.7 Current market value of securities and source of valuation
18.8 Rate of interest
18.9 Interest earnings
18.10 Statement relating the report to its compliance with the Statement of Investment Policy or the
manner in which the portfolio is not in compliance
18.11 Statement on availability of funds to meet the next six months obligations
18.12 Monthly and Year to date City Treasurer Budget Amounts for Interest Income
18.13 Percentage of Portfolio by Investment Type
18.14 Days to Maturity for all Investments
18.15 Comparative report on Monthly Investment Balances& Interest Yields
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18.16 Monthly transactions
This quarterly report shall be placed on the City Council Agenda for Council and public review. In
addition, a commentary on capital markets and economic conditions may be included with the
report. The City Treasurer shall submit a monthly report listing the financial transactions. The
monthly report may also contain additional information.
19.0 Investment Policy Adoption:
By virtue of a resolution of the City Council of the City of Huntington Beach, the Council shall
acknowledge the receipt and filing of this annual statement of investment policy for the respective fiscal
year.
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GLOSSARY
AGENCIES: Federal agency securities.
ASKED:The price at which securities are offered. (The price at which a firm will sell a security to an investor.)
BANKERS' ACCEPTANCE (BA): A draft or bill or exchange accepted by a bank or trust company. The
accepting institution guarantees payment of the bill, as well as the issuer. The drafts are drawn on a bank by an
exporter or importer to obtain funds to pay for specific merchandise. An acceptance is a high grade negotiable
instrument.
BASIS POINT:One one-hundredth of percent(i.e. 0.01%)
BENCHMARK: A comparative base for measuring the performance or risk tolerance of the investment portfolio. A
benchmark should represent a close correlation to the level of risk and the average duration of the portfolio's
investments.
BID: The price offered by a buyer of securities. (When you are selling securities,you ask for a bid.)
BROKER: A broker brings buyers and sellers together for a commission. He does not take a position.
CERTIFICATE OF DEPOSIT (CD): A time deposit with a specific maturity evidenced by a certificate. Large-
denomination CD's are typically negotiable.
COLLATERAL: Securities, evidence of deposit or other property. which a borrower pledges to secure repayment
of a loan.Also refers to securities pledged by a bank to secure deposits of public monies.
COMMERCIAL PAPER: Short term unsecured promissory note issued by a corporation (including limited
liability companies) to raise working capital. These negotiable instruments are purchased at a discount to par value
or at par value with interest bearing. Commercial paper is issued by corporations such as General Motors
Acceptance Corporation, IBM,Bank of America,etc.
COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR): The official annual report for the City. It
includes combined statements for each individual fund and account group prepared in conformity with GAAP. It
also includes supporting schedules necessary to demonstrate compliance with finance-related legal and contractual
provisions,extensive introductory material and a detailed Statistical section.
COUPON: a). The annual rate of interest that a bond's issuer promises to pay the bondholder on the bond's face
value. b)A certificate attached to a bond evidencing interest due on a payment date.
DEALER: A dealer. as opposed to a broker, acts as a principal in all transactions, buying and selling for his own
account.
DEBENTURE: A bond secured only by the general credit of the issuer.
DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities: delivery versus payment and
delivery versus receipt. Delivery versus payment is delivery of securities with an exchange of money for the
securities. Delivery versus receipt is delivery of securities with an exchange of a signed receipt for the securities.
DERIVATIVES: (1) Financial instruments whose return profile is linked to, or derived from,the movement of one
or more underlying index or security, and may include a leveraging factor, or (2) financial contracts based upon
notional amounts whose value is derived from an underlying index or security(interest rates, foreign exchange rates,
equities or commodities).
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DISCOUNT: The difference between the cost price of a security and its maturity when quoted at lower than face
value.A security selling below original offering price shortly after sale also is considered to be at a discount.
DISCOUNT SECURITIES: Non-interest bearing money market instruments that are issued at a discount and
redeemed at maturity for full face value(e.g. US Treasury Bills).
DIVERSIFICATION: Dividing investment funds among a variety of securities offering independent returns.
FEDERAL CREDIT AGENCIES: Agencies of the Federal govermnent set up to supply credit to various classes
of institutions(e.g. S&L's, Small business firms,students,farmers, farm cooperatives, and exporters).
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A Federal agency that insures bank deposits,
currently up to$250..000 per deposit.
FEDERAL FUNDS RATE: The rate of interest at which Fed funds are traded. This rate is currently pegged by the
Federal Reserve though open-market operations.
FEDERAL HOME LOAN BANKS (FHLB): The institutions that regulate and lend to savings and loan
associations. The Federal Home Loan Banks play a role analogous to that played by the Federal Reserve Banks vis-
a-vis member commercial banks.
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC): Created to promote the development of
a nationwide secondary market in mortgages. It does this by purchasing residential mortgages from financial
institutions insured by an agency of the federal government and selling its interest in them through mortgage backed
securities. The interest and principal payments fi-om the mortgages pass through to the investors either monthly,
semiannually or annually.
FEDERAL INTERMEDIATE CREDIT BANK (FICB): Loans to lending institutions used to finance the short
term and intermediate needs of farmers,such as seasonal production.
FEDERAL LAND BANK (FLB): Long term mortgage credit provided to farmers by Federal Land Banks. These
bonds are issued at irregular times for various maturities ranging from a few months to ten years.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA): FNMA. like GNMA was chartered under the
Federal National Mortgage Association Act in 1938. FNMA is a Federal corporation working under the auspices of
the Department of HousincT and Urban Development (HUD). It is the largest single provider of residential mortgage
funds in the United States. Fannie Mae,as the corporation is called, is a private stockholder-owned corporation. The
corporation's purchases include a variety of adjustable mortgages and second loans, in addition to fixed-rate
mortgages. FNMA's securities are highly liquid and are widely accepted. FNMA assumes and guarantees that all
security holders will receive timely payment of principal and interest.
FEDERAL OPEN MARKET COMMITTEE(FOMC): Consists of seven members of the Federal Reserve Board
and five of the twelve Federal Reserve Bank Presidents. The President of the New York Federal Reserve Bank is a
permanent member, while the other presidents serve on a rotating basis. The committee periodically meets to set
Federal Reserve guidelines regarding purchases and sales of Government Securities in the open market as a means
of influencing the volume of bank credit and money.
FEDERAL RESERVE SYSTEM: The central bank of the United States created by congress and consisting of a
seven-member Board of Governors in Washington, D.C.; 12 regional banks and about 5700 commercial banks are
member of the system.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA OR GINNIE MAE): Securities
influencing the volume of bank credit guaranteed by GNMA and issued by mortgage bankers, commercial banks,
savings and loan associations and other institutions. Security holder is protected by full faith and credit of the US
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HB -859- Item 13. - 349
Government. Ginnie Mae securities are backed by the FHA, VA or FMHM mortgages. The term "pass-through" is
often used to describe Ginnie Maes.
LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of
value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and
reasonable size can be done at those quotes.
LOCAL GOVERNMENT INVESTMENT POOL(LGIP): The aggregate of all funds from political subdivisions
that are placed in the custody of the State Treasurer for investment and reinvestment.
MARKET VALUE: The price at which a security is trading and could presumable be purchased or sold.
MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between the parties
to repurchase-reverse agreements that establish each party's rights in the transactions.A master agreement will often
specify, among other things,the right of the buyer-lender to liquidate the underlying securities in the event of default
by the seller-borrower.
MATURITY: The date upon which the principal or stated value of an investment becomes due and payable.
MONEY MARKET: The market in which short-term debt instruments (bills, commercial paper, bankers'
acceptances,etc.)are issued and traded.
NEGOTIABLE CERTIFICATES OF DEPOSIT: Unsecured obligations of the financial institution, bank or
savings and loan, bought at par value with the promise to pay face value plus accrued interest at maturity. They are
high-grade negotiable instruments, paying a higher interest rate than regular certificates of deposit.
OFFER: The price asked by a seller of securities. (When you are buying securities, you ask for an offer.) See
"Asked"and"Bid".
OPEN MARKET OPERATIONS: Purchases and sales of government and certain other securities in the open
market by the New York Federal Reserve Bank as directed by the FOMC in order to influence the volume of money
and credit in the economy. Purchases inject reserves into the bank system and stimulate growth of money and credit: `
Sales have the opposite effect. Open market operations are the Federal Reserve's most important and most flexible
monetary policy tool.
PORTFOLIO:Collection of securities held by an investor.
PRIMARY DEALER: A group of government securities dealers who submit daily reports of market activity and
positions and monthly financial statements to the Federal Reserve Bank of New York and are subject to its informal
oversight. Primary dealers include Securities and Exchange Commission (SEC)-registered securities broker/dealers,
banks and a few unregulated firms.
PRUDENT PERSON RULE: An investment standard. In some states, the law requires that a fiduciary,such as a
trustee,.may invest money only in a list of securities selected by the custody state—the so-called"legal list". In other
states, the trustee may invest in a security if it is one that would be bought by a prudent person of discretion and
intelligence who is seeking a reasonable income and preservation of capital.
QUALIFIED PUBLIC DEPOSITORIES: A financial institution which does not claim exemption from the
payment of any sales or compensating use or ad vcdorem taxes under the laws of this state,which has segregated for
the benefit of the commission eligible collateral having a value of not less than its maximum liability and which has
been approved by the Public Deposit Protection Commission to hold public deposits.
RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market price.
This may be the amortized yield to maturity;on a bond,the current income return.
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Item 13. - 350 Ins -860-
REPURCHASE AGREEMENT (RP OR REPO): A holder of securities sells these securities to an investor with
an agreement to repurchase them at a fixed date. The security "buyer" in effect lends the "seller" money for the
period of the agreement, and the terms of the agreement are structured to compensate him for this. Dealers use RP
extensively to finance their position. Exception: When the Fed is said to be doing RP. it is lending money that is,
increasing bank reserves.
SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities and valuables of all types
and descriptions are held in the bank's vaults for protection.
STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises (FHLB, FNMA, FHLMC, etc.) and
Corporations, which have imbedded option (e.,-. call features, step-up coupons, floating rate coupons, derivative-
based returns) into their debt structure. Their market performance is impacted by the fluctuation of interest rates,the
volatility of the imbedded options and shifts in the shape of the yield curve.
SECONDARY MARKET: A market made for the purchase and sale of outstanding issues following the initial
distribution.
SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to protect investors in securities
transactions by administering securities legislation.
SEC RULE 15C3-I: See"Uniform Net Capital Rule".
SMALL BUSINESS ADMINISTRATION (SBA): The portion of these securities which are guaranteed by
Federal government to provide financial assistance through direct loans and loan guarantees to small businesses.
Cash flows from these instruments may not be in equal installments because of prepayments.
STUDENT LOAN ASSOCIATION NOTES (SALLIE MAE): A US Corporation and instrumentality of the US
Government. Throu-h its borrowings, funds are targeted for loans to students in higher education institutions.
SLMA' s securities are highly liquid and are widely accepted.
TENNESSEE VALLEY AUTHORITIES (TVA): A US Corporation created in the 1930's to electrify the
Tennessee Valley area; currently a major utility headquartered in Knoxville,Tennessee. TVA's securities are highly
liquid and are widely accepted.
TREASURY BILLS: A non-interest bearing discount security issued by the US Treasury to finance the national
debt. Most bills are issued to mature in three months,six months, or one year.
TREASURY BOND: Long-term US Treasury securities having initial maturities of more than 10 years.
TREASURY NOTES: Intermediate-term coupon bearing US Treasury having initial maturities of from one year to
ten Vears.
UNIFORM NET CAPITAL RULE: Securities and Exchange Commission requirement that member firms as well
as nonmember broker/dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to l;
also called net capital rule and net capital ratio. Indebtedness covers all money owed to a firm, including margin
loans and commitments to purchase securities, one reason new public issues are spread among members of
underwriting syndicates. Liquid capital includes cash and assets easily converted into cash.
YIELD: The rate of annual income return on an investment,expressed as a percentage.(a)Income Yield is obtained
by dividing the current dollar income by the current market price for the security. (b)Net Yield or Yield to Maturity
is the current income yield minus any premium above par or plus any discount from par in purchase price, with the
adjustment spread over the period from the date of purchase to the date of maturity of the bond.
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HB -861- Item 13. - 351
APPENDIX D
SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL DOCUMENTS
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Item 13. - 352 HB -862-
APPENDIX E
PROPOSED FORM OF BOND COUNSEL OPINION
Upon delivery of the Series 2014A Bonds, Orrick, Herrington & Sutcliffe LLP, Los Angeles,
California, Bond Counsel to the Authority, proposes to render its final approving opinion with respect to
the Series 2014A Bonds in suhstantially the following fwrrn:
Huntington Beach Public Financing Authority
Huntington Beach, California
Huntington Beach Public Financing Authority
(Orange County, California)
Lease Revenue Bonds, 2014 Series A
(Senior Center Project)
(Final Opinion)
Ladies and Gentlemen:
We have acted as bond counsel to the Huntington Beach Public Financing Authority (the
"Authority") in connection with the issuance of its Huntington Beach Public Financing Authority(Orange
County, California) Lease Revenue Bonds, 2014 Series A (Senior Center Project) (the "Series 2014A
Bonds'), in the aggregate principal amount of $ . Capitalized terms not otherwise defined
herein shall have the meanings ascribed thereto in the Indenture.
In such connection,we have reviewed the Indenture, dated as of September 1,2011 (the"Original
Indenture"), as amended and supplemented by that First Supplemental Indenture, dated as of 1,
2014 (the Original Indenture as amended, the "Indenture"), each by and among the Authority,the City of
Huntington Beach (the "City") and The Bank of New York Mellon Trust Company, N.A., as trustee (the
"Trustee"), the Site Lease, dated as of September 1, 2011 (the "Original Site Lease"), as amended and
supplemented by that First Amendment to Site Lease, dated as of 1, 2014 (the Original Site Lease
as amended, the "Site Lease"), each by and between the City and the Authority, the Lease Agreement,
dated as of September 1, 2011 (the "Original Lease Agreement''), as amended and supplemented by that
First Amendment to Lease Agreement, dated as of 1, 2014 (the Original Lease Agreement as
amended, the "Lease Agreement'), each by and between the City and the Authority, the Tax Certificate,
dated the date hereof(the "Tax Certificate"), opinions of counsel to the Authority, the City. the Trustee
and others, certificates of the Authority, the City, the Trustee and others and such other documents,
opinions and matters to the extent we deemed necessary to render the opinions set forth herein.
The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and
court decisions and cover certain matters not directly addressed by such authorities. Such opinions may
be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken
to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or
any other matters come to our attention after the date hereof. Accordingly, this opinion speaks only as of
its date and is not intended to, and may not, be relied upon in connection with any such actions, events or
matters. Our engagement with respect to the Series 2014A Bonds has concluded with their issuance, and
we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and
signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery
thereof by, and validity against, any parties other than the Authority and the City. We have assumed,
Without undertaking to verify,the accuracy of the factual matters represented, warranted or certified in the
F-1
HB -963- Item 13. - 353
documents, and of the legal conclusions contained in the opinions, referred to in the second paragraph
hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the
Indenture, the Site Lease, the Lease Agreement and the Tax Certificate, including (without limitation)
covenants and agreements compliance with which is necessary to assure that future actions, omissions or
events will not cause interest on the Series 2014A Bonds to be included in gross income for federal
income tax purposes.
We call attention to the fact that the rights and obligations under the Series 2014A Bonds, the
Indenture, the Site Lease, the Lease Agreement and the Tax Certificate and their enforceability may be
suliject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance. moratorium and
other laws relating to or affecting creditors" rights, to the application of equitable principles, to the
exercise of judicial discretion in appropriate cases, and to the limitations on legal remedies against joint
powers authorities and cities in the State of California. We express no opinion with respect to any
indemnification, contribution, penalty, choice of law, choice of forum, choice of venue, waiver or
severability provisions contained in the foregoing documents nor do we express any opinion with respect
to the state or quality of title to or interest in any of the real or personal property described in the Site
Lease or the Lease Agreement or the accuracy or sufficiency of the description contained therein of, or
the remedies available to enforce liens on, any such property. Finally, we undertake no responsibility for
the accuracy, completeness or fairness of the Official Statement or other offering material relating to the
Series 2014A Bonds and express no opinion with respect thereto.
Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the
following opinions:
1. The Series 2014A Bonds constitute the valid and binding special obligations of the
Authority, payable solely from the Lease Revenues and the other assets pledged therefor under the
Indenture.
2. The Indenture has been duly executed and delivered by, and constitutes a valid and
binding obligation of, the Authority.
3. The Indenture, the Site Lease and the Lease Agreement have been duly executed and
delivered by, and constitute valid and binding obligations of,the City.
4. Interest on the Series 2014A Bonds is excluded from gross income for federal income tax
purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California
personal income taxes. Interest on the Series 2014A Bonds is not a specific preference item for purposes
of the federal individual or corporate alternative minimum taxes, although we observe that such interest is
included in adjusted current earnings when calculating corporate alternative minimum taxable income.
We express no opinion regarding any other tax consequences related to the ownership or disposition of,or
the accrual or receipt of interest on,the Series 2014A Bonds.
Faithfully yours.
ORRICK, HERRINGTON & SUTCLIFFE LLP
per
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Item 13. - 354 xB -864-
APPENDIX F
FORM OF CONTINUING DISCLOSURE CERTIFICATE
City of Huntington Beach
relating to
Huntington Beach Public Financing Authority
(Orange County, California)
Lease Revenue Bonds. 2014 Series A
(Senior Center Project)
This Continuing Disclosure Certificate (the"Disclosure Certificate") is executed and delivered by
the City of Huntington Beach (the "City") in connection with the issuance of the above-named bonds (the
"Bonds"). The Bonds are being issued by the Huntington Beach Public Financing Authority (the
"Authority") pursuant to Article 4, Chapter 5, Division 7, Title 1 (commencing with section 6584) of the
California Government Code, an indenture, dated as of September 1, 2011, by and among the City, the
Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee"). as
amended and supplemented by the First Supplemental Indenture, dated as of , 2014, by and among
the City, the Authority and the Trustee (collectively, the "Indenture") and a resolution (the "Resolution")
adopted by the City Council of the City on [August 18], 2014. The City covenants and agrees as follows:
SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed
and delivered by the City for the benefit of the Holders and Beneficial Owners of the Bonds and in order
to assist the Participating Underwriters (Series 2014A Bonds) in complying with Securities and Exchange
Commission ("S.E.C.") Rule 15c2-12(b)(5).
SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to
any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the
following capitalized terms shall have the following meanings:
"Annual Report" shall mean any Annual Report provided by the City pursuant to, and as
described in. Sections 3 and 4 of this Disclosure Certificate.
"Beneficial Owner" shall mean any person which has or shares the power, directly or indirectly,
to make investment decisions concerning ownership of any Bonds (including persons holding Bonds
through nominees, depositories or other intermediaries).
"Dissemination Agent" shall mean The Bank of New York Mellon Trust Company, N.A., or any
successor Dissemination Agent designated in writing by the City and which has filed with the City a
written acceptance of such designation.
"Holder" shall mean the person in whose name any Bond shall be registered.
"Listed Events" shall mean any of the events listed in Section 5(a) or (b) of this Disclosure
Certificate.
"MSRB" shall mean the Municipal Securities Rulemaking Board or any other entity designated
or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Until
otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB
are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB,
currently located at http://emma.msrb.org.
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I-TB -865- Item 13. - 355
"Participating Undei-vvriters (Series 2014A Bonds)" shall mean the original underwriters of the
Bonds required to comply with the Rule in connection with offering of the Bonds.
"Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as the same may be amended from time to time.
SECTION 3. Provision of Annual Reports.
(a) The City shall, or shall cause the Dissemination Agent to, not later than nine months after
the end of the City's fiscal year(which shall be July 1 of each year, so long as the City's fiscal year ends
on September 30), commencing with the report for the 2013-14 fiscal year (which is due not later than
July 1, 2015). provide to the MSRB an Annual Report which is consistent with the requirements of
Section 4 of this Disclosure Certificate. The Annual Report may cross-reference other information as
provided in Section 4 of this Disclosure Certificate; provided, that the audited financial statements of the
City may be submitted separately from the balance of the Annual Report and later than the date required
above for the filing of the Annual Report if they are not available by that date. ,If the City's fiscal year
changes, it shall give notice of such change in a filing with the MSRB. The Annual Report shall be
submitted on a standard form in use by industry participants or other appropriate form and shall identify
the Bonds by name and CUSIP number.
(b) Not later than 15 business days prior to said date, the City shall provide the Annual
Report to the Dissemination Agent (if other than the City). if the City is unable to provide to the MSRB
an Annual Report by the date required in subsection (a), the City shall, in a timely manner, send or cause
to be sent to the MSRB a notice in substantially the form attached as Exhibit A.
(c) The Dissemination Agent shall (if the Dissemination Agent is other than the City) file a
report with the City certifying that the Annual Report has been provided pursuant to this Disclosure
Certificate, stating the date it was provided to the MSRB.
SECTION 4. Content of Annual Reports. The City's Annual Report shall contain or include by
reference the following:
(a) Audited financial statements of the City for the preceding fiscal year, prepared in
accordance with Generally accepted accounting principles as promulgated to apply to Governmental
entities from time to time by the Governmental Accounting Standards Board (GASB)and the laws of the
State of California and including all statements and information prescribed for inclusion therein by the
Controller of the State of California. if the City's audited financial statements are not available by the
time the Annual Report is required to be provided to the MSRB pursuant to Section 3(a), the Annual
Report shall contain unaudited financial statements in a format similar to the financial statements
contained in the final Official Statement, and the audited financial statements shall be provided to the
MSRB in the same manner as the Annual Report when they become available.
To the extent not included in the audited financial statement of the City, the Annual Report shall
also include the following:
(i) Summary of Long and Intennediate Term Obligations;
(i1) Tax Revenues by Source; and
(iii) Gross Assessed Value of All Taxable Property;
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Item 13. - 356 xB -866-
(iv) General Fund Property Tax Levies and Collections(Secured Taxes);
(v) General Fund Balance Sheet;
(vi) General Fund Statement of Revenues, Expenditures and Changes in Fund Balance;
(vii) Principal Secured Property Taxpayers; and
(viii) Investment Portfolio.
An update of the financial and operating data contained in the Official Statement under the
caption "CITY FINANCIAL INFORMATION —Current Investments."
An update of the financial and operating data contained in the Official Statement under the
captions "OTHER FINANCIAL INFORMATION —Risk Management," "—Employee Retirement Plan—
CalPERS," "—Retirement Plan—Supplemental,""—Post-Employment Medical Insurance" and "— Public
Agency Retirement Systems(PARS)Notes Payable."
Any or all of the items listed above may be set forth in one or a set of documents or may be
included by specific reference to other documents, including official statements of debt issues of the City
or related public entities, which have been made available to the public on the MSRB's website. The City
shall clearly identify each such other document so included by reference.
SECTION 5. Reporting of Significant Events.
(a) The City shall give, or cause to be given, notice of the Occurrence of any of the following
events with respect to the Bonds in a timely manner not later than ten business days after the occurrence
of the event:
1. Principal and interest payment delinquencies;
2. Unscheduled draws on debt service reserves reflecting financial difficulties;
3. Unscheduled draws on credit enhancements reflecting financial difficulties;
4. Substitution of credit or liquidity providers, or their failure to perform;
5. Adverse tax opinions or issuance by the Internal Revenue Service of proposed or final
determination of taxability or of a Notice of Proposed Issue (IRS Form 5701 TEB);
6. Tender offers;
7. Defeasances;
8. Rating changes; or
9. Bankruptcy, insolvency, receivership or similar event of the obligated person.
Note: for the purposes of the event identified in subparagraph (9). the event is considered to occur
when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an
obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state
or federal law in which a court or governmental authority has assumed jurisdiction over substantially all
F-3
14B -867- Item 13. - 357
of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the
existing governmental body and officials or officers in possession but subject to the supervision and
orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization,
arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over
substantially all of the assets or business of the obligated person.
(b) The City shall give, or cause to be given, notice of the occurrence of any of the following
events with respect to the Bonds, if material, in a timely manner not later than ten business days after the
occurrence of the event:
1. Unless described in paragraph 5(a)(5), other material notices or determinations by the
Internal Revenue Service with respect to the tax status of the Bonds or other material events affecting the
tax status of the Bonds;
2. Modifications to rights of Bond holders;
3. Optional, unscheduled or contingent Bond calls;
4. Release, substitution, or sale of property securing repayment of the Bonds;
5. Non-payment related defaults;
6. The consummation of a merger, consolidation. or acquisition involving an obligated
person or the sale of all or substantially all of the assets of the obligated person. other than in the ordinary
course of business. the entry into a definitive agreement to undertake such an action or the termination of
a definitive agreement relating to any such actions, other than pursuant to its terms; or
7. Appointment of a successor or additional trustee or the change of name of a trustee.
(c) Whenever the City obtains knowledge of the occurrence of a Listed Event described in
Section 5(b), the City shall determine if such event would be material under applicable federal securities
laws.
(d) if the City learns of the occurrence of a Listed Event described in Section 5(a), or
determines that knowledge of a Listed Event described in Section 5(b)would be material under applicable
federal securities laws, the City shall within ten business days of occurrence file a notice of such
occurrence with the MSRB. Notwithstanding the foregoing, notice of the Listed Event described in
subsections (a)(7) or (b)(3) need not be given under this subsection any earlier than the notice (if any) of
the underlying event is given to Holders of affected Bonds pursuant to the Indenture.
SECTION 6. Format for Filings with MSRB. Any report or filing with the MSRB pursuant to
this Disclosure Certificate must be submitted in electronic format, accompanied by such identifying
information as is prescribed by the MSRB.
SECTION 7. Termination of Reporting Oblif4ation. The City's obligations under this Disclosure
Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the
Bonds. If such termination occurs prior to the final maturity of the Bonds, the City shall give notice of
such termination in a filing with the MSRB.
SECTION 8. Dissemination Agent. The City may, from time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may
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Item 13. - 358 HB -868-
discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent.
The Dissemination Agent shall not be responsible in any manner for the content of any notice or report
prepared by the City pursuant to this Disclosure Certificate. The initial Dissemination Agent shall be The
Bank of New York Mellon Trust Company,N.A.
SECTION 9. Amendment, Waiver. Notwithstanding any other provision of this Disclosure
Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure
Certificate may be waived, provided that the following conditions are satisfied:
(a) If the amendment or waiver relates to the provisions of Sections 3(a), 4, or 5(a) or(b), it
may only be made in connection with a change in circumstances that arises from a change in legal
requirements, change in law, or change in the identity, nature or status of an obligated person with respect
to the Bonds, or the type of business conducted;
(b) The undertaking, as amended or taking into account such waiver, would, in the opinion of
nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the
original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as
well as any change in circumstances; and
(e) The amendment or waiver does not, in the opinion of nationally recognized bond counsel,
materially impair the interests of the Holders or Beneficial Owners of the Bonds.
in the event of any amendment or waiver of a provision of this Disclosure Certificate, the City
shall describe such amendment in the nest Annual. Report, and shall include, as applicable, a narrative
explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a
change of accounting" principles, on the presentation) of financial information or operating data being
presented by the City. In addition, if the amendment relates to the accounting principles to be followed in
preparing financial statements, (i) notice of such change shall be given in a filing with the MSRB, and (ii)
the Annual Report for the year in which the change is made should present a comparison (in narrative
form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis
of the new accounting principles and those prepared on the basis of the former accounting principles.
SECTION 10. Additional information. Nothing in this Disclosure Certificate shall be deemed to
prevent the City from disseminating any other information, using the means of dissemination set forth in
this Disclosure Certificate or any other means of communication, or including any other information in
any Annual Report or notice required to be filed pursuant to this Disclosure Certificate, in addition to that
which is required by this Disclosure Certificate. If the City chooses to include any information in any
Annual Report or notice in addition to that which is specifically required by this Disclosure Certificate,
the City shall have no obligation under this Disclosure Certificate to update such information or include it
in any future Annual Report or notice of occurrence of a Listed Event or any other event required to be
reported.
SECTION 11. Default. In the event of a failure of the City to comply with any provision of this
Disclosure Certificate, any Holder or Beneficial Owner of the Bonds may take such actions as may be
necessary and appropriate, including seeking mandate or specific performance by court order, to cause the
City to comply with its obligations under this Disclosure Certificate; provided, that any such action may
be instituted only in the Superior Court of the State of California in and for the County of Orange or in
U.S. District Court for the Central District of California in or nearest to the County. The sole remedy
under this Disclosure Certificate in the event of any failure of the City to comply with this Disclosure
Certificate shall be an action to compel performance.
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HB -969- Item 13. - 359
SECTION 12. Duties, Immunities and Liabilities of Trustee and Dissemination Agent. Article
VII of the Indenture is hereby made applicable to this Disclosure Certificate as if this Disclosure
Certificate were (solely for this purpose) contained in the Indenture. The Dissemination Agent shall be
entitled to the protections and limitations from liability afforded to the Trustee thereunder. The
Dissemination Agent(if other than the Trustee or the Trustee in its capacity as Dissemination Agent) shall
have only such duties as are specifically set forth in this Disclosure Certificate, and the City agrees to
indemnify and save the Dissemination Agent, the Trustee, their officers, directors, employees and agents,
harmless against any loss, expense and liabilities which it may incur arising out of the disclosure of
information pursuant to this Disclosure Certificate or arising out of or in the exercise or performance of
its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending
against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or
willful misconduct.
The Dissemination Agent shall be paid compensation by the City for its services provided
hereunder in accordance with its schedule of fees as agreed to between the Dissemination Agent and the
City from time to time and all expenses, legal fees and advances made or incurred by the Dissemination
Agent in the performance of its duties hereunder. The Dissemination Agent may rely and shall be
protected in acting or refraining from acting upon and directions from the City or an opinion of nationally
recognized bond counsel. Neither the Trustee nor the Dissemination Agent shall have any liability to any
party for any monetary damages or other financial liability of any kind whatsoever related to or arising
from any breach of this Disclosure Certificate. No person shall have any right to commence any action
against the Trustee or Dissemination Agent seeking any remedy other than to compel specific
performance of this Disclosure Certificate. Any company succeeding to all or substantially all of the
Dissemination Agent's corporate trust business shall be the successor to the Dissemination Agent
hereunder without the execution or filing of any paper or any further act. The obligations of the City
under this Section shall survive resignation or removal of the Dissemination Agent and payment of the
Bonds.
SECTION 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the
City, the Dissemination Agent, the Participating Underwriters (Series 2014A Bonds) and Holders and
Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.
Date: , 2014 CITY OF HUNTINGTON BEACH
By
Director of Finance
AGREED AND ACKNOWLEDGED:
THE BANK OF NEW YORK MELLON
TRUST COMPANY,N.A., as Dissemination Agent
By
Authorized Officer
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Item 13. - 360 I-IB -870-
EXHIBIT A
FORM OF NOTICE TO THE MUNICIPAL SECURITIES RULEMAKING BOARD
OF FAILURE TO FILE ANNUAL REPORT
Name of Obligated Person: City of Huntington Beach
Name of Issuer: Huntington Beach Public Financing Authority
Name of Bond Issue: Huntington Beach Public Financing Authority
(Orange County, California)
Lease Revenue Bonds, 2014 Series A
(Senior Center Project)
Date of Issuance: . 2014
NOTICE IS HEREBY GIVEN that the City of Huntington Beach (the "City") has not provided
an Annual Report with respect to the above-named Bonds as required by Section 4 of the City's
Continuing Disclosure Certificate, dated the Date of Issuance. [The City anticipates that the Annual
Report will be filed by ]
Dated:
CITY OF HUNTINGTON BEACH
By
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HB -971- Item 13. - 361
APPENDIX G
BOOK-ENTRY ONLY SYSTEM
The description that folloivs of the procedures and recordkeeping with respect to beneficial
ownership interests in the Series 2014A Bonds, ptrwnent of principal of and interest on the Series 2014A
Bonds to Participants or Beneficial avners, confir°rnation and transfer of beneficial ownership interests
in the Series 201.1A Bonds, and other bond-related transactions by and between DTC, Participants and
Beneficial Owners, is based on information furnished b,1; DTC which the City and the Authority each
believes to be reliable, but the City and the Authority take no responsibilily for the completeness or
accarracv thereof.
The Depository Trust Company ("DTC"),New York,NY, will act as securities depository for the
Series 2014A Bonds (the "Securities"). The Securities will be issued as fully-registered securities
registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be
requested by an authorized representative of DTC. One fully-registered Security certificate will be issued
for the Securities, in the aggregate principal amount of such issue, and will be deposited with DTC.
DTC, the world's largest securities depository, is a limited-purpose trust company organized
under the New York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code, and a"clearing agency" registered pursuant to the provisions
of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over
3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money
market instruments (from over 100 countries)that DTC's participants ("Direct Participants") deposit with
DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other
securities transactions in deposited securities, through electronic computerized book-entry transfers and
pledges between Direct Participants' accounts. This eliminates the need for physical movement of
securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers,
banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned
subsidiary of The Depository Trust&Clearing Corporation ("DTCC"). DTCC is the holding company for
DTC, National Securities Clearing Corporation and Fixed income Clearing Corporation, all of which are
registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC
system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks,
trust companies, and clearing corporations that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor's
rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange
Commission. More information about DTC can be found at www.dtcc.com. The information on such
website is not incorporated herein by such reference or otherwise.
Purchases of Securities under the DTC system must be made by or through Direct Participants,
which will receive a credit for the Securities on DTC's records. The ownership interest of each actual
purchaser of each Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation from DTC of their
purchase. Beneficial Owners are. however, expected to receive written confirmations providing details of
the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the
Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting
on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their
ownership interests in Securities, except in the event that use of the book-entry system for the Securities is
discontinued.
OHSUSA:758222928.3 G-1
Item 13. - 362 HB -872-
To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are
re<oistered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be
requested by an authorized representative of DTC. The deposit of Securities with DTC. and their
registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC's records
reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which
may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible
for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct
Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take
certain steps to augment the transmission to them of notices of significant events with respect to the
Securities, such as redemptions, tenders, defaults. and proposed amendments to the Security documents.
For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the
Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the
alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request
that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are
being redeemed; DTC's practice is to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to
Securities unless authorized by a Direct Participant in accordance with DTC's MMl Procedures. Under
its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record
date. The Omnibus Proxy assigns Cede& Co.'s consenting or voting rights to those Direct Participants to
whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Redemption proceeds, distributions, and dividend payments on the Securities will be made to
Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's
practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail
information from the Authority or the Trustee, on payable date in accordance with their respective
holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the responsibility of such Participant
and not of DTC,the Trustee,the Authority or the City. subject to any statutory or regulatory requirements
as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend
payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of
DTC) is the responsibility of the Authority, the City or the Trustee, disbursement of such payments to
Direct Participants will be the responsibility of DTC, and disbursement of such payments to the
Beneficial Owners will be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as depository with respect to the Securities at any
time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event
that a successor depository is not obtained, Security certificates are required to be printed and delivered.
The Authority may decide to discontinue use of the system of book-entry-only transfers through DTC (or
a successor securities depository). In that event, Security certificates will be printed and delivered to
DTC.
01 JSUSA:758222928.3 G-2
NB -87;- Item 13. - 363
The City,the Authority and the Underwriter cannot and do not give any assurances that DTC, the
Participants or others will distribute payments of principal, interest or premium, if any.with respect to the
securities paid to DTC or its nominee as the registered owner, or will distribute any redemption notices or
other notices, to the Beneficial Owners, or that they will do so on a timely basis or will serve and act in
the manner described in this Official Statement. The City, the Authority and the Underwriter are not
responsible or liable for the failure of DTC or any Participant to make any payment or give any notice to a
Beneficial Owner with respect to the securities or an error or delay relating thereto.
OHSUSA:7iS222928.3 G-3
Item 13. - 364 HB -874-
NOTICE OF PUBLIC HEARING
Notice of Public Hearing in accordance with Section 6586.5(a)(2) of the California
government Code with respect to the issuance of revenue bonds (the "Bonds") by
The Huntington Beach Public Financing Authority (the "Authority",) in an amount
not to exceed $16,405,000
NOTICE IS HEREBY GIVEN THAT, pursuant to Section 6586.5 of the California
Government Code, the City Council (the "City Council") of the City of Huntington Beach
(the "City") will hold a public hearing on Monday, August 18, 2014, at 6:00 P.M., at the
City Council Chambers located at 2000 Main Street, Huntington Beach, California, in
respect of the proposed financing of a senior recreation facility on a five-acre site within
Huntington Central Park, consisting of a senior center building, a parking lot, and related
landscape and hardscape, to be located at 18041 Goldenwest Street, Huntington
Beach, California, 92648 by the issuance and sale of bonds of the Huntington Beach '
Public Financing Authority (the "Authority"), and to determine the significant public
benefits to the City from the proposed financing, including demonstrable savings to the
City from the issuance and sale of such bonds, such as savings in effective interest rate
costs (in accordance with Section 6586 of the California Government Code).
Any interested person may appear at said public hearing to address the City on the
foregoing matters. Written communications to the City Council should be mailed to the
Office of the City Clerk at the address below. Further information may be obtained from
the Finance Department via email to mloadsmanCDsurfcity-hb.ora or telephone (714)
536-5630.
The City of Huntington Beach endeavors to accommodate persons of handicapped
status in the admission or access to, or treatment or employment in, city programs and
activities. The City of Huntington Beach is an equal opportunity employer.
Dated: August 7, 2014
City Council of the City of Huntington Beach
By: Joan Flynn, City Clerk
2000 Main Street
Huntington Beach, CA 92648-2702
Telephone: (714) 536-5227
http://huntiny-tonbeachca.gov/HBPublicComments/
Printed: 8/4/2014 4:57:15 PM
u0s Times
ME D I A GROUP
Order ID: 2586653 Page 1 of 2
GROSS PRICE* : $146.69 Agency Commission not included
PACKAGE NAME: Legal-HBI-
Nn4ircc
Product(s): Huntington Beach Independent, hbindependent.com, CApublicnotice.com_HBI
AdSize(s): 3 Column,
Run Date(s): Thursday, August 07, 2014
Color Spec. B/W
Preview
AFFIDAVIT OF PUBLICATION
STATE OF CALIFORNIA, ) PROOF OF PUBLICATION
)ss.
County of Orange )
I am a citizen of the United States and a
resident of the County aforesaid;I am over the
age of eighteen years, and not a party to or
interested in the above entitled matter.I am the
principal clerk of The Orange County
Register, a newspaper of general circulation,
putblisiiW in the city Of.Santa Ana, County of
Orange, and which newspaper has been — - — -
NOTICE OF PUBLIC NEARING
adjudged to be a newspaper of general Notice of Public Hearing in accordance with Section 6586.5(a)(2)of the California
government Code with respect to the issuance of revenue bonds(the"Bonds")by ,
circulation b the Superior Court of the The Huntington Beach Public Financing Authority(the"Authority",)in an amount
y p not to exceed$16,405,000 I
County of Orange, State of California, under NOTICE IS HEREBY GIVEN THAT, pursuant to Section 6586.5 of the California Govern-
ment Code,the City Council (the "City Council") of the City of Huntington Beach (the
"City")will hold a public hearing on Monday;August 18,2014,at 6:00 P.M., at the City
the date of November 19, 1905, Case No. A- Council Chambers located at 2000 Main Street,Huntington Beach,California,in respect of
the proposed financing of a senior recreation facility on a five-acre site within Huntington
Central Park,consisting of a senior center building,a parking lot, and related landscape
21046,that the notice,of which the annexed is and hardscape,to be located at 18041 Goldenwest Street,Huntington Beach,California,
92648 by the issuance and sale of bonds of the Huntington Beach Public Financing Au-
thority(the"Authority"),and to determine the significant public'benefits to the City from the
a true printed copy,has been published in each proposed financing,including demonstrable savings to the City from the issuance and sale
of such bonds,such as savings in effective interest rate costs(in accordance with Section
6586 of the California Government Code).
-regular.and entire issue of said newspaper and
Any interested parson may appear at said public hearing to address the City on the forego-
ing matters. Written communications to the City Council should be mailed to the Office of
not in any supplement thereof on the following the City Clerk at the address below. Further information may be obtained from the Finance
Department via email to mloadsman@surfcity-hb.org or telephone(714)536-5630.
dates,to wit: The City of Huntington Beach endeavors to accommodate persons of handicapped status
in the admission cr access to,or treatment or employment in,city programs and activities.
The City of Huntington Beach is an equal opportunity employer. -
Dated: August.11,2014 August 11, 2014. Ciyty Council
u Flynnofthe C ty Cleof rk Huntington Beach
,City
2000 Main Street
Huntington Beach,CA 9264E-2702
Telephone: (714)536-5227
http://h u nti n gton beachca.gov/H BPub 1 i cCo mments/
"I certify(or declare)under the penalty of perjury
Published:Orange County Register August 11,2014. R-1299 9952968 ,
under the laws of the State of California that the _
iutCbving is tine and correct":
I I
Executed at Santa Ana, Orange County,
California,on
Date: August 11,2014
if
Signature
The Orange County Register.
625 N.Grand Ave.
Santa Ana,CA 92701
(714)796-2209
V �I� "�,�`a '�p pi �4�1i"i kt"lnn ��i���� H 'r k"4�, }�I�rgl�•t�'�`f� di k
Huntinerton Beach
01111!I!:::
Senior Center in Central P ark
r
2014 Series A Lease Revenue Bonds
August 18, 2014
NNW-
a� b
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Financing 1 itea
BOND COUNSEL: UNDERWRITER:
Orrick, Herrington & Sutcliffe LLP Bank of America Merrill Lynch
Don Field, Kevin Hale, Frank X. Lauterbur,
Robert F. Lawrence, Laura Gao Cody Press, Geoffrey Sauers
Kane Balmer & Berkman UNDERWRITER'S COUNSEL:
Guillermo A. Frias Stradling Yocca Carlson & Rauth
Brian Forbath
FINANCIAL ADVISOR: CITY OF HUNTINGTON BEACH:
Public Financial Management, Inc. Finance Department
Craig Hoshijima, Hana Hu Lori Ann Farrell, Dahle Bulosan,
Sunny Han, Mary Loadsman
TRUSTEE:
The Bank of New York Mellon Trust Company, N.A.
Valere Boyd, Fanny Chen, Rosanne Romero
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Back"round
9
® Council approved contract with design consultants to
complete plans and specifications — July 1, 2013
• Council approved a contract for construction management
services on August 4, 2014
® Approval is being requested for issuance of bids for
construction contract on August 18, 2014
® Council approval is requested for bond financing totaling
$16.4 million on August 18, 2014 for the project and
related costs of issuance
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Projecth
Sc edule
• `V f8�1];;1905"T�. • Public Works Commission Review
a •August 18, 2014 Public Hearing and Council Authorization for Bonds
®" • August 18, 2014 Council Award Construction Management Contract
I
I
h
r,9 ®: • Council Authorization to Advertise for Construction Bids
}`h...; iikli;a • Open Construction Bids/Bid Review
IR
! I.
iN!';I trsl.: • November 11 2014 Bond Closing and Financing Available
ji µ6 '' '''!!a-=hl i;r • November 17, 2014 Council Award Construction Contract (18 Month Contract)
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I)'
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Cost Estimates TO Date
Soft Costs
■ Additional A&E; Testing/Inspection $8509000
■ Construction Management $6501000
Sub-Total: $195009000
Direct Costs
• Building & On-Site Construction $ 1690009000
• Off-Site Construction $8009000
• FF&E $5009000
Sub-Total: $1793009000
• Contingencies $297009000
Project Total $2195009000
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m_— �
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Senior Center Financing Plan
Available Funding Sources
:I� " r"u�,lu «za."$' e^ r," ,`ril1,J,� ,e+ �I, ,:q?r''^%,w• ul u: .i �` .1 w :n""JI�,a, ^I!d".;Pr, z' ,f,b' 'N •ti' N ""n%'�u'
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FY 12013/14 Capital Improvement Plan $1500,000 Yes/Carryover
FY 2012/13 GF Year End Transfer $19000,000 FY 2014/15
FY,2012/13 General Fund Balance Set 'Aside ;; .$2,000;0 00 ;FY 2014/15
Total Cash In-Hand $495009000 Yes
Ca ital Cam ai n/Donations: (Est.),* $2,000,000 No
Total In-Land"& Potential Donations $69500,000
* The amount of potential donations and Capital Campaign receipts is estimated only. No final amounts received.
-
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$15 U U0
® Bond Issue
➢ The HBPrF- A can issue a lease revenue bond backed by the
General Fund
➢ Estimated annual interest rate of 3.5% to 4.5%
➢ Annual debt service payment of $1.2M
➢ Total final principal and interest costs of, 23 million for a 20-
year bond, higher for 30-years
➢ The FY 2014/15 Proposed Budget includes funding for the
first year of debt service costs
➢ Including a required debt service reserve (1-.2M) and costs of
issuance, the bond proceeds will total $16.4 million
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Debt Service Schedule
City of Huntington Beach
General Fund Supported Annual Debt Service
0 $7,000
0 $6,000 ®Senior Center
0
E--
®2011 Series A
$5,000 -- if 2010 Series A
$4,000
w ®Series 2004
I
$3,000
F, -
$2,000 - — — — — —
�
$1 000 —
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N 04 N N N N 04 04 N N N N N N N N 04 04 N N N N N 04 N N N N N N N
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w61
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y:.: ec e e Action
➢Council and PFA will conduct public hearings and approve
resolutions to execute and deliver
,�A end ent to Site Lease;
Amendment to Lease Agreement;
➢First Supplemental Indenture;
;,Bond Purchase Agreement-
;,Continuing Disclosure Certificate; and
➢Distribution of an Official Statement®
Authorize the City Manager and City Clerk to take all
administrative and budgetary actions necessary to perform the
bond issuance
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