HomeMy WebLinkAboutYear-End Audit Results - FY 2019/20 Comprehensive Annual Fin �� y /
�PP�D✓ED �-o
City of Huntington Beach
File #: 21-124 MEETING DATE: 2/16/2021
REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Oliver Chi, City Manager
PREPARED BY: Dahle Bulosan, Chief Financial Officer
Subject:
Year-End Audit results for the FY 2019/20 Comprehensive Annual Financial Report (CAFR) and
FY 2020/21 Mid-Year Budget Adjustments & Updates
Statement of Issue:
Year-End Audit Results
The City received an Unmodified (Clean) Audit Opinion for the City's Fiscal Year (FY) 2019/20
Comprehensive Annual Financial Report (CAFR), which is the best audit result available. In addition,
the Government Finance Officers Association awarded their Certificate of Achievement for
Excellence in Financial Reporting to the City for the 34th consecutive year. Included as an
attachment is the FY 2019/20 CAFR to receive and file.
Fiscal Year 2020121 Mid-Year Adjustments & Updates
The Finance Department has also spent time recently performing a mid-year budget review for the
fiscal year that began on July 1, 2020. In interfacing with operating departments, budgetary requests
have been assessed across all City departments, and certain adjustments are being recommended
based on available resources through grants and / or restricted funds.
Financial Impact:
Fiscal Year 2020121 Mid-Year Adjustments
1. General Fund (100) budget adjustments are requested as follows:
a. Community Development Department - funding for the preparation of the Mitigated
Negative Declaration for Seacliff Senior Living and Memory Care Facility ($44,060)
b. Fire Department - funding for Fire Strike team reimbursement costs ($1 ,105,000);
payments to the Department of Health Care Services (DHCS) for the Ground
Emergency Medical Transport (GEMT) Quality Assurance Fee (QAF) Program
($312,240); and funding for Metro Cities Joint Powers Authority (JPA) increased costs
($30,250)
2. The Public Works Department is requesting additional appropriations totaling $530,109,
through the following sources:
a. Refuse Collection Fund 504 ($190,000)
City of Huntington Beach Page 1 of 5 Printed on 2/10/2021
powered LegistarT.
File #: 21-124 MEETING DATE: 2/16/2021
b. Water Master Plan Fund 507 ($340,109)
3. The Police Department is requesting additional appropriation of $222,121, through the
following sources:
a. Police Facilities Development Impact Fund 227 ($90,000)
b. Narcotics Forfeiture Fund 242 ($12,121)
c. AB 109 Fund 979 ($70,000)
d. Pedestrian and Bicycle Safety Program Grant Fund 1266 ($50,000)
4. The Finance Department is requesting additional appropriations of $6,201,060, through the
following funds:
a. Retiree Insurance Fund 702 ($1,298,000)
b. Retirement Supplement Fund 703 ($4,903,060)
5. The Administrative Services Department is requesting an additional appropriation of $935,181
in the Self Insurance General Liability Fund 552.
Details related to the proposed adjustments are outlined in the report below. Further, there are
sufficient revenues, cash, and / or fund balances to support the above referenced adjustments.
Recommended Action:
A) Receive and File the FY 2019/20 Comprehensive Annual Financial Report; and,
B) Approve mid-year budget adjustments to the FY 2020/21 Revised Budget in the funds and by the
amounts contained in Attachment 1.
Alternative Action(s):
Do not approve the recommended action(s) and direct staff accordingly.
Analysis:
Year-End Audit Results
Auditing firm Davis Farr LLP (Auditors) audited the City's financial statements and internal control for
the FY 2019/20. The City received an Unmodified (Clean) Audit Opinion for the FY 2019/20
Comprehensive Annual Financial Report (CAFR), which is the highest opinion possible (Attachment
2).
In addition, the Auditors issued the following reports (Attachment 3):
• AU-C 260 Letter: Communications
• Appropriations Limit Agreed-Upon Procedures
• Air Quality Management District (AQMD) Report
Fiscal Year 2020/21 Mid-Year Adjustments & Updates
The FY 2020/21 Budget was adopted by the City Council on June 29, 2020, for the fiscal year
City of Huntington Beach Page 2 of 5 Printed on 2/10/2021
powerea2*LegistarTM
File #: 21-124 MEETING DATE: 2/16/2021
beginning July 1, 2020. The Finance Department has compiled recommended budget adjustments
to cover additional costs and/or provide appropriations necessary to expend funds that have been
received for specific purposes. The City has received revenues or has set-aside prior year fund
balances that will support the requested adjustments in the General Fund. The Other Funds
adjustments will be funded by available revenue or fund balances within each distinct Fund.
GENERAL FUND (FUND 100)
The Community Development Department entered into a reimbursement agreement with SBLP
Huntington Beach, LLC. The funds were used to cover professional services costs for the
preparation of the Mitigated Negative Declaration for Seacliff Senior Living and Memory Care Facility.
The department is requesting to increase its professional services appropriation by $44,060 to cover
these pass-thru costs, which have been offset by the reimbursement revenues and result in a net
neutral impact to the General Fund.
The 2020 California wildfire season was characterized by a record-setting year of wildfires that
burned across the State of California. As of the end of the calendar year, nearly 10,000 fires had
burned over 4.2 million acres of land, which is more than 4% of the state's roughly 100 million acres
of land. The California Fire and Rescue Emergency Mutual Aid System (Mutual Aid System)
coordinates resources from various jurisdictions within the State of California whenever a local
agency is overwhelmed by a major disaster in its community or region.
The Huntington Beach Fire Department participates in the Mutual Aid System, and the department
has responded to multiple mutual aid requests throughout California to assist in major fires. To date,
the Fire Department has incurred $1,105,000 in Strike Team deployment expenses. The State of
California will reimburse all allowable costs related to these Strike Team expenses, plus a 16.81%
administrative rate to be applied to those allowable costs. Since there is no annual appropriation for
this business unit, given that Strike Team costs are unknown until costs are incurred, the Fire
Department is requesting appropriation for $1,105,000. Of note, the appropriation will be fully offset
by State reimbursements.
California Welfare and Institutions authorized the Ground Emergency Medical Transportation
Services (GEMT) Quality Assurance Fee (QAF) program in accordance with Senate Bill 523. The
QAF is assessed on each qualified emergency medical transport, regardless of payer type. DHCS
uses the revenues collected through this program to provide additional funding to eligible
governmental entities that provide GEMT services to Medi-Cal beneficiaries. The Fire Department is
requesting an appropriation of$312,240 to cover anticipated QAF payments for the remainder of the
fiscal year. Based on the number of Medi-Cal transports the City provides each year, it is anticipated
that the QAF payments will be fully offset by revenues received under the program.
Essential emergency dispatch and paging services are provided by Metro Cities Communications
Joint Powers Authority (JPA). Being a member of a fire dispatch Joint Powers Authority allows for
cost sharing between member agencies. Calculation of agency fair share percentage is based upon
the total of emergency calls within an agency's jurisdiction, divided by the total number of calls the
JPA receives. Given a higher than anticipated number of calls for service, the Fire Department is
requesting an additional appropriation of $30,250 to cover the Metro Cities JPA's increase in budget
City of Huntington Beach Page 3 of 5 Printed on 2/10/2021
powered LegistarTM
File #: 21-124 MEETING DATE: 2/16/2021
allocation to the City of Huntington Beach.
OTHER FUNDS
Police Facilities Development Impact (Fund 227)
A fund balance appropriation of$90,000 is requested in the Police Facilities Development Impact
Fund to purchase and equip a new van for the Crisis Negotiation Team (CNT). Development impact
fees collected in this fund are to be used to fund new law enforcement facilities, vehicles, and
equipment in response to the additional calls for service generated by new development. The new
CNT van adheres to the expenditure criteria of this fund and there is sufficient fund balance for this
purchase.
Narcotics Forfeiture - Treasury (Fund 242)
This fund accounts for the Equitable Sharing Funds received from the Department of the Treasury
and can be used to supplement local law enforcement resources. A fund balance appropriation of
$12,121 is requested in the Narcotics Forfeiture Fund for the purchase of miscellaneous Police
Department equipment and supplies. There is sufficient fund balance in this fund to cover the
appropriation.
Refuse Collection Service (Fund 504)
The residential curbside collection rate increased by $0.33 effective July 1, 2020, based on the
formula adopted in Resolution 2017-26, and is estimated to provide an additional $190,000 in
revenues. The Public Works Department is requesting an expenditure appropriation of$190,000 to
fund the Refuse Collection and Disposal Services contract. Based on current revenue collection
amounts, these adjustments will have a net neutral impact.
Water Master Plan (Fund 507)
An appropriation of$340,109 is needed in the Water Master Plan Fund for charges related to general
administrative oversight as determined through the City's Cost Allocation Plan. There is sufficient
fund balance in this fund to cover the appropriation.
Self-Insurance General Liability (Fund 552)
An appropriation of$935,181 is needed in the Self Insurance General Liability Fund for excess
liability coverage and for risk insurance services for the commercial property, difference in conditions
(DIC), contractor's equipment and auto physical damage program, terrorism, and cyber liability
coverage. There is sufficient fund balance in this fund to cover the additional appropriation.
Retiree Insurance (702)
The Finance Department is requesting an appropriation of$1,298,000 in the Retiree Insurance Fund:
$1,187,265 for contributions and payments made for the City's Retiree Medical Plan, and $110,735
for Transfers Out to the General Fund for general administrative oversight as determined through the
City's Cost Allocation Plan. The total contribution made to the fund each year is determined by the
City's actuary. This appropriation is needed to true up the retiree health insurance budget based on
the most recent actuarial valuation.
City of Huntington Beach Page 4 of 5 Printed on 2/10/2021
powered LegistarTM
File #: 21-124 MEETING DATE: 2/16/2021
Retirement Supplement (Fund 703)
An additional appropriation of$4,903,060 is needed in the Retirement Supplement Fund for
contributions and payments made for the City's Retiree Supplemental Plan. The total contribution
made to the fund each year is determined by the City's actuary. This appropriation is needed to true
up the retiree pension payments budget, based on the most recent actuarial valuation.
AB 109 (Fund 979)
Public Safety Realignment was enacted in 2011 with the signing of Assembly Bill 109, which provided
a portion of the Vehicle License Fees go to local law enforcement. A fund balance appropriation of
$70,000 is requested in the AB 109 Fund for compliance checks and for a new server for the high
tech crime lab. There is sufficient fund balance in this fund to cover the appropriation.
Pedestrian and Bicycle Safety Program Grant (Fund 1266)
The Police Department received funding of$50,000 for the Pedestrian and Bicycle Safety Program
Grant, awarded by the California Office of Traffic Safety (OTS).
Environmental Status:
Not applicable.
Strategic Plan Goal:
Enhance and maintain high quality City services
Enhance and maintain infrastructure
Strengthen long-term financial and economic sustainability
Enhance and modernize public safety service delivery
Attachment(s):
1. Fiscal Year 2020/21 Recommended Mid-Year Adjustments
2. FY 2019/20 Comprehensive Annual Financial Report (CAFR)
3. Other Auditor Issued Reports
City of Huntington Beach Page 5 of 5 Printed on 2/10/2021
powere32)7y LegistarT'
ATTACHMENT 1
Fiscal Year 2020/2021 Recommended Mid-Year Budget Adjustments
Recommended Adjustments by Fund:
APPROPRIATION INCREASE
Fund No Fund Name Appropriation Dept
100 General Fund 44,060 Community Development
100 General Fund 1,447,490 Fire
General Fund Subtotal 1,491,550
227 Police Facilities Development Impact 90,000 Police
242 Narcotics Forfeiture-Treasury 12,121 Police
504 Refuse Collection Service 190,000 Public Works
507 Water Master Plan 340,109 Public Works
552 Self Insurance General Liability 935,181 Administrative Services
702 Retiree Insurance 1,298,000 Finance
703 Retirement Supplement 4,903,060 Finance
979 AB 109 70,000 Community Services
1266 Pedestrian and Bicycle Safety Program 50,000 Public Works
Other Funds Subtotal 7,888,471
All Funds Total 9,380,021
328
E:
.
MhY'/���� �� � �''� ��� +rlll�ll'I �L'�►��� ' $evil
q
Aa
, w
m _
.. e.4. o
v fit",
For The Fiscal ��'o� ! To
Year Ended
June 30, 2020
CITY OF HUNTINGTON BEACH, CALIFORNIA
17, 190g,
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED
J U N E 30, 2020
Prepared by the Finance Department
330
THIS PAGE INTENTIONALLY LEFT BLANK
331
INTRODUCTORY SECTION
332
THIS PAGE INTENTIONALLY LEFT BLANK
333
City of Huntington Beach
Comprehensive Annual Financial Report
For the Year Ended June 30, 2020
TABLE OF CONTENTS
INTRODUCTORY SECTION
Tableof Contents........................................................................................................................................ i-ii
Letterof Transmittal .................................................................................................................................... iii-ix
CityOfficials................................................................................................................................................ x
OrganizationalChart................................................................................................................................... xi
Certificate of Achievement in Excellence in Financial Reporting................................................................. xii
FINANCIAL SECTION
Independent Auditor's Report...................................................................................................................... 1-3
Management's Discussion and Analysis (Required Supplementary Information) .......................................4-22
Basic Financial Statements:
Government-wide Financial Statements:
Statementof Net Position .................................................................................................................. 25
Statementof Activities ....................................................................................................................... 26
Fund Financial Statements:
Balance Sheet—Governmental Funds .............................................................................................. 27
Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position......... 28
Statement of Revenues, Expenditures and Changes in Fund Balances—Governmental Funds ...... 29
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances
of Governmental Funds to the Statement of Activities....................................................................... 30
Statement of Net Position — Proprietary Funds.................................................................................. 31
Statement of Revenues, Expenses and Changes in Fund Net Position — Proprietary Funds............ 32
Statement of Cash Flows— Proprietary Funds................................................................................... 33
Statement of Fiduciary Fund Net Position — Fiduciary Funds ............................................................ 34
Statement of Changes in Fiduciary Fund Net Position — Fiduciary Funds......................................... 34
Notes to Financial Statements.............................................................................................................. 36-120
Required Supplemental Information:
Notes to Required Supplementary Information .................................................................................. 124
Schedule of Revenues, Expenditures and Changes in Fund Balance— Budget
AndActual —General Fund............................................................................................................. 125
Schedule of Revenues, Expenditures and Changes in Fund Balance— Budget
And Actual —Grants Special Revenue Fund................................................................................... 126
Schedule of Changes in the Net Pension Liability and Related Ratios.............................................. 127-129
Schedule of Changes in the Net OPEB Liability and Related Ratios................................................. 130
Schedule of Contributions.................................................................................................................. 131-133
Schedule of Money Market Weighted Rate of Return........................................................................ 133
Schedule of Contributions for the OPEB Plan.................................................................................... 134
i
334
FINANCIAL SECTION (Continued)
Supplementary Information:
Combining and Individual Fund Statements and Schedules:
Combining Balance Sheet—Other Governmental Funds.................................................................. 139-142
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances
OtherGovernmental Funds ............................................................................................................ 143-146
Schedule of Revenues, Expenditures, and Changes in Fund Balances—
Budget and Actual — Other Governmental Funds ........................................................................... 147-154
Schedule of Revenues, Expenditures and Changes in Fund Balance— Budget
And Actual — LMIHAF Capital Projects Fund .................................................................................. 155
Statement of Net Position — Internal Service Funds........................................................................... 160
Statement of Revenues, Expenses, and Changes in Fund Net Position
InternalService Funds .................................................................................................................. 161
Statement of Cash Flows— Internal Service Funds........................................................................... 162
Combining Statement of Fiduciary Fund Assets and Liabilities.......................................................... 166
Combining Statement of Changes in Fiduciary Assets and Liabilities................................................ 167-168
STATISTICAL SECTION
Net Position by Component— Last Ten Fiscal Years.................................................................................. 171-172
Changes in Net Position — Last Ten Fiscal Years....................................................................................... 173-174
Fund Balances—Governmental Funds— Last Ten Fiscal Years ................................................................ 175
Changes in Fund Balances—Governmental Funds— Last Ten Fiscal Years............................................. 177-178
Assessed and Actual Valuation of All Taxable Property (Excluding Redevelopment Agency) -
LastTen Fiscal Years .............................................................................................................................. 179
Property Tax Rates—All Direct and Overlapping Government Tax Rate 04-001
Largest Area in City— Last Ten Fiscal Years........................................................................................... 179
Property Tax Levies and Collections— Last Ten Fiscal Years .................................................................... 180
Top Ten Property Tax Payers—Current Year and Nine Years Ago............................................................ 181
Ratios of Outstanding Debt by Type— Last Ten Fiscal Years..................................................................... 183-184
Legal Debt Margin — Last Ten Fiscal Years ................................................................................................ 185
Statement of Direct and Overlapping Bonded Debt .................................................................................... 186
Principal Private Employers—Current Year and Nine Years Ago............................................................... 187
Full-Time Actual and Budgeted City Employees by Function/Program— Last Ten Fiscal Years.................. 188
Operating Indicators by Function/Activity— Last Ten Fiscal Years.............................................................. 189-190
Capital Assets Statistics by Function/Activity.............................................................................................. 191
ii
335
CITY OF HUNTINGTON BEACH
December 16, 2020
Honorable Mayor, City Council and Citizens of the City of Huntington Beach:
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 year ended June 30, 2020.
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 Davis Farr LLP.
The goal of the audit was to provide reasonable assurance that the City's financial statements
are free from material misstatement. In addition, Davis Farr LLP audits the City's major program
expenditures of federal grants for compliance with Title 2 of the United States Code of Federal
Regulations Part 200 (Uniform Guidance). The report of the Single Audit is published separately
from this CAFR and may be obtained upon request from the City's Finance Department.
This report consists of management's representations concerning the City's finances. As such,
management assumes full responsibility for the completeness and accuracy of the information
presented in this document and that it is reported in a manner that fairly presents the financial
position and operations of the various funds of the City. To provide a reasonable basis for
making these representations, and assurance that the financial statements will be free from
material misstatement, management has established a comprehensive internal control
framework that is designed to both protect the government's assets from theft, loss, or misuse
and to compile sufficient reliable information for financial statement conformity with GAAP. As
the cost of internal controls should not outweigh their benefits, the City's comprehensive
framework of internal controls has been designed to provide reasonable rather than absolute
assurance that the financial statements will be free from material misstatement.
We are pleased to report that Davis Farr LLP granted the City an unmodified (clean) opinion for
the financial statements of the City for the year ended June 30, 2020. The auditor's opinion can
be found in the Financial Section of this report. GAAP requires that management provide a
narrative introduction, overview and analysis to accompany the financial statements in the form
of a Management Discussion and Analysis (MD&A). This transmittal letter is designed to
complement and should be read in conjunction with it. The MD&A can be found immediately
following the independent auditor's report.
336
Profile of the City of Huntington Beach
The City of Huntington Beach is home to a thriving beach community, located on the Orange
County coast, 35 miles south of Los Angeles and 90 miles north of San Diego. With a population
of 200,748 residents, it is known as Surf City due to its abundance of beaches; the year-round
sunny and warm Mediterranean climate; and its casual lifestyle. With over 10 miles of coastline
and iconic pier spanning 1,856 foot in length- the longest pier on the West Coast- Huntington
Beach plays host to over 16 million visitors annually
In addition to its internationally recognized beaches, Huntington Beach was hailed as #1 in the
nation for Quality of City Services" and #18 by WalletHub in their "Best-Run City in America
poll," (June 2020), as well as one of the top ten "Happiest Cities" in the U.S. (March 2020). The
City was also ranked #25 and #29 in California and the U.S., respectively, for "Providing
Homeowners with an Excellent Return on Investment" by LendEDU (May 2020).
Demographically, the City benefits from higher education levels, median incomes, and home
values as compared with the State. The City boasts an annual median household income of
$91,318, 51% higher than the United States, 28% higher than the State of California, and 6%
higher than Orange County.
Founded in the late 1880s, 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. The City of Huntington Beach is a full-service city
including police, fire, public works, and other key functional departments with a dedicated and
talented team of over 900 full-time equivalent employees.
In 2011, the unincorporated 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.
Economic Condition and Outlook
Similar to other cities throughout the nation, the novel coronavirus (COVID-19) pandemic has
created financial uncertainty that will impact the City's financial standing. State and County
Shelter-in-Place measures have successfully slowed the spread of the virus and prevented local
hospitals from being overwhelmed, but the efforts have also caused unprecedented changes to
everyday life. Economic engines are struggling in response to Shelter-in-Place Orders — the
unemployment rate remains high, the stock market has experienced extraordinary volatility, and
the City has had to restrict certain business activities that were previously allowed to resume.
While we are still in the process of understanding the long-term impacts as projections change
daily, there is no question that there has and will continue to be economic challenges due to
COVID-19.
The motto for Huntington Beach's FY 2020/21 Adopted Budget is "OneHB," reflecting the City's
commitment to facing the unprecedented challenges created by the COVID-19 pandemic
guided by the following principles:
iv
337
• To stay committed to being One Team: working together to serve the people of
Huntington Beach exceptionally to inspire pride in the community.
• Work to have One Focus: to stay fanatical about achieving municipal excellence by
being active caretakers of our unique, people-centric HB culture.
• Continue to pursue One Goal: to ensure that HB continually improves its standing as a
premier coastal community as measured through the health of our people, our
organization, our infrastructure, and our community.
The City's FY 2020/21 adopted budget is balanced. Property tax values are expected to rise
slightly, but are offset by substantial projected declines in Sales Tax and Transient Occupancy
Tax as a result of the COVID-19 pandemic. As part of the FY 2020/21 budget balancing
measures, City Council approved the implementation of a Separation Incentive Program (SIP)
to reduce the size of the City's current workforce. 97 employees opted to participate in the SIP,
which, coupled with Citywide reorganization plans, achieved the projected cost savings required
to remain balanced for FY 2020/21. The City's reorganization plans include the following:
• Combining the Human Resources and Information Services departments into a single
Administrative Services department;
• Merging the Community Services and Library departments into one operation;
• Instituting a large-scale reorganization in the Public Works department; and,
• Making additional operational adjustments in the Community Development, Finance, and
Fire departments.
While the City is well positioned to respond to the economic crisis created by COVID-19 without
compromising services or losing focus on priority initiatives, the long term impacts of COVID-
19 have yet to be fully realized and it is clear that economic conditions and outcomes will need
to be closely monitored.
Property Tax
The City of Huntington Beach's assessed valuations are very strong, reflecting both new
development and increased property values. The City's FY 2020/21 assessed property value
grew 5.3% to $46.1 billion. This solid performance, coupled with steady year-over-year growth,
reflects a stable property tax base that can weather steep declines in real estate markets. Over
60% of parcels have an assessed valuation (AV) base year prior to 2004, representing a
significant amount of untapped AV. For FY 2019/20, secured property tax revenue collections
totaled $58.3 million. For FY 20/21, secured property taxes are estimated at $62.0 million,
reflecting a 6.3 percent increase.
v
338
City of Huntington Beach
Total Assessed Valuation
Fiscal Years 2011/12-2020/21
(in billions)
550.0
$46.1
$45.0 $43.8
541.5
$40.0 $39.4
536A $37:5
$343
$35.0 4.S32
529.9 $31,3 °
$30.0
525.0
520.0
515.0
510.0
$5.0
50.0
2011/12 2012/13 2013/1.4 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21
Sales Tax
Huntington Beach's business community is well-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. The City's
diverse sales tax base makes it a stable source of revenue and mitigates the impact of industry-
specific downturns as shown below.
City of Huntington Beach
Composition of Sales Tax Revenue
Fiscal Year 2019/20
Other
State and County 6% Autos and
Pools Transportation
16% 21%
A' Building and
Construction
7%
Restaurants and
Hotels Business and
14% Industry
god,,
General Consumer Fuel and Service
Goods Stations
19% 8%
Vl
339
City of Huntington Beach
Historical Sales Tax Revenue
545.0 $43-9
$40.4 541.1
540.0
$36.1
$35.0
531.4
530.0
$25 5 $27.2 527,2
n$25.0 $22.6
520.0
515.0
510.0
55,0
$0.0
2010/11 2011/12 2012/13 2013/14 2014/1.5 2015/16 2016/17 2017118' 2018f19 2019/20
'Fiscal Year 2017/18 reflects nine months of data only due to the change in the City's fiscal year
Transient Occupancy Tax (TOT)
Transient Occupancy Tax (TOT), a 10 percent tax applied to hotel stays within the City remains
strong as Huntington Beach remains a prime tourist destination and the hotel industry continues
to thrive. The City collected $9.6M in TOT revenues during FY 2019/20, with the $4.4M decline
due to the impact of Shelter-in-Place orders to combat the COVID-19 virus on business and
leisure travel.
City of Huntington Beach
Transient Occupancy Tax Revenue
S 16.0
$14.0
514.0
S 12.0 511.4
$10.0
,.,SIOA - 592 --$9.6
i SSA 58.8
$8.0 $7.2 57.6
c
56.5
a Sfi.0
54.0 .
1
52-0
50.0
2010/11 2011112 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18' 2019/19 2019/20
'Fiscal Year 2017/18 reflects nine months of data only due to the change in the City's fiscal year
Budget Development and Monitoring
The budget is prepared under the supervision of the City Manager and transmitted to the City
Council for deliberation at least 30 days prior to the end of the fiscal year. Pursuant to the City's
Charter, the City Council must adopt the annual budget by June 301h 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 Chief Financial Officer'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.
vii
340
Cash Management Policies and Practices
Surplus cash is invested by the elected City Treasurer, in investments 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 cash balances. The rate of return earned for the year ended June 30,
2020 was 2.11 percent. The City Treasurer, as required by California Government Code 53601,
has prepared an annual Statement of Investment Policy which allows 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 the goals and objectives of the City for the next
three years. The City Council has five Strategic Plan goals:
• Improve quality of life;
• Enhance and maintain infrastructure;
• Strengthen long-term economic and financial sustainability;
• Enhance and modernize public safety service delivery; and,
• Enhance and maintain high quality City services.
The Plan drives both short and long-term budgetary decisions and the daily operations of the
City by ensuring everyone is consistently working to achieve the goals outlined in the Plan. To
meet the goal of strengthening economic and financial sustainability, the City has implemented
plans to reduce its unfunded liabilities by prepaying its obligations.
The City's CalPERS costs are expected to total $45.8 million in FY 2020/21. This reflects a
$2.5 million, or 5.8 percent increase to last year's Adopted Budget. The City's unfunded pension
liability is currently $436.0 million, representing a 68.2 percent funded status.
The FY 2020/21 Adopted Budget does include a $1 million contribution to the Section 115 Trust,
funded by one-time savings from the previous year. The City Council adopted a Pension Rate
Stabilization Plan, otherwise known as a Section 115 Trust, to provide an additional alternative
investment vehicle to CalPERS, providing the ability to select a portfolio based on the City's
own distant risk tolerance, and the desire to achieve a one-for-one reduction in its liabilities.
On November 18, 2019, City Council authorized staff to move forward with preparing for the
potential issuance of a Pension Obligation Bond to "refinance" the City's unfunded pension
liability through the approval of a resolution. Shortly after Council's authorization, the documents
were submitted to the Orange County Superior Court to begin the judicial validation process
which was finalized on May 18, 2020. The City is continuously monitoring the interest rate and
current economic climate to ensure that moving forward with the issuance of Pension Obligation
Bonds is timed correctly and will be beneficial for the City in the long run. Concurrently, the City
is in the process of developing a formal Unfunded Pension Liability payoff policy to plan for any
additional unfunded pension liabilities that may arise through changes in the discount rate and
other actuarial assumptions used by CalPERS.
viii
341
Paying down these liabilities, controlling the City's pension costs through various mechanisms
including the issuance of Pension Obligation Bonds, funding a Section 115 trust, and creating
an Unfunded Pension Liability Policy helps build capacity to manage future pension cost
increases. While the impact of higher CalPERS costs will not be entirely mitigated, this
proactive strategy has placed Huntington Beach in a stronger financial position than many other
cities.
Awards and Acknowledgements
The City of Huntington Beach has once again received the "Certificate of Achievement for
Excellence in Financial Reporting" award bestowed by the Government Finance Officers'
Association (GFOA) of the United States and Canada for the 34t" consecutive year. 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 June 30, 2020, 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 its consideration for another award.
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. I would also like to thank the Finance Commission, a seven member body
appointed by the City Council, which has been instrumental in helping the City maintain its long
term goal of financial sustainability.
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 Sunny Rief, Anna
Garan, Rae Bowman, Ian Wuh, Ming Zhai, Leslie Zimmer, and Thuy Vi for their hard work and
dedication.
Respectfully,
Dahle Bulosan
Chief Financial Officer
ix
342
City of Huntington Beach
City Council
Kim Carr, Mayor
Tito Ortiz, Mayor Pro Tem
Barbara Delgleize, Councilmember
Dan Kalmick, Councilmember
Natalie Moser, Councilmember
Erik Peterson, Councilmember
Mike Posey, Councilmember
Executive Team
Oliver Chi, City Manager
Travis Hopkins, Assistant City Manager
Elected Department Heads
Alisa Backstrom, City Treasurer
Robin Estanislau, City Clerk
Michael Gates, City Attorney
Department Directors
Dahle Bulosan, Finance
Sean Crumby, Public Works
Chief Scott Haberle, Fire
Interim Chief Julian Harvey, Police
Ursula Luna-Reynosa, Community Development
Brittany Mello, Administrative Services
Chris Slama, Community Services
Behzad Zamanian, Information Services
X
343
City of Huntington Beach
Organizational Chart
Adopted Budget — FY 2020/21
. THE PEOPLE:.
CITY CITY COUNCIL CITY
LCrrYLERKATTORNEY Mayor TREASURER
, Mayor Pro-Tem
Administration, City C4und Members
Advisory Public Support Investments
&Elections
Lfigation Records
Management CITY
MANAGER
Commur6ty
Prosecution
ASSISTANT
FIRE (H)
COMMUNITY CITY MANAGER
SERVICES
Fire Administrative Facilities 8 PUBLIC HUMAN
Administration Operations Events ENERGY
INFORMATION RESOURCES
Fire Recreation,
Prevention Investigations Human&
Cultural Services
Emergency
Response Un'rfarm
Marine
Safety
FINANCE COMMUNITY PUBLIC C (!F:RMATION LIBRARY
DEVELOPMENT WORKS VICES SERVICES
Accounting Neighborhood Applications& Administration&
Services Preservation& Engineering Database Building
ade Enf cement Support Man ernent
es
Budget inspection General Custopmer ublicServi y
Management
Services Services Sup Common
Outreach
Revenue Permit& Maintenance Infrastructure oath Services&
Plan Check Family
Services Plan
Cher Operations Systems P arnminq
am
Public Safety Technology&
Planning Transparlation Systems Support
Semr�s
Office of
Business Utilities GIS
Develo rnent
Xt
344
C.Povernment Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Huntington Beach
4.1
California
For its Comprehensive Annual
Financial Report
For the Fiscal Year Ended
June 30, 2019
Execi.ftiie Director/CEO
Xii
345
FINANCIAL SECTION
346
VolDai
� Davis Farr LLP
2301 Dupont Drive I Suite 200 1 Irvine,CA 92612
CERTIFIED PUBLIC ACCOUNTANTS Main:949.474.2020 1 Fax:949.263.5520
Independent Auditor's Report
City Council
City of Huntington Beach
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, as of June 30, 2020, 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
Management is responsible for the preparation and fair presentation of these financial
statements in accordance with accounting principles generally accepted in the United States
of America; 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.
Auditor's Responsibility
Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the
United States of America and the standards applicable to financial audits contained in
Government Auditing Standards, issued by the Comptroller General of the United States.
Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free from 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.
347
1
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 of
Huntington Beach, California, as of June 30, 2020, 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.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
management's discussion and analysis, budgetary comparison information for the General
Fund and each major special revenue fund, schedule of changes in net pension liability and
related ratios, schedule of pension contributions, schedule of money market weighted rate
of return, schedule of changes in net OPEB liability and related ratios, and schedule of OPEB
contributions 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 of Huntington Beach's basic financial statements. The
combining and individual fund financial statements and schedules, the introductory section
and the statistical section are presented for purposes of additional analysis and are not a
required part of the basic financial statements. The combining and individual fund financial
statements and schedules are the responsibility of management and were derived from and
relates directly to the underlying accounting and other records used to prepare the basic
financial statements. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and certain additional procedures,
including comparing and reconciling such information directly to the underlying accounting
and other records used to prepare the basic financial statements or to the basic financial
statements themselves, and other additional procedures in accordance with auditing
standards generally accepted in the United States of America. In our opinion, the combining
and individual fund financial statements and schedules are fairly stated, in all material
respects, in relation to the basic financial statements as a whole. The introductory section
and the statistical section 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 it.
348
2
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
December 16, 2020 on our consideration of the City of Huntington Beach'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 of
Huntington Beach's internal control over financial reporting and compliance.
x
Irvine, California
December 16, 2020
349
3
MANAGEMENT DISCUSSION
AND
ANALYSIS
350
4
City of Huntington Beach
Management's Discussion and Analysis
> For the Year Ended June 30, 2020
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 year ended June 30, 2020. 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-ix 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
Increase Increase
June 30, 2020 June 30, 2019 (Decrease) (Decrease)
Assets $ 1,210,177 $ 1,177,879 $ 32,298 2.7%
Deferred Outflows of Resources 57,761 70,705 (12,944) -18.3%
Liabilities 571,233 552,239 18,994 3.4%
Deferred Inflows of Resources 14,289 13,401 888 6.6%
Total Net Position 682,416 682,944 (528) -0.1%
Unrestricted Net Position (236,041) (214,275) (21,766) 10.2%
Long-Term Obligations 538,081 527,500 10,581 2.0%
Program Re\,enues 146,713 144,865 1,848 1.3%
Taxes 175,663 175,576 87 0.1%
Other General Re\enues 9,271 16,027 (6,756) -42.2%
Expenses 332,174 305,331 26,843 8.8%
• The City of Huntington Beach's total assets and deferred outflows of resources
exceeded its liabilities and deferred inflows of resources at the close of the most
recent fiscal year by $682,416,000. Total net position decreased by $528,000 or
0.1 percent and unrestricted net position decreased by$21,766,000 or 10.2 percent
in spite of the growth in assets primarily as a result of the ramp up in liabilities and
decrease in deferred outflows of resources related to pension and other
postemployment benefits.
• Long-term obligations increased by $10,581,000 or 2.0 percent. This increase is
primarily due to the rise in pension and OPEB liabilities. In addition, a new lease in
the amount of $1,172,000 was approved in fiscal year 2019/20 to finance the fire
engine and ambulance replacement.
• Deferred outflows of resources decreased by $12,944,000 or 18.3 percent due to
the actuarially determined amortization of changes in assumptions, differences
between expected and actual investment earnings, and differences between
expected and actual experience used to determine the City's net pension liability.
Deferred inflows of resources increased by $888,000 or 6.6 percent primarily due
to the net difference between the projected and actual earnings on pension plan
investments.
351
5
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended June 30, 2020
• Program revenues increased by $1,848,000 or 1.3 percent. The two largest
increases are from one-time revenue sources consisting of Hermosa Vista and
Huntington Pointe loan repayments amounting to almost $7,400,000, and
affordable housing in-lieu fees of $2,200,000 paid by the developer to fulfill the
affordable housing requirement for the Sea Dance Housing Development. These
sizable payments help offset the decline in charges for services that are attributed
to the change in water connection and capital surcharge fee calculation which
resulted to an overall reduction in water revenue and loss of revenue due to COVID-
19. In March 2020, street sweeping citations were halted as part of the HB Ready
Response Plan, rent for City-owned concessionaires were temporarily abated and
recreational classes were cancelled. Additionally, in April 2020, a payment deferral
program for business license renewal payments and transient occupancy taxes
covering the period of March 1-July 31, 2020 was established, providing businesses
the option to postpone payment of fees and revenues charged and/or collected
during this period until June 30, 2021. Moreover, substantial amounts of
development impact fees were collected in fiscal year 2018/19 from three large
residential development projects. Development impact fees can fluctuate from year
to year depending on a number of factors that attract developers to do large projects
in the City.
• Expenses increased by $26,843,000 or 8.8 percent due to the significant increase
in pension and workers compensation costs that have been allocated to the various
functions. Furthermore, spending on non-capital improvements in Community
Development and Public Works increased. Police and Fire also incurred additional
labor costs during the height of the pandemic and civil unrest to address the
community needs and maintain public safety.
Overview of the Financial Statements
This discussion and analysis serves as an introduction to the City of Huntington Beach's
basic financial statements. The City of Huntington Beach's basic financial statements are
comprised of three components: 1) government-wide financial statements; 2) fund
financial statements; and 3) notes to the financial statements. This report also contains
certain other supplementary information in addition to the basic financial statements.
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, liabilities,
deferred outflows and inflows with the difference between them 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.
352
6
t
City of Huntington Beach
Management's Discussion and Analysis
u,.triw For the Year Ended June 30, 2020
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 the City
Council, City Manager, City Treasurer, City Attorney, City Clerk, Finance, Community
Development, Fire, Information Services, Police, Community Services, Library Services,
and Public Works departments. Business-type activities include Water, Sewer, Refuse,
and Hazmat Services.
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 25-26 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.
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 25 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, and Low and Moderate Income Housing Asset Fund (LMIHAF)
Capital Projects Fund all of which are considered to be major funds. Data from the other
22 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.
353
7
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended June 30, 2020
The City provides an annual appropriated budget for its governmental funds. Budgetary
comparison schedules for the General Fund and the major special revenue fund (Grants)
are required to be presented and are included on pages 125 and 126 of this report and
demonstrate compliance with the budget.
The basic governmental fund financial statements can be found on pages 27 and 29 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 used in accounting as a device to accumulate and
allocate costs internally among the City's various functions. The City uses internal service
funds to account for its self-insurance worker's compensation activities, self-insurance
general liability activities, and equipment replacement needs. Because these services
predominantly benefit governmental rather than business-type functions, they have been
included with governmental activities in the government-wide financial statements.
Proprietary funds provide the same type of information as the government-wide financial
statements, only in more detail. The proprietary fund financial statements provides
information for Water, Sewer Service, Refuse, Hazmat Service, Self-Insurance Workers'
Compensation, Self-Insurance General Liability, and Equipment Replacement Funds.
The basic proprietary fund financial statements can be found on pages 31-33 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
statements 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 34 of this report.
354
8
r
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended June 30, 2020
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 36-120 of this report.
355
9
r
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended June 30, 2020
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 124-134 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 139-146 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 plus
deferred outflows exceeding liabilities plus deferred inflows by $682,416,000.
Below is a summary schedule of the City's net position at June 30, 2020 (in thousands):
Amount Percent
Increase Increase
Governmental Activities June 30, 2020 June 30, 2019 (Decrease) (Decrease)
Current and Other Assets $ 253,795 $ 230,456 $ 23,339 10.1%
Capital Assets 714,759 708,469 6,290 0.9%
Total Assets 968,554 938,925 29,629 3.2%
Deferred Outflows of Resources 54,499 67,019 (12,520) -18.7%
Current and Other Liabilities 22,200 15,137 7,063 46.7%
Long-Term Obligations 508,578 498,810 9,768 2.0%
Total Liabilities 530,778 513,947 16,831 3.3%
Deferred Inflows of Resources 13,374 12,649 725 5.7%
Net Position:
Net Investment in Capital Assets 673,498 664,281 9,217 1.4%
Restricted 79,926 66,089 13,837 20.9%
Unrestricted (274,523) (251,022) (23,501) -9.4%
Total Net Position $ 478,901 $ 479,348 $ (447) -0.1%
--Amount Percent
Increase Increase
Business-Type Activities June 30, 2020 June 30, 2019 (Decrease) (Decrease)
Current and Other Assets $ 98,838 $ 93,258 $ 5,580 6.0%
Capital Assets 142,785 145,696 (2,911) -2.0%
Total Assets 241,623 238,954 2,669 1.1%
Deferred Outflows of Resources 3,262 3,686 (424) -11.5%
Current and Other Liabilities 10,952 9,602 1,350 14.1%
Long-Term Obligations 29,503 28,690 813 2.8%
Total Liabilities 40,455 38,292 2,163 5.6%
Deferred Inflows of Resources 603 752 (149) -19.8%
Net Position:
Net Investment in Capital Assets 142,785 145,696 (2,911) -2.0%
Restricted 22,248 21,153 1,095 5.2%
Unrestricted 38,482 36,747 1,735 4.7%
Total Net Position $ 203,515 $ 203,596 $ (81) 0.0%
356
10
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended June 30, 2020
Analysis of the City's Net Position
Current and Other Assets: The increase in current and other assets of$23,339,000 for
governmental activities is mainly due to the increase in cash balance. The City received
various Federal, State and County grants to cover emergency operational costs and
economic development assistance to businesses impacted by the pandemic. CARES Act
Funds of $6,500,000 were distributed by the County of Orange to the City in June 2020.
Nearly $4,800,000 of the CARES funding was directed to help local small businesses that
were negatively impacted by the pandemic and $1,700,000 was for other COVID-19
emergency costs. As previously mentioned, the developer of Hermosa Vista and
Huntington Pointe Apartments repaid approximately$7,400,000 in loans issued by the City
in 2001 and 2003 during FY 2019/20.
The increase in current and other assets of $5,580,000 for business-type activities is due
to an increase in cash balance. A large portion of the increase came from the revenue
generated by the Water fund in excess of actual expenses paid in the fiscal year. In
addition to the timing of payment of expenses, some planned improvement projects were
postponed as a result of the pandemic.
Current and Other Liabilities: Current and other liabilities for governmental activities
increased by $7,063,000 and increased by $1,350,000 for business-type activities due to
normal fluctuations in the accounts payable and payroll cycles. For governmental
activities, the majority of the increase is related to CARES Act Funds received towards the
end of the fiscal year that was recorded as unearned revenue.
Deferred Outflows and Inflows of Resources: The decrease in deferred outflows of
resources of $12,520,000 and $424,000 for governmental activities and business-type
activities, respectively, and the increase in deferred inflows of resources of $725,000 for
governmental activities and decrease of $149,000 for business-type activities,
respectively, are mainly due to the actuarially determined amortization of changes in
assumptions, differences between projected and actual earnings on pension plan
investments, and differences between expected and actual experience used to determine
the net pension and other postemployment benefits liabilities. See Notes 6, 7, and 8 for
additional information.
Long-Term Obligations: Long-term obligations for governmental activities increased by
$9,768,000 primarily due to an increase in the City's workers' compensation claims and
pension liabilities. Long-term obligations for business-type activities increased by
$813,000 due to increases in compensated absences and net pension liabilities.
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
357
11
City of Huntington Beach
Management's Discussion and Analysis
.,.,, . For the Year Ended June 30, 2020
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 $9,217,000 or 1.4 percent, primarily due to residential street
improvements. Net position invested in capital assets net of related debt from business-
type activities decreased $2,911,000 or 2.0 percent primarily due to normal year to year
depreciation.
Restricted Net Position: An additional portion of the City's net position is subject to
external (legally imposed or statutory) restrictions ($79,926,000 for governmental
activities, and $22,248,000 for business-type activities). These amounts represent 16.7
percent and 10.9 percent of net position for governmental activities and business-type
activities, respectively. Restricted net position from governmental activities increased
$13,837,000 or 20.9 percent. The increase is largely due to the addition of the Pension
Liability and Surf City "Y Funds, and increase in restricted net position in the LMIHAF,
Infrastructure and Lease Capital Projects Funds. Restricted net position from business-
type activities increased by $1,095,000 or 5.2 percent primarily due to an increase in
restricted Water Master Plan funds available for capital projects as funds are spent.
Unrestricted Net Position: The unrestricted net position (negative $274,523,000 for
governmental activities and $38,482,000 for business-type activities) represent negative
57.3 percent and 18.9 percent, respectively, of net position for governmental activities and
business-type activities. Unrestricted net position for governmental activities decreased
$23,501,000 largely due to an increase in net pension and other postemployment benefits
liabilities and decrease in deferred outflows of resources which are also related to pension
and OPEB. Unrestricted net position for business-type activities increased by $1,735,000
or 4.7 percent during the year due to the net income from Sewer and Hazmat service
operations in fiscal year 2019/20.
358
12
City of Huntington Beach
Management's Discussion and Analysis
« For the Year Ended June 30, 2020
A condensed summary of governmental activities (in thousands) follows:
Governmental Activities
Amount Percent
Increase Increase
Revenues: June 30, 2020 June 30, 2019 (Decrease) (Decrease)
Program Revenues:
Charges for Current Services $ 59,819 $ 61,736 $ (1,917) -3.1%
Operating Grants and Contributions 8,141 6,644 1,497 22.5%
Capital Grants and Contributions 14,483 8,361 6,122 73.2%
Total Program Revenues 82,443 76,741 5,702 7.4%
General Revenues:
Property Taxes 94,263 89,124 5,139 5.8%
Sales Taxes 44,616 47,437 (2,821) -5.9%
Utility Taxes 18,149 18,788 (639) -3.4%
Franchise Taxes 7,872 6,225 1,647 26.5%
Transient Occupancy Tax 10,763 14,002 (3,239) -23.1%
Use of Money and Property 3,208 8,746 (5,538) -63.3%
From Other Agencies -Unrestricted 3,317 4,046 (729) -18.0%
Total General Revenues 182,188 188,368 (6,180) -3.3%
Total Revenues 264,631 265,109 (478) -0.2%
Expenses:
City Council 405 360 45 12.5%
City Manager 3,328 4,501 (1,173) -26.1%
City Treasurer 317 246 71 28.9%
City Attorney 3,136 2,886 250 8.7%
City Clerk 949 976 (27) -2.8%
Finance 6,661 6,245 416 6.7%
Human Resources - 6,261 (6,261) -100.0%
Community Development 15,722 6,144 9,578 155.9%
Fire 62,840 56,494 6,346 11.2%
Information Services 8,643 7,530 1,113 14.8%
Police 97,204 87,355 9,849 11.3%
Community Services 12,539 13,369 (830) -6.2%
Library Services 5,776 5,206 570 10.9%
Public Works 45,834 40,803 5,031 12.3%
Interest on Long-Term Debt 1,686 1,823 (137) -7.5%
Total Expenses 265,040 240,199 24,841 10.3%
Change in Net Position Before Transfers (409) 24,910
Transfers (38) (37)
Change in Net Position (447) 24,873
Net Position -Beginning of Year 479,348 454,475
Net Position -End of Year $ 478,901 $ 479,348
359
13
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended June 30, 2020
The cost of all governmental activities this year was $265,040,000. However, as shown
in the Statement of Activities, the amount that the taxpayers ultimately financed for these
activities was $182,597,000, because costs of $59,819,000 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 $8,141,000, and
capital grants and contributions of$14,483,000. Overall, the City's governmental program
revenues were $82,443,000. The City paid for the remaining "public benefit" portion of
governmental activities with $182,188,000 in taxes and general revenue (some of which
may only be used for certain programs) and with other revenues, such as interest and
general entitlements.
Charges for current services decreased $1,917,000 or 3.1 percent. As noted in the
financial highlights section, the absence of one-time revenue sources from large
development projects and City's responses to help mitigate the risks posed by COVID-19
negatively impacted the City's parking-related revenue and recreational fees which caused
the Charges for Current Services to drop. The one-time affordable housing in-lieu fee and
PCTA settlement payment received in fiscal year 2019/20 partially offset the loss in
revenue.
Operating Grants and Contributions increased by $1,497,000 or 22.5 percent and Capital
Grants and Contributions have increased by $6,122,000 or 73.2 percent, respectively,
primarily due to the Hermosa Vista and Huntington Pointe loan repayments of almost
$7,400,000.
Program expenses increased by $24,841,000 or 10.3 percent due to the rise in pension
and workers compensation costs coupled with the increase in spending on Police,
Community Development, Fire, and Public Works. Due to COVID-19 and a number of
protests that occurred in the latter part of the fiscal year, additional Police and Fire related
expenses were incurred. There were also several non-capital improvements that caused
the Community Development and Public Works expenses to increase.
Total resources available during the year to finance governmental operations were
$743,979,000 consisting of net position at July 1, 2019 of $479,348,000, program
revenues of $82,443,000, and general revenues of $182,188,000. Total expenses for
governmental activities during the year were $265,040,000 plus transfers of $38,000.
Thus, net position decreased by $477,000 or 0.1 percent, to $478,901,000.
360
14
i6 �* City of Huntington Beach
Management's Discussion and Analysis
� For the Year Ended June 30, 2020
A condensed summary of business-type activities (in thousands) follows:
Business-Type Activities
Amount Percent
Increase Increase
June 30, 2020 June 30, 2019 (Decrease) (Decrease)
Program Revenues:
Charges for Current Services $ 64,270 $ 68,124 $ (3,854) -5.7%
Total Program Revenues 64,270 68,124 (3,854) -5.7%
Use of Money and Property 2,746 3,235 (489) -15.1%
Total Revenues 67,016 71,359 (4,343) -6.1%
Expenses:
Water Utility 44,463 43,405 1,058 2.4%
Sewer Service 9,828 9,442 386 4.1%
Refuse Collection 12,609 12,051 558 4.6%
Hazmat Service 235 234 1 0.4%
Total Expenses 67,135 65,132 2,003 3.1%
Increase (Decrease)in Net Position Before
Transfers (119) 6,227
Transfers 38 37
Total Change In Net Position (81) 6,264
Net Position -Beginning of Year 203,596 197,332
Net Position -End of Year $ 203,515 $ 203,596
The City's net position from business-type activities decreased by $119,000 before
transfers. The formula to calculate the water connections and capital surcharge fees were
changed in July 2019 that ultimately led to lower revenues.
The cost of all business-type activities this year was $67,135,000. As shown in the
Statement of Activities, the amount paid by users of the systems was $64,270,000, other
revenue was $2,746,000, and transfers were $38,000. Beginning net position was
$203,596,000 and ending net position was $203,515,000, a decrease of$81,000 which is
less than a tenth of a percentage. Of the ending net position amount, $142,785,000, or
70.2 percent, was invested in capital assets, $22,248,000 or 10.9 percent was restricted
for expenses for the Water Master Plan, and $38,482,000, or 18.9 percent was
unrestricted.
Transfers in for business-type activities were $38,000 for the current year and $37,000 for
the prior year.
361
15
'. City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended June 30, 2020
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
Increase Increase
June 30 2020 June 30 2019 Decrease Decrease
Total Fund Equity:
General Fund $ 80,088 $ 79,013 $ 1,075 1.4%
Grants Special Revenue Fund 4,561 6,069 (1,508) -24.8%
LMIHAF Capital Projects Fund 9,485 5,541 3,944 71.2%
Total Fund Equity $ 94,134 $ 90,623 $ 3,511 3.9%
The General Fund Balance increased by $1,075,000. The increase in total expenditures
was minimal and the amount transferred out of the fund was lower in fiscal year 2019/20.
However, California's stay-at-home orders, decisions to temporarily close businesses,
CDTFA's sales tax deferral program and payment deadline extensions, City's TOT deferral
program and the general economic uncertainty caused by the pandemic tampered the
growth experienced in the first 3 quarters of the fiscal year and resulted in a loss of sales
tax, transient occupancy tax, utility users tax, parking revenues, and concessionaire
revenues.
The Grants Special Revenue Fund Balance decreased by $1,508,000 primarily due to the
increase in COVID-19 related expenditures that is anticipated to be reimbursed with
CARES Act and FEMA Disaster Relief funds, and other capital projects that have not been
reimbursed by the granting agencies. The bulk of the capital project expenditure increase
is related to the Atlanta Avenue Widening Project and various traffic signal projects
throughout the City including the Bolsa Chica/Pearce Traffic Signal Project,
Gothard/Center Signal Modification Project and Gothard/Slater Signal Modification
Project.
The LMIHAF Capital Projects Fund Balance increased by $3,944,000 as a result of
repayments received from loans issued by the City for down payment assistance and the
acquisition and construction of developments for low and moderate-income residents.
362
16
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended June 30, 2020
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
Increase Increase
June 30, 2020 June 30, 2019 (Decrease) (Decrease)
Net Position:
Water Fund $ 125,233 $ 127,391 $ (2,158) -1.7%
Sewer Fund 78,275 76,266 2,009 2.6%
Refuse Fund (83) (105) 22 21.0%
Hazmat Sendce Fund 90 44 46 104.5%
Total Net Position $ 203,515 $ 203,596 $ (81) 0.0%
Unrestricted Net Position:
Water Fund $ 11,125 $ 11,528 $ (403) -3.5%
Sewer Fund 27,506 25,457 2,049 8.0%
Refuse Fund (239) (282) 43 15.2%
Hazmat Service Fund 90 44 46 104.5%
Total Unrestricted Net Position $ 38,482 $ 36,747 $ 1,735 4.7%
The Water Fund total net position decreased by $2,158,000 due to lower revenues
recognized in fiscal year 2019/20 which also caused the unrestricted net position to decline
by $403,000. The Sewer Fund net position increased by $2,009,000 and unrestricted net
position increased by $2,049,000 due to planned sewer projects being deferred to the
following year. In addition, all enterprise funds with the exception of the Water Fund
generated revenues that exceeded the expenses incurred for the current fiscal year.
Long-Term Obligations
Below is a schedule of the changes to the City's long-term obligations (in thousands):
Balance July 1, Balance June
Governmental Activities: 2019 Additions Retirements 30, 2020
Revenue Bonds $ 39,150 $ - $ (3,485) $ 35,665
Compensated Absences 11,295 5,294 (3,956) 12,633
Claims Payable 35,026 13,068 (10,939) 37,155
Pollution Remediation 2,000 - - 2,000
LED Lighting Phase 1 656 (110) 546
I-Bank CLEEN Loan 2,454 - (283) 2,171
CEC Loan 2,818 - (230) 2,588
Leases Payable 5,083 1,172 (1,014) 5,241
Total Long-Term Obligations-Governmental
Activities 98,482 19,534 (20,017) 97,999
Business-Type Activities:
Compensated Absences 1,416 590 (391) 1,615
Business-Type Activities: 1,416 590 (391) 1,615
Total Long-Term Obligations $ 99,898 $ 20,124 $ (20,408) $ 99,614
363
17
City of Huntington Beach
Management's Discussion and Analysis
� For the Year Ended June 30, 2020
Additional information on the City's long-term debt is shown in Note 11 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. The City's total long-term obligations
decreased slightly by $284,000 or 0.3 percent from the prior fiscal year as debt service
payment were partially offset by a new lease in the amount of $1,172,000 that was
approved to finance the purchase of a fire engine and ambulance replacement.
The City continues to maintain strong credit ratings on all of its debt issues. Most notably,
on August 27, 2014 Fitch Ratings issued an AAA Implied General Obligation Bond rating
to the City of Huntington Beach and that same rating was most recently reaffirmed in July
2020. Additionally, in April 2019, the 1999 RDA bonds received a credit ratings increase
from Moody's Investor Service of two tiers, from A2 to Aa3.
The following are the ratings as determined by Moody's Investors Service and Standard
and Poor's as of June 30, 2020.
Debt Instrument Moody's S & P
1999 Tax Allocation Refunding Bonds Aa3 AA-
2002 Tax Allocation Refunding Bonds N/A AA-
2010 Lease Revenue Bonds, Series A Aa2 AA
2011 Lease Revenue Bonds, Series A Aa2 AA
2014 Lease Revenue Bonds, Series A N/A AA
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.
364
18
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended June 30, 2020
Below is a schedule of the City's capital assets, net of accumulated depreciation (in
thousands):
Amount Percent
Increase Increase
Governmental Activities: June 30, 2020 June 30, 2019 (Decrease) (Decrease)
Land $ 362,069 $ 362,534 $ (465) -0.1%
Buildings 126,779 128,628 (1,849) -1.4%
Machinery and Equipment 13,962 13,267 695 5.2%
Construction in Progress 7,515 7,631 (116) -1.5%
Infrastructure 204,434 196,409 8,025 4.1%
Total Governmental Activities 714,759 708,469 6,290 0.9%
Business-Type Activities:
Land 3,907 3,907 - 0.0%
Buildings 68,359 63,356 5,003 7.9%
Machinery and Equipment 7,025 7,776 (751) -9.7%
Construction in Progress 442 5,701 (5,259) -92.2%
Infrastructure 63,052 64,956 (1,904) -2.9%
Total Business-Type Activities 142,785 145,696 (2,911) -2.0%
Total Capital Assets $ 857,544 $ 854,165 $ 3,379 0.4%
Capital assets from governmental activities increased $6,290,000 or 0.9 percent. This
increase is largely due to street replacement infrastructure costs. Capital assets from
business-type activities decreased $2,911,000 or 2.0 percent largely due to regular
depreciation for the year. Further information on the City's capital assets can be found in
Note 12 of the financial statements.
General Fund Budgetary Highlights
Changes to Original Budget
Comparing the FY 2019/20 General Fund Original (i.e. Adopted) Budget expenditures
amount of $213,270,000 to the final budgeted amount of $219,038,000 shows a net
increase of $5,768,000, or 2.7 percent. This overall increase was largely the result of
budget carryovers from the previous year.
Final budgeted revenues for the General Fund decreased $5,207,000 or 2.3 percent from
the original (adopted) budget for the fiscal year ended June 30, 2020. The change from
original to final budget occurred primarily as a result of adjustments made to budgeted
property tax, other taxes, fines, forfeitures and penalties, charges for current services and
other revenues.
365
19
City of Huntington Beach
Management's Discussion and Analysis
-sm For the Year Ended June 30, 2020
Variance with Final Budget
General Fund actual revenues were less than the final budget by $388,000 for the fiscal
year ended June 30, 2020.
General Fund expenditures were $3,402,000 less than the final budget. The favorable
budget variance is due in large part to the following:
• The Community Services and Library Services Departments realized $914,000 in
savings primarily due to a reduction in city-provided services impacted by the
COVID-19 pandemic.
• The Public Works and Community Development Departments realized $1,532,000
in savings primarily due to differences in the projected versus actual timing of
design, construction, and maintenance contracts for projects, as well as the deferral
of various building and planning contracts.
Analysis of City's Other Major Governmental Funds
Grants Special Revenue Fund
The fund balance in the Grant Special Revenue Fund decreased by $1,508,000.
Significant grant expenditures in the current year were for Community Development Block
Grant, HOME Grant, street improvement and traffic signal grants and projects, and COVID-
19 related expenditures that will either be reimbursed by FEMA and/or funded with CARES
Act Funds from the State.
LMIHAF Capital Projects Fund
The fund balance in the LMIHAF Capital Projects Fund increased by$3,944,000 as a result
of repayments received for loans issued by the City for down payment assistance and the
acquisition and construction of developments for low and moderate-income residents.
Economic Factors and Next Year's Budget
The Adopted FY 2020/21 Budget is structurally balanced, totaling $359.0 million in All
Funds. This reflects a $22.0 million, or 5.8 percent decrease from the FY 2019/20 Adopted
All Funds Budget of$381.0 million. The largest All Funds decreases are attributed to the
Retirement Supplemental Fund ($3.1 million), Hotel/Motel Business Improvement District
(BID) ($1.1 million), Water Master Plan Fund ($1.6 million), and RORF Fund ($1.4 million).
The General Fund, which provides the majority of public services to the community, totals
$216.9 million, reflecting a $14.7 million, or 6.4 percent decrease from the FY 2019/20
366
20
City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended June 30, 2020
budget of$231.6 million in response to the anticipated impact of the COVID-19 pandemic.
The largest budget revenue decline is in Transient Occupancy Tax, which is anticipated to
decrease $7.4 million or 51.8 percent. Sales tax revenue, the second largest revenue
category for the City, was budgeted at $39.2 million, a decrease of 4.8 percent from the
FY 2019/20 Adopted Budget. The Adopted General Fund Budget for next year has no
reliance on one-time revenues to fund ongoing operations, which is critical to maintaining
the City's financial viability and success. Major highlights are as follows:
Public Safety: Funding for Public Safety represents 60 cents for every dollar spent in the
General fund. With over half of the General Fund Budget committed to the Police and Fire
Departments, the City has dedicated the greatest share of its resources, or $129.6 million
to these core services.
In the Police Department, the budget adds $1.6 million in equipment replacement including
replacement of 11 police vehicles. The CIP includes $300,000 for the Police Department
South substation renovation.
In the Fire Department, the Adopted Budget adds $452,000 in equipment replacement
including replacement of an ambulance, lifeguard rescue boats, and breathing air
compressors. The General Fund CIP includes $820,000 for modifications to the Heil Fire
Station apparatus bay entry and Lake Fire Station renovation.
An Existential Threat: Pension Cost Increases: In December 2016, the CaIPERS Board
of Administration voted to lower the annual expected rate of return for the over$300 billion
Statewide portfolio from the existing rate of 7.5 percent to 7.0 percent. While this is a
practical and financially sound response to the mounting pressure that PERS' investment
projections have gone largely unmet for years, this change will regrettably be fully borne
by cities and counties throughout the State, not by CaIPERS itself.
For the City of Huntington Beach, the increased pension costs have been significant. In
FY 2020/21, CalPERS costs are about $41.7 million in the General Fund. It is anticipated
the City will incur an additional $10.0 million per year in pension costs by FY 2024/25,
bringing the City's total CalPERS pension costs to approximately $55.8 million. While the
City Council and staff work diligently to mitigate the effects, these dramatic cost increases
have real world impacts. They limit the City's ability to invest in its infrastructure, enhance
services, and restore service level reductions made during the Great Recession.
The FY 2020/21 Adopted Budget is balanced. However, due to the continuing economic
downturn resulting from the COVID-19 pandemic, significant budget reductions were made
to minimize impacts to fund balance. This fiscally conservative approach to developing
the FY 2020/21 budget seeks to implement the City Council's priorities and strategic goals,
367
21
City of Huntington Beach
Management's Discussion and Analysis
� E4 . . For the Year Ended June 30, 2020
and continues to fund the most critical operations to meet the needs of our residents and
businesses; while also adapting to a new reality of constrained revenues.
General Fund Revenue
General Fund revenue is projected to be $216.9 million, a $13.9 million or 6.0 percent
decrease from the FY 2019/20 Adopted Budget resulting from the COVID-19 stay-at-home
and social distancing public health orders.
• Property Taxes are estimated at$94.4 million, reflecting an increase of 5.2 percent due
to the low interest rates leading to accelerated growth in assessed valuations.
• Sales Tax revenues are projected to be $39.2 million, a decrease of 4.8 percent from
fiscal year 2019/20. The decrease is due to mandated stay-at-home orders, which
severely reduced consumer activity.
• Transient Occupancy Taxes are anticipated to reach $6.9 million, a 51.7 percent
decrease due decline in occupancy in Huntington Beach hotels in the early part of the
fiscal year due to travel restrictions as a result of COVID-19 pandemic.
• Utility Users' Taxes, budgeted at $16.6 million, is decreasing by 7.3 percent due to the
long term trends towards energy conservation and bundled telecommunication
packages.
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 email tvi@surfcity-hb.org.
368
22
THIS PAGE INTENTIONALLY LEFT BLANK
369
23
BASIC FINANCIAL STATEMENTS
370
24
CITY OF HUNTINGTON BEACH
STATEMENT OF NET POSITION
JUNE 30,2020
(In Thousands)
Governmental Business-Type
ASSETS Activities Activities Total
Cash and Investments $ 211,878 $ 90,140 $ 302,018
Cash and Investments with Fiscal Agent 5,815 - 5,815
Receivables, Net 33,712 5,947 39,659
Advances to Successor Agency 1,363 - 1,363
Inventories - 1,433 1,433
Prepaids 770 - 770
Joint Venture 257 1,318 1,575
Subtotal 253,795 98,838 352,633
Capital Assets:
Non-Depreciable 369,584 4,349 373,933
Depreciable, Net 345,175 138,436 483,611
Total Capital Assets 714,759 142,785 857,544
Total Assets 968,554 241,623 1,210,177
DEFERRED OUTFLOWS OF RESOURCES
Deferred Outflows Related to Pensions 51,659 2,925 54,584
Deferred Outflows Related to Other Postemployment Benefits 2,840 337 3,177
Total Deferred Outflows of Resources 54,499 3,262 57,761
LIABILITIES
Current Liabilities:
Accounts Payable 6,510 8,611 15,121
Accrued Payroll 5,666 548 6,214
Unearned Revenue 7,095 - 7,095
Accrued Interest Payable 568 - 568
Deposits 2,361 1,793 4,154
S u btota 1 22,200 10,952 33,152
Long-Term Obligations:
Long-Term Obligations Due Within One Year 17,763 440 18,203
Long-Term Obligations Due in More than One Year 80,236 1,175 81,411
Net Pension Liability 407,316 27,499 434,815
Net Other Postemployment Benefits Liability 3,263 389 3,652
Total Long-Term Obligations 508,578 29,503 538,081
Total Liabilities 530,778 40,455 571,233
DEFERRED INFLOWS OF RESOURCES
Deferred Inflows Related to Pensions 10,758 603 11,361
Deferred Inflows Related to Other Postemployment Benefits 2,616 312 2,928
Total Deferred Inflow of Resources 13,374 915 14,289
NET POSITION
Net Investment in Capital Assets 673,498 142,785 816,283
Restricted for:
Debt Service 16,986 - 16,986
Capital Projects 11,761 22,248 34,009
Public Works and Community Services Projects 51,179 - 51,179
Total Restricted Net Position 79,926 22,248 102,174
Unrestricted (274,523) 38,482 (236,041)
Total Net Position $ 478,901 $ 203,515 $ 682,416
See Notes to Financial Statements 371
25
CITY OF HUNTINGTON BEACH
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30,2020
(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 $ 405 $ 177 $ - $ - $ (228) $ $ (228)
City Manager 3,328 5,315 40 17 2,044 2,044
City Treasurer 317 163 - - (154) (154)
City Attorney 3,136 7 (3,129) (3,129)
City Clerk 949 220 (729) (729)
Finance 6,661 3,302 - - (3,359) (3,359)
Community Development 15,722 10,037 3,826 5,477 3,618 3,618
Fire 62,840 10,122 80 - (52,638) (52,638)
Information Services 8,643 636 - (8,007) (8,007)
Police 97,204 5,329 1,689 (90,186) (90,186)
Community Services 12,539 17,631 373 5,465 5,465
Library Services 5,776 266 167 - (5,343) (5,343)
Public Works 45,834 6,614 1,966 8,989 (28,265) (28,265)
Interest on Long-Term Debt 1,686 - - - (1,686) (1,686)
Total Governmental Activities 265,040 59,819 8,141 14,483 (182,597) (182,597)
Business-type Activities:
Water Utility 44,463 40,518 - - (3,945) (3,945)
Sewer Service 9,828 10,900 1,072 1,072
Refuse Collection 12,609 12,573 (36) (36)
Hazmat Service 235 279 44 44
Total Business-Type Activities 67,135 64,270 (2,865) (2,865)
Total Governmental and Business
Type Activities $ 332,175 $ 124,089 $ 8,141 $ 14,483 $ (182,597) $ (2,865) $ (185,462)
General Revenues:
Taxes:
Property Taxes 94,263 94,263
Sales Taxes 44,616 44,616
Utility Taxes 18,149 18,149
Franchise Taxes 7,872 7,872
Transient Occupancy Tax 10,763 10,763
Total Taxes 175,663 - 175,663
Other:
Use of Money and Property 3,208 2,746 5,954
From Other Agencies-Unrestricted 3,317 - 3,317
Total General Revenues 182,188 2,746 184,934
Transfers (38) 38 -
Total General Revenues and Transfers 182,150 2,784 184,934
Change in Net Position (447) (81) (528)
Net Position-Beginning of Year 479,348 203,596 682,944
Net Position-End of Year $ 478,901 $ 203,515 $ 682,416
See Notes to Financial Statements 372
26
CITY OF HUNTINGTON BEACH
BALANCE SHEET
GOVERNMENTALFUNDS
JUNE 30,2020
(in Thousands)
Grants Other
Special LMIHAF Capital Governmental
ASSETS General Fund Revenue Projects Funds Total
Cash and Investments $ 76,184 $ 11,543 $ 8,130 $ 77,095 $ 172,952
Cash and Investments with Fiscal Agent - 30 - 5,785 5,815
Taxes Receivable 11,350 - - 1,098 12,448
Other Receivables, Net 7,523 4,266 9,036 305 21,130
Advances to Successor Agency - - 1,363 - 1,363
Prepaids 120 50 - 170
TOTAL ASSETS $ 95,177 $ 15,839 $ 18,579 $ 84,283 $ 213,878
LIABILITIES,DEFERRED INFLOWS OF RESOURCES
AND FUND BALANCES
Liabilities:
Accounts Payable $ 3,888 $ 720 $ 78 $ 1,286 $ 5,972
Accrued Payroll 5,389 186 8 60 5,643
Unearned Revenue 626 6,469 - - 7,095
Deposits Payable 2,360 1 - - 2,361
Total Liabilities 12,263 7,376 86 1,346 21,071
Deferred Inflows of Resources:
Unavailable Revenue 2,826 3,902 9,008 15,736
Total Deferred Inflows of Resources 2,826 3,902 9,008 15,736
Fund Balances:
Nonspendable
Prepaids 120 50 170
Restricted
Underground Utilities 364 - 364
Restitution 282 282
Senior Center Donations 180 180
Section 115 Trust 7,503 - 7,503
Pollution Remediation - 355 355
Debt Service 16,986 16,986
Highways, Streets and Transportation - 14,049 14,049
Low Income Housing 9,435 2,350 11,785
Air Quality - 1,262 1,262
Other Capital Projects - - 20,752 20,752
Other Purposes 991 4,561 1,921 7,473
Committed
Economic Uncertainties 25,010 - - 25,010
Parks - 1,951 1,951
Other Capital Projects - 19,784 19,784
Assigned
Capital Improvement Reserve 8,046 3,527 11,573
Equipment Replacement 8,295 - 8,295
General Plan Maintenance 791 791
General Liability Plan Migration 2,801 2,801
Cityview Replacement 1,028 1,028
Section 115 Trust 2,500 2,500
Triple Flip 896 896
Strategic Initiatives 16,536 16,536
Housing Agreement 101 101
Year-End Fair Value 1,983 1,983
Other Purposes 2,661 - - 2,661
TOTAL FUND BALANCES 80,088 4,561 9,485 82,937 177,071
TOTAL LIABILITIES, DEFERRED INFLOWS
OF RESOURCES AND FUND BALANCES $ 95,177 $ 15,839 $ 18,579 $ 84,283 $ 213,878
See Notes to Financial Statements 373
27
CITY OF HUNTINGTON BEACH
RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS
TO THE STATEMENT OF NET POSITION
J U N E 30,2020
(in Thousands)
Amounts reported for governmental activities in the statement of net position are
different because:
Total Fund Balances Governmental Funds $ 177,071
Net capital assets used in governmental activities are not current financial resources and,
therefore, are not reported in the governmental funds. Amounts exclude net Capital Assets
of the Internal Service Funds,
Capital Assets 1,077,066
Accumulated Depreciation (366,365)
Total Capital Assets 710,701 710,701
Joint Venture 257
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 must be added to the Statement of Net Position. 4,727
Revenues that are measurable but not available are not recognized as revenue in
govemmental funds. Such amounts are recorded as unavailable revenue under the
modified accrual basis of accounting. 15,736
Deferred outflows related to pensions 51,518
Deferred outflows related to Other Postemployment Benefits (OPEB) 2,824
Governmental funds report all pension contributions as expenditures; however, in the
statement of net position, the excess of the total pension liability over the plan
fiduciary net position is reported as a net pension liability. (405,988)
Deferred inflows related to pensions (10,729)
Deferred inflows related to Other Postemployment Benefits (OPEB) (2,602)
Governmental funds report all OPEB contributions as expenditures; however, in the
statement of net position, the excess of the total OPEB liability over the plan fiduciary
net position is reported as a net pension liability. (3,246)
Other long-term liabilities are not due in the current period and, therefore, are not recorded
in the governmental funds.
Accrued Interest Payable (568)
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.
Amounts exclude Long-Term Obligation of the Internal Service Fund.
Long-Term Obligations Due in One Year (8,849)
Long-Term Obligations Due in More than One Year (51,951)
Net Position of Governmental Activities $ 478,901
See Notes to Financial Statements 374
28
CITY OF HUNTINGTON BEACH
STATEMENT OF REVENUES, EXPENDITURES,AND
CHANGES IN FUND BALANCES
GOVERNMENTALFUNDS
FOR THE YEAR ENDED JUNE 30,2020
(In Thousands)
Grants LMIHAF Other
General Special Capital Governmental
REVENUES Fund Revenue Projects Funds Total
Property Taxes $ 87,497 $ - $ - $ 6,766 $ 94,263
Sales Taxes 41,063 - - 3,553 44,616
Utility Taxes 18,149 - - - 18,149
Other Taxes 17,499 - - 7,079 24,578
Licenses and Permits 8,368 - - 2,898 11,266
Fines and Forfeitures 3,403 - - - 3,403
From Use of Money and Property 17,510 2,508 5,688 2,157 27,863
Intergovernmental 4,102 5,292 - 1,915 11,309
Charges for Current Services 25,501 - - 4,022 29,523
Other 2,395 989 - 1,865 5,249
Total Revenues 225,487 8,789 5,688 30,255 270,219
EXPENDITURES
Current:
City Council 394 - - - 394
City Manager 4,045 11 286 4,342
City Treasurer 297 - - - 297
City Attorney 2,898 - - - 2,898
City Clerk 874 12 - - 886
Finance 6,174 5 - 21 6,200
Community Development 9,184 1,859 1,339 2,310 14,692
Fire 55,030 1,447 - - 56,477
Information Services 7,812 105 - 556 8,473
Police 85,993 1,689 - - 87,682
Community Services 9,064 809 - 4,556 14,429
Library Services 4,752 290 - 157 5,199
Public Works 27,264 3,927 - 16,464 47,655
Debt Service:
Principal 1,637 - - 3,485 5,122
Interest 218 - - 1,530 1,748
Total Expenditures 215,636 10,154 1,339 29,365 256,494
Excess(Deficiency)Of Revenues Over
(Under)Expenditures 9,851 (1,365) 4,349 890 13,725
OTHER FINANCING SOURCES (USES)
Transfers In 172 36 - 9,801 10,009
Issuance of Long-Term Debt - - - 1,172 1,172
Transfers Out (8,948) (179) (405) (515) (10,047)
Total Other Financing Sources (Uses) (8,776) (143) (405) 10,458 1,134
Net Change In Fund Balances 1,075 (1,508) 3,944 11,348 14,859
Fund Balances-Beginning Of Year 79,013 6,069 5,541 71,589 162,212
Fund Balances-End Of Year $ 80,088 $ 4,561 $ 9,485 $ 82,937 $ 177,071
See Notes to Financial Statements 375
29
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 JUNE 30,2020
(In Thousands)
Amounts reported for governmental activities in the
Statement of Activities are different because:
Net Changes in Fund Balances-Total Governmental funds $ 14,859
Capital Expenditures -Govemmental funds report capital outlays as
expenditures. However, in the Statement of Activities, the cost of these
assets are allocated over their estimated useful livers and reported as
depreciation expense.
Depreciable Assets Purchased 21,527
Non-Depreciable Assets Purchased 2,423
Non-Depreciable Assets Disposition (2,331)
Capital Asset Dispositions (3,117)
Capital Asset Depreciation (14,096)
Joint Venture (2,455)
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 Grant and Other Revenue Accrual 2,922
Prior Year Grant and Other Revenue Accrual (2,289)
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. 1,371
Pension expenses reported in the statement of activities includes the change in the
net pension liability and related changes in pension amounts for deferred outflows and
deferred inflows of resources. (23,875)
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). 435
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. 1,516
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 (568)
Prior Year Interest Accrual 630
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. 5,122
The issuance of long-term debt provides current financial resources to governmental
funds. (1,172)
The repayment of some expenses such as compensated absences, claims,and
pension expenses, reported in the Statement of Activities, do not require the use of
current resources, and therefore are not reported as expenditures in the
governmental funds. (1,349)
Change in Net Position of Governmental Activities $ (447)
See Notes to Financial Statements 376
30
CITY OF HUNTINGTON BEACH
STATEMENT OF NET POSITION
PROPRIETARYFUNDS
FOR THE YEAR ENDED JUNE 30,2020
(In Thousands)
Governmental
Business-Type Activities-Enterprise Funds Activities
Sewer Hazmat
Water Service Refuse Service Internal Service
Fund Fund Fund Fund Total Funds
ASSETS
Current Assets:
Cash and Investments $ 32,517 $ 34,415 $ 483 $ 477 $ 67,892 $ 38,926
Restricted Cash and Investments 22,248 - - - 22,248 -
Other Recehables,Net 2,129 513 383 8 3,033 134
Prepaids - - - - - 600
Joint Ventures 1,318 1,318 -
Imentories 1,433 1,433
Unbilled Receivables 1,868 476 570 - 2,914
Total Current Assets 61,513 35,404 1,436 485 98,838 39,660
Capital Assets:
Land 3,907 - - - 3,907 -
Buildings and Impro\,ements 57,299 42,784 - 100,083 -
Machinery and Equipment 16,362 4,081 215 20,658 4,871
Infrastructure 101,865 44,096 - 145,961 -
Construction in Progress 15 427 - 442 -
Less Accumulated Depreciation (87,588) (40,619) (59) (128,266) (813)
Total Capital Assets 91,860 50,769 156 142,785 4,058
Total Assets 153,373 86,173 1,592 485 241,623 43,718
DEFERRED OUTFLOWS OF RESOURCES
Deferred Outflows Related to Pensions 2,047 766 68 44 2,925 141
Deferred Outflows Related to Other Postemployment Benefits 243 83 8 3 337 16
Total Deferred Outflows of Resources 2,290 849 76 47 3,262 157
LIABILITIES
Current Liabilities:
Accounts Payable 6,938 664 1,009 - 8,611 538
Accrued Payroll 370 157 11 10 548 23
Deposits Payable 1,793 - - - 1,793 -
Current Portion of Claims Payable - - - - - 8,902
Current Portion of Compensated Absences 315 108 16 1 440 12
Total Current Liabilities 9,416 929 1,036 11 11,392 9,475
Non-Current Liabilities:
Compensated Absences 840 288 44 3 1,175 32
Net Pension Liability 19,249 7,199 639 412 27,499 1,328
Net Other Postemployment Benefits Liability 279 96 10 4 389 17
Claims Payable - - - - - 28,253
Total Non-Current Liabilities 20,368 7,583 693 419 29,063 29,630
Total Liabilities 29,784 8,512 1,729 430 40,455 39,105
DEFERRED INFLOWS OF RESOURCES
Deferred Inflows Related to Pensions 422 158 14 9 603 29
Deferred Inflows Related to Other Postemployment Benefits 224 77 8 3 312 14
Deferred Inflows Related to Pensions 646 235 22 12 915 43
Total Deferred Inflows of Resources ' 646 ° 235 ° 22 12 915 43
NET POSITION
Investment in Capital Assets 91,860 50,769 156 - 142,785 4,058
Restricted for:
Capital Projects 22,248 - - - 22,248 -
Unrestricted 11,125 27,506 (239) 90 38,482 669
Total Net Position $ 125,233 $ 78,275 $ (83) $ 90 $ 203,515 $ 4,727
See Notes to Financial Statements 377
31
CITY OF HUNTINGTON BEACH
STATEMENT OF REVENUES,EXPENSES,AND CHANGES IN FUND NET POSITION
PROPRIETARY FUNDS
FOR THE YEAR ENDED JUNE 30,2020
(In Thousands)
Governmental
Business-Type Activities-Enterprise Funds Activities
Sewer Hazmat
Water Service Refuse Service Internal Service
Fund Fund Fund Fund Total Funds
OPERATING REVENUES
Sales $ 37,205 $ - $ - $ - $ 37,205 $ -
Fees and Charges for Service - 10,867 12,488 279 23,634 16,815
Other 3,313 33 85 3,431 75
Total Operating Revenues 40,518 10,900 12,573 279 64,270 16,890
OPERATING EXPENSES
Water Purchases 16,389 - - - 16,389 -
Supplies and Operations 10,676 7,742 12,588 235 31,241 4,856
Engineering 2,205 - - - 2,205 -
Production and Distribution 7,706 7,706
Maintenance 217 217
Water Meters 2,228 2,228
Water Quality 890 890
Water Use Efficiency 242 242 -
Claims and Judgments - - 11,044
Depreciation 3,910 2,086 21 6,017 518
Total Operating Expenses 44,463 9,828 12,609 235 67,135 16,418
Operating Income(Loss) (3,945) 1,072 (36) 44 (2,865) 472
NON-OPERATING REVENUES(EXPENSES)
Interest Income 1,787 937 7 15 2,746 1,044
Income(Loss)Before Transfers (2,158) 2,009 (29) 59 (119) 1,516
TRANSFERS
Transfers In - 51 - 51 -
Transfers Out - (13) (13)
Total Transfers 51 (13) 38 -
Change in Net Position (2,158) 2,009 22 46 (81) 1,516
Net Position-Beginning Of Year 127,391 76,266 (105) 44 203,596 3,211
Net Position-End Of Year $ 125,233 $ 78,275 $ (83) $ 90 $ 203,615 $ 4,727
See Notes to Financial Statements 378
32
CITYOF HUNTINGTON BEACH
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
FOR THE YEAR ENDED JUNE 30,2020
(In Thousands)
Gove rn me nta I
Business-Type Activities-Enterprise Funds Activities
Sewer Hazmat
Water Service Refuse Service Internal Service
Fund Fund Fund Fund Total Funds
CASH FLOWS FROM OPERATING ACTIVITIES
Cash Received from Customers and Users $ 42,776 $ 10,954 $ 12,582 $ 279 $ 66,591 $ 16,922
Cash Paid to Employees for Services (9,591) (3,646) (303) (207) (13,747) (681)
Cash Paid to Suppliers of Goods and Services (28,041) (3,997) (12,167) (10) (44,215) (12,183)
Net Cash and Investment Provided by
Operating Activities 5,144 3,311 112 62 8,629 4,058
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Transfers In - - 51 - 51 -
Transfers Out - (13) (13)
Net Cash and Investments Provided(Used)by
Noncapital Financing Activities 51 (13) 38
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Purchase of Capital Assets (1,060) (2,046) - - (3,106) (2,402)
Net Cash and Investments Used by
Capital and Related Financing Activities (1,060) (2,046) - (3,106) (2,402)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest Received 1,787 937 7 15 2,746 1,044
Net Cash and Investments Provided by
Investing Activities 1,787 937 7 15 2,746 1,044
Net Increase(Decrease)in Cash and Investments 5,871 2,202 170 64 8,307 2,700
Cash and Investments-Beginning of Year 48,894 32,213 313 413 81,833 36,226
Cash and Investments-EndofYear $ 54,765 $ 34,415 $ 483 $ 477 $ 90,140 $ 38,926
RECONCILIATION OF OPERATING
INCOME(LOSS)TO NET CASH AND INVESTMENTS
PROVIDED(USED)BY OPERATING ACTIVITIES
Operating Income(Loss) $ (3,945) $ 1,072 $ (36) $ 44 $ (2,865) $ 472
Adjustments to Reconcile Operating
Income(Loss)to Net Cash and Investments
Provided(Used)by Operating Activities
Depreciation 3,910 2,086 21 6,017 518
(Increase)Decrease in Other Receivables,Net 2,245 39 55 2,339 32
(Increase)in Unbilled Receivables (109) 15 (46) (140) -
Decrease in Prepaids - - - - 818
(increase)in Joint Ventures 543 543 -
Decrease in Inventory (15) - - (15) -
Increase(Decrease)in Accounts Payable 1,326 (333) 85 1,078 41
Increase(Decrease)in Accrued Payroll 93 51 3 3 150 3
Increase in Deposits Payable 122 - - - 122 -
(Decrease)in Claims Payable - - - - - 2,129
Increase(Decrease)in Compensated Absences 133 66 1 (1) 199 (11)
Decrease in Deferred Pension Outflow 330 123 11 8 472 24
(Decrease)in Deferred Pension Inflow (104) (39) (3) (3) (149) (8)
Increase in Net Pension Liability 652 243 22 11 928 44
(Increase)in Deferred Other Postemployment Benefits Outflow (35) (12) (1) - (48) (3)
Increase in Deferred Other Postemployment Benefits Inflow 224 77 8 3 312 14
(Decrease)in Net Other Postemployment Benefits Liability (226) (77) (8) (3) (314) (15)
Net Cash and Investments Provided
by Operating Activities $ 5,144 $ 3,311 $ 112 $ 62 $ 8,629 $ 4,058
NONCASH INVESTING,CAPITAL,AND FINANCING ACTIVITIES
There were no noncash investing,capital,or financing activities during the year ended June 30,2020.
See Notes to Financial Statements 379
33
CITY OF HUNTINGTON BEACH
STATEMENT OF FIDUCIARY FUND NET POSITION
FIDUCIARY FUNDS
JUNE 30,2020
(In Thousands)
Huntington Beach
Pension Trust Redevelopment
Fund-Retirement successor Agency
Total Agency Supplemental Private Purpose
ASSETS Funds Fund Trust
Cash and Investments $ 9,808 $ 505 $ 7,625
Cash and Investments with Fiscal Agent 3,449 - 2,569
Mutual Funds - 57,300 -
Money Market Funds - 1,716 -
Accounts Receivable, Net 557 1 32
Total Assets $ 13,814 $ 59,522 $ 10,226
LIABILITIES
Accounts Payable $ 1,096 $ - $ 476
Accrued Payroll 9 - 5
Due to Bondholders 6,116 - -
Advances from City of Huntington Beach - - 1,363
Held for Others 6,593 - -
Long-Term Obligations
Long-Term Obligations Due Within One Year - - 3,959
Long-Term Obligations Due in More than One Year - - 29,857
Total Liabilities $ 13,814 $ - $ 35,660
NET POSITION
Restricted for Pension Benefits $ 59,522
Held in Trust For Other Purposes $ (25,434)
CITYOF HUNTINGTON BEACH
STATEMENT OF CHANGES IN FIDUCIARY FUND NET POSITION
FIDUCIARY FUNDS
FOR THE YEAR ENDED JUNE 30,2020
(In Thousands)
Huntington Beach
Pension Trust Redevelopment
Fund-Retirement Successor Agency
Supplemental Private Purpose
ADDITIONS Fund Trust
Employer Contributions $ 3,995 $ -
Property Taxes - 5,233
Total Additions Before Investment Income 3,995 5,233
Investment Income:
Investment Income 2,229 242
Less Investment Expense (116) -
Net Investment Income 2,113 242
Total Additions 6,108 5,475
DEDUCTIONS
Benefits 5,012 -
Administrative Costs 444 -
Economic Development - 153
Interest and Fiscal Agency Expenses - 2,019
Total Deductions 5,456 2,172
Change in Net Position 652 3,303
Net Position -Beginning of Year 58,870 (28,737)
Net Position -End of Year $ 59,522 $ (25,434)
See Notes to Financial Statements 380
34
THIS PAGE INTENTIONALLY LEFT BLANK
381
35
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
Footnote
Number Description Page
1. Summary of Significant Accounting Policies............................37-53
2. Cash and Investments..................................................................54-62
3. Other Receivables.........................................................................62-63
4. Unearned Revenue.......................................................................64
5. Unavailable Revenue ...................................................................64
6. Retirement Plan — Normal ...........................................................65-75
7. Retirement Plan — Supplemental ...............................................75-82
8. Other Post Employment Benefits ..............................................83-89
9. Risk Management ................................................................90-91
10. Interfund Transactions..........................................................................92-93
11. Long-Term Obligations.................................................................94-104
12. Capital Assets................................................................................ 104-106
13. Investment in Joint Ventures.......................................................106
14. Related Party Transaction........................................................... 106
15. Successor Agency Trust for Assets of the Former
Redevelopment Agency of the City of Huntington Beach.....107-114
16. Commitments and Contingencies.............................................. 114-118
17. Other Information ......................................................................... 118
18. Subsequent Events ...................................................................... 118-120
382
36
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
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) or
presented as a fiduciary trust fund with the primary government for financial
reporting purposes. The criteria used in determining the scope of the reporting
entity are based on the provisions of GASB Statement 14, The Financial Reporting
Entity, as amended by GASB Statement 39, Determining Whether Certain
Organizations Are Component Units, and GASB Statement 61, The Financial
Reporting Entity. Omnibus an amendment of GASB Statements No. 14 and No. 34.
A legally separate, tax exempt organization should be reported as a blended
component unit of the City if all of the following criteria are met:
1. The governing board is substantively the same as the primary government and
there is a financial benefit or burden relationship between the primary
government and the component unit;
2. The component unit provides services entirely, or almost entirely, to the primary
government or otherwise exclusively, or almost exclusively, benefits the primary
government even though it does not provide services directly to it; and
3. The component unit's total debt outstanding, including leases, is expected to be
repaid entirely or almost entirely with the resources of the primary government.
Based on the application of the criteria listed above, the following component units
have been included.
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.
383
37
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
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, Chief Financial Officer, and the City
Manager (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, deferred inflows/outflows of
resources, 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.
384
38
City of Huntington Beach
.. Notes to Financial Statements
For the Year Ended June 30, 2020
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.
As a general rule, the effects of interfund activity have been eliminated from the
government-wide financial statements.
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.
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 $79,926,000 of governmental
activities restricted net position, of which $42,686,000 is restricted by enabling
legislation. The government-wide Statement of Net Position reports $22,248,000
of business-type activities restricted net position, of which all is restricted by
enabling legislation. This category presents restrictions placed on the categories
of Capital Projects, Debt Service, and Specific Projects and Programs.
385
39
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Unrestricted Net Position — This category represents the net position of the City,
not restricted for any project or other purpose. The government-wide Statement of
Net Position reports a deficit unrestricted net position of $274,523,000 of
governmental activities unrestricted net position, which is largely a result of the
recent implementation of GASB Statement Nos. 68 and 75 that requires the City to
report Net Pension Liabilities and Net Other Post-Employment Benefits (OPEB)
Liability. The City's Net Pension Liability at June 30, 2020 is $434,815,000 and Net
OPEB Liability is $3,652,000, respectively, of which $407,316,000 and $3,263,000,
respectively, is payable from Governmental Activities. The government-wide
Statement of Net Position reports $38,482,000 of business-type activities
unrestricted net position.
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, current liabilities, and deferred inflows are included on the Balance
Sheets. The Statement of Revenues, Expenditures, and Changes in Fund Balances
presents 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.
386
40
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
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 includes amounts that are not in spendable form
and typically includes inventories, prepaid items, and other items that by
definition cannot be appropriated.
• 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 by formal action as specified by the City's Fund Balance Policy.
Commitments to fund balance are made through adoption of a resolution by City
Council.
• 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 Manager or designee has the authority to
establish, modify, or rescind a fund balance assignment as specified by the
City's Fund Balance Policy.
• 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.
387
41
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
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 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 June 30, 2020, by major fund (in thousands):
General Fund $ 4,520
Grants Special Revenue 796
LMIHAF Capital Projects 3,031
Other Governmental Funds 18,676
Total Encumbrance All Funds $ 27,023
Economic Uncertainties Reserve
The City Council established an Economic Uncertainties 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. 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 in excess of $1 million 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.
388
42
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Proprietary Fund 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 major proprietary fund.
Proprietary funds are accounted for using the "economic resources" measurement
focus and the accrual basis of accounting. Accordingly, all assets, deferred
inflows/outflows, 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.
The internal service funds, which provide services to the other funds of the City, are
presented in a single column in the proprietary funds financial statements. Because
the principal users of the internal services funds are the City's governmental
activities, the assets and liabilities of the internal service funds are consolidated into
the governmental activities column of the government-wide Statement of Net
Position. The costs of the internal service fund services are spread to the
appropriate function or program on the government-wide Statement of Activities and
the revenues and expenses within the internal service funds are eliminated from the
government-wide financial statements to avoid any doubling effect of these
revenues and expenses.
389
43
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 are made to the Supplemental Plan
based on the City's policy to fund the required contributions as determined by the
Plan's actuary and are recognized when they are made. The Retiree Medical
Insurance Trust Fund accounts for the activities of the City's Other Post-
Employment Benefits plans, which provide postemployment medical insurance to
retirees.
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.
The City reports the following major funds:
Governmental Funds
General Fund — accounts for activity not required to be accounted for in another
fund.
Grants 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.
390
44
' City of Huntington Beach
Notes to Financial Statements
. „ For the Year Ended June 30, 2020
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 and report financial resources that are
restricted, committed, or assigned to expenditure for principal and interest.
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.
Internal Service Funds
Self Insurance Workers' Comp Fund — accounts for the City's self insurance
workers' compensation program in an internal service fund.
Self Insurance General Liability Fund — accounts for the City's self insurance
general liability program in an internal service fund.
Equipment Replacement Fund — accounts for the City's equipment replacement
needs in an internal service fund.
Fiduciary 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 State's Dissolution Act.
391
45
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
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.
For financial reporting purposes, investments are adjusted to their fair value
whenever the difference between fair value and the carrying amount is material.
Changes in fair value that occur during the fiscal year are recognized as
investments income reported for that fiscal year. Investment income includes
interest earnings, changes in fair value and any gains or losses realized upon the
liquidation or sale of investments.
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. In June 2020, the City Council adopted a resolution authorizing the deposit
and investment of excess funds in the Orange County Investment Pool (OCIP). The
investments in OCIP are managed by the County Treasurer. The City's investment
policy is further discussed in Note 2 on page 54.
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.
392
46
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
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 acquisition
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
f. Unearned Revenue
In the government-wide and the fund-level financial statements, unearned revenues
are those where the asset recognition (availability criteria) has been met, but the
revenue recognition criteria have not been met.
393
47
a:
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
g. Deferred Outflows/Inflows of Resources
In addition to assets, the statement of financial position will sometimes report a
separate section for deferred outflows of resources. This separate financial
statement element, deferred outflows of resources, represents a consumption of
net position that applies to future periods and so will not be recognized as an outflow
of resources (expense/expenditure) until then. The City reports deferred outflows
related to pensions and OPEB which are the result of the implementation of GASB
Statement Nos. 68 and 75.
In addition to liabilities, the statement of financial position will sometimes report a
separate section for deferred inflows of resources. This separate financial statement
element, deferred inflows of resources, represents an acquisition of net position that
applies to a future periods and so will not be recognized as an inflow of resources
(revenue) until that time. The City reported the following in this category:
1. Unavailable revenues (which include revenues, notes, and long-term
receivables) measured under the modified accrual basis of accounting reported
in governmental funds. These amounts are deferred and will be recognized as
an inflow of resources in the period that the amounts become available.
2. Changes in the net pension liability not included in pension expense.
3. Changes in the net other postemployment benefits liability not included in OPEB
expense.
h. Inventories
Proprietary fund inventories are valued at weighted-average cost and consist of
expendable supplies and repair parts. The cost of such inventories is recorded as
expenditures/expenses when consumed rather than when purchased.
394
48
911U 5. City of Huntington Beach
_ Notes to Financial Statements
�T For the Year Ended June 30, 2020
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
i. 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 monies that are to be paid or to be received from other
funds.
j. 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 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.
k. Employee Compensated Absences
The City records the cost of all accumulated and unused leave time (vacation, sick,
and comp) 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.
395
49
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
I. 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. City property tax revenues are
recognized when levied in the governmental funds to the extent that they result in
current receivables collectible within 60 days after year-end.
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, July 1 - 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
396
50
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
m. 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:
• Annual ROPS submission due to Department of Finance, February 1
• Distribution of RPTTF to Successor Agencies for the July-December ROPS
period, June 1
• Distribution of RPTTF to Successor Agencies for the January-June ROPS
period, January 2
n. 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.
o. 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.
397
51
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
p. Pensions and OPEB
For purposes of measuring the net pension liability, net OPEB liability, related
deferred outflows of resources and deferred inflows of resources, pension/OPEB
expense, information about the fiduciary net position of the Plan and additions
to/deductions from the Plan's fiduciary net position have been determined on the
same basis as they are reported by the CaIPERS' Financial Office and the City's
Defined Benefit Pension Plan. For this purpose, benefit payments (including
refunds of employee contributions) are recognized when currently due and payable
in accordance with the benefit terms. Investments are reported at fair value.
GASB Statement Nos. 68 and 75 require reported results to pertain to liability and
asset information within certain defined timeframes. For this report, the following
timeframes are used.
Supplemental Other
Employee CalPERS Post-Employment
Retirement Plan Pension Plans Benefit Plan
Valuation Date (VD) June 30, 2019 June 30, 2018 June 30, 2019
Measurement Date (MD) June 30, 2020 June 30, 2019 June 30, 2019
Measurement Period (MP) July 1, 2019 to July 1, 2018 to July 1, 2018 to
June 30, 2020 June 30, 2019 June 30, 2019
398
52
j City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
q. Fair Value Measurements
Certain assets and liabilities are required to be reported at fair value. The fair value
framework provides a hierarchy that prioritizes the inputs to valuation techniques
used to measure fair value. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (Level 1
measurements) and the lowest priority to unobservable inputs (Level 3
measurements). The three levels of fair value hierarchy are described as follows:
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for
identical assets or liabilities in active markets.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly or indirectly and fair value is determined
through the use of models or other valuation methodologies including:
• Quoted prices for similar assets or liabilities in active markets;
• Quoted prices for identical or similar assets or liabilities in markets that are
inactive;
• Inputs other than quoted prices that are observable for the asset or liability;
• Inputs that are derived principally from or corroborated by observable market
data by correlation or other means.
Level 3 - Inputs to the valuation methodology are unobservable and significant to
the fair value measurement. These unobservable input reflect the City's own
assumptions about the inputs market participants would use in pricing the asset or
liability (including assumptions about risk). These unobservable inputs are
developed based on the best information available in the circumstances and may
include the City's own data.
399
53
t City of Huntington Beach
Notes to Financial Statements
tr ., . For the Year Ended June 30, 2020
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 Section
53601 (or the City's investment policy, where more restrictive) that address interest
rate risk and concentration of credit risk. This table does not address investments of
debt proceeds held by bond trustees that are governed by the provisions of debt
agreements of the City, rather than the general provisions of the California Government
Code or the City's investment policy.
MAXIMUM SPECIFIED%OF PORTFOLIO MINIMUM RATING;':
INVESTMENTTYPE-- MAXIMUM MATURITY
�. /MAXIMUM PERpISSUER REQUIREMENTS
Bankers'Acceptances 180 days 25%(up to 40%with Council approval)/ Al/Pl,"A"Rating
10%
Negotiable Certificates of Deposit 3 years(Up to 5 years 30•�/10% Al/Pl,"A"Rating
with Council approval
Commercial Paper 270days 25%/10% Al,"A"Rating
State Obligations-CA And Others 5 years None/10% "A"Rating
City/Local Agency of CA Obligations 5 years None/10% "A"Rating
U.S.Treasury Obligations 5 years None None
U.S.Government Agency Obligations 5years None None
IBRD,IFC,IADB 5years 10% "AA"Rating
Repurchase Agreements 3 Months None None
20•/0 of the base value of the portfolio.
Reverse Repurchase Agreements 92 days None
Requires City Council Approval.
Medium-Term Corporate Notes 5years 30%/10% "A"Rating
Non-negotiable Certificates of Deposit 3 years None/10•% Al/Pl,"A"Rating
Money Market Mutual Funds 60 days 15%/10•- "AAA"Rating
Local Agency Investment Fund(LAIF) N/A Up to$75,000,000 None
Orange County Investment Pool(OCIP) N/A N/A None
Joint Powers Authority N/A None/$20,000,000 None
400
54
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020.
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' �;j�Maxlmum ,�s
�-r a-a' . . V z
Authorized Investment Type. "'!�� ty ,''Maximum Maturi Percentage „�Investment�
of Portfolio £. in One Issuer.=..
U.S.Treasury Securities 5 Years No Limit No Limit
Federal Agency Securities 5 Years No Limit No Limit
Bankers'Acceptances 180 Days No Limit No Limit
Time CDs 360 Days No Limit No Limit
Negotiable CDs 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
Corporate Bonds 5Years No Limit No Limit
California Asset Mgmt. Program N/A No Limit No Limit
Forward Purchase/Delivery Agreements Life of Bond No Limit No Limit
401
55
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
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:
Minimum Target Asset MAXIM&M
AuthorizedYlnVestmentType "' ��ld `I � ���
All ,
Allocation.., Allocation
x
Cash orrEAMR-
quivalentss9. . ., ,. ,,�
Money Market 0% 0% 8%
Fixed=Income= _=- r<< 12% _ .NQ&20%t
Short-Term Bond 0% 0% 8%
Long-Term Bond 0% 0% 8%
High Yield Bond 0% 0% 8%
Inflation Protected Bond 0% 0% 8%
World Bond 0% 0% 8%
eF
DomestiaEquity �i��ti� illiy��� �. „� �33%,. 41% �.w '49%
Large Cap Equity(Value, Blend,Growth) 20% 28% 36%
Mid Cap Equity(Value, Blend,Growth) 0% 9% 17%
Small Cap Equity(Value, Blend, Growth) 0% 4% 12%
'g
Foreign,Equity„
Foreign Large Equity(Value, Blend,Growth) 19% 27% 35%
Foreign Sm/Mid Equity(Value, Growth) 0% 0% 8%
Emerging Markets 0% 7% 15%
rrr �I r��, Mu �
Real Estate �i'IfiN�h' iViilR ui' 00 x 3% � 'r 1190
Real Estate 0% 3% 11%
� U EN r
COmmOciltles' tl r'il' �iP� ,4 +rA��o 10%
Natural Resources 0% 2% 10%
402
56
` City of Huntington Beach
Notes to Financial Statements
� 0 For the Year Ended June 30, 2020
2. CASH AND INVESTMENTS (Continued)
At year-end, the City had the following deposits and investments (amounts in
thousands):
Primary Government:
Cash and Investments $ 302,018
Cash and Investments with Fiscal Agent 5,815
Total Primary Government 307,833
Fiduciary Funds:
Cash and Investments 17,938
Cash and Investments with Fiscal Agent 65,034
Total Fiduciary Funds 82,972
Total Deposits and Investments $ 390,805
Disclosures Relating to Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect
the fair value of an investment. Generally, the longer the maturity of an investment, the
greater the sensitivity of its fair value is to changes in market interest rates. One of the
ways that the City manages its exposure to interest rate risk is by purchasing a
combination of shorter term and longer term investments and by timing cash flows from
maturities so that a portion of the portfolio is maturing or coming close to maturity evenly
over time as necessary to provide the cash flow and liquidity needed for operations.
Information about the sensitivity of the fair values of the City's investments, including
investments held by bond trustees, to market interest rate fluctuations is provided by
the following table that shows the distribution of the City's investments by maturity (in
thousands).
Investment Maturities(In Years)
More than
INVESTMENTS: Fair Value Less than 1 1 to 3 3 to 5 5 Total
US Treasuries $ 8,372 $ - $ 3,106 $ 5,266 $ 8,372
US Agency Securities` 83,489 5,094 32,521 45,874 83,489
Mutual Funds 57,300 57,300 - - 57,300
Money Market Funds 2,807 2,807 - - 2,807
Medium Term Notes-IADB 20,866 - 6,190 14,676 20,866
Corporate Bonds 55,669 12,883 37,478 5,308 55,669
Local Agency Investment Fund 82,794 82,794 - - 82,794
Orange County Investment Pool 40,000 40,000 40,000
California Asset Mgmt Program 2,787 2,787 2,787
PARS Pension Rate Stabilization Program 7,503 7,503 - - 7,503
Total Investments $ 361,587 $ 211,168 $ 79,295 $ 71,124 $ 361,587
Total Deposits 29,218
Total Deposits and Investments $ 390,805
Security is callable,but classified above according to original maturity date
403
57
t City of Huntington Beach
Notes to Financial Statements
16. o4 � � For the Year Ended June 30, 2020
2. CASH AND INVESTMENTS (Continued)
Disclosures Relating to Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation
to the holder of the investment. This is measured by the assignment of a rating by a
nationally recognized statistical rating organization. Presented below are the minimum
ratings required by, where applicable, the California Government Code or the City's
investment policy, or debt agreements, and the actual rating as of the year-end for each
investment type (in thousands):
Remaining as of Year End
INVESTMENTS: Minimum Total AAA AA A Not Rated
Legal Rating
US Treasuries N/A $ 8,372 $ 8,372 $ $ $
US Agency Securities' N/A 83,489 83,489
Mutual Funds N/A 57,300 - 57,300
Money Market Funds AAA 2,807 2,807 -
Medium Term Notes-IADB AA 20,866 20,866
Corporate Bonds A 55,669 - 17,888 37,781 -
Local Agency Investment Fund N/A 82,794 - - 82,794
Orange County Investment Pool N/A 40,000 - 40,000
California Asset Mgmt Program N/A 2,787 2,787 _
PARS Pension Rate Stabilization Program N/A 7,503 - - - 7,503
Total Investments $ 361,587 $ 118,321 $ 17,888 $ 37,781 $ 187,597
Note:All US Agencies are rated AAA by Moody's and AA by S&P
404
58
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
2. CASH AND INVESTMENTS (Continued)
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 a 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 U.S. Treasury Securities, external
investment pools, or Money Market Funds)that represent 5% or more of the City's total
investments are as follows (in thousands):
Fair Value
Issuer Investment Type Amount
Federal Home Loan Bank U.S.Agency Securities
$15,844
Federal Home Loan Mortgage Corporation U.S.Agency Securities
$46,705
Inter-American Development Bank Medium Term Notes $15,849
405
59
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
2. CASH AND INVESTMENTS (Continued)
Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository
financial institution, a government will not be able to recover its deposits or will not be
able to recover collateral securities that are in the possession of an outside party. The
custodial credit risk for investments is the risk that, in the event of the failure of the
counterparty (e.g., broker-dealer) to a transaction, a government will not be able to
recover the value of its investment or collateral securities that are in the possession of
another party. The California Government Code and the City's investment policy do
not contain legal or policy requirements that would limit the exposure to custodial credit
risk for deposits or investments, other than the following provisions for deposits: The
California Government Code requires that a financial institution secure deposits made
by state or local governmental units by pledging securities in an undivided collateral
pool held by a depository regulated under state law (unless so waived by the
governmental unit). The fair value of the pledged securities in the collateral pool must
equal at least 110 percent of the total amount deposited by the public agencies.
California law also allows financial institutions to secure City deposits by pledging first
trust deed mortgage notes having a value of 150 percent of the secured public deposits.
As of June 30, 2020, the City's deposits with financial institutions were covered by FDIC
up to $250,000, and the remaining amounts were collateralized as described above.
None of the City's investments were subject to custodial credit risk. Per the Investment
Policy's statement, the City of Huntington Beach is the registered owner of all
investments in the portfolio.
Investment in State Investment Pool
The City is a voluntary participant in LAIF, which 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. Currently, LAIF
does not have an investment rating.
406
60
City of Huntington Beach
Notes to Financial Statements
n For the Year Ended June 30, 2020
2. CASH AND INVESTMENTS (Continued)
Investment in the Orange County Investment Pool
The City is a participant in the County Treasurer's Orange County Investment Pool
(OCIP). The OCIP is an external investment pool, is not rated and is not registered with
the Securities Exchange Commission (SEC). The County Treasury Oversight
Committee conducts OCIP oversight. Cash on deposit in the OCIP at June 30, 2020,
is stated at fair value. The OCIP values participant shares on an amortized cost basis
during the year and adjusts to fair value at year-end. For further information regarding
the OCIP, refer to the County of Orange Comprehensive Annual Financial Report.
Investment in California Asset Management Program Pool
The City is a voluntary participant in the California Asset Management Program
(CAMP). CAMP is an investment pool offered by the California Asset Management
Trust (the Trust). The Trust is a joint powers authority and public agency created by
the Declaration of Trust and established under the provisions of the California Joint
Exercise of Powers Act (California Government Code Sections 6500 et seq., or the
"Act") for the purpose of exercising the common power of its Participants to invest
certain proceeds of debt issues and surplus funds. The Trust's activities are directed
by a Board of Trustees, all of whom are employees of the California public agencies
which are participants in the Trust. The City reports investments in CAMP at the fair
value amounts provided by CAMP, which is the same as the value of the pool share.
The Pool is managed to maintain a dollar-weighted average portfolio maturity of 60
days or less and seeks to maintain a constant net asset value (NAV) per share of$1.00.
The Pool invests in obligations of the United States Government and its agencies, high-
quality, short-term debt obligations of U.S. companies and financial institutions. The
Pool is a permitted investment for all local agencies under California Government Code
Section 53601(p). CAMP is rated AAAm by Standard & Poor's.
Investment in Public Agency Retirement Services Pension Rate Stabilization
Program
The City established a Section 115 pension trust account within the Public Agency
Retirement Services Pension Rate Stabilization Program (PARS PRSP) to hold assets
that are legally restricted for use in administering the City's defined benefit pension
plan. The pension trust fund's specific cash and investments are managed by a third-
party portfolio manager under guidelines approved by the City.
407
61
` City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
2. CASH AND INVESTMENTS (Continued)
Fair Value Measurement
The City categorizes its fair value investments within the fair value hierarchy
established by generally accepted accounting principles. The City has the following
recurring fair value measurements as of June 30, 2020 (in thousands):
Fair Value Hierarchy
INVESTMENTS: Level Level Level3 Total
U.S. Treasuries $ - $ 8,372 $ - $ 8,372
U.S. Agency Securities - 83,489 - 83,489
Medium Term Notes - IADB - 20,866 - 20,866
Corporate Bonds - 55,669 - 55,669
Total Investments $ - $ 168,396 $ - $ 168,396
3. OTHER RECEIVABLES
A summary of Other Receivables as of June 30, 2020 is as follows (in thousands):
Description Amount
Developer Loans Receivable $ 39,152
Emerald Cove Loan Receivable 7,237
Housing Rehabilitation Loans Receivable 2,315
First Time Homebuyers Receivable 1,771
Emergency Medical Fee Receivable 1,319
Other Grants Receivable 1,827
Other Receivable 6,661
Total Other Receivables $ 60,282
Allowance for Uncollectible Developer Loans (39,152)
Net Other Receivables on Governmental Fund Financial Statements $ 21,130
Other Receivables Reconciliation
Net Receivable on Government-wide Financial Statements $ 33,712
Taxes Receivable on Governmental Fund Financial Statements (12,448)
Other Receivables on Internal Service Fund (134)
Net Other Receivables on Governmental Fund Financial Statements $ 21,130
408
62
` City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
3. OTHER RECEIVABLES (Continued)
a. Developer Loans
Loans made to developers to construct or rehabilitate certain facilities under
deferred loan agreements total $39,152,000 at year-end. These loans are allowed
until a future event occurs. Loans to the Low and Moderate Income Housing Asset
Fund total $20,949,000, loans made under the Home Program total $13,929,000
and loan made under the Affordable Housing In-Lieu Program total $4,274,000.
Interest rates on these loans range from 0% to 6.5%. The allowance for
uncollectible developer loans is $39,152,000 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.
b. 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 June 30, 2020 is $7,237,000.
c. 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 $2,315,000 at year-end. These loans are deferred
until a future event occurs. The interest rates on these loans range from 0% to 6%.
d. Deferred Loans — First Time Homebuyers and Down Payment Assistance
Loans made for down payment assistance of qualified first time homebuyers under
deferred loan agreements total $1,771,000 at year-end. These loans are deferred
until a future event occurs.
409
63
' City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
4. UNEARNED REVENUE
Governmental and enterprise funds defer revenue recognition in connection with
resources that have been received as of year-end, but not yet earned (unearned
revenue). The amounts are as follows (in thousands):
Grants Total
General Special Unearned
Fund Revenue Revenue
Community Services Unearned Revenue (Classes) $ 626 $ - $ 626
Grants - 6,469 6,469
Total $ 626 $ 6,469 $ 7,095
5. UNAVAILABLE REVENUE
Certain revenues in governmental funds are considered unavailable revenue 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
unavailable 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):
Grants Tota I
Special Unavailable
General Fund Revenue LMIHAF Revenue
Grants $ - $ 1,587 $ - $ 1,587
Deferred Loans:
Emerald Cove - - 7,237 7,237
Housing Rehabilitation - 2,315 - 2,315
First Time Homebuyers - - 1,771 1,771
Related Party Transaction
(City Manager's Housing Loan) 1,491 - - 1,491
Other Unavailable Re\enue 1,335 - - 1,335
Total $ 2,826 $ 3,902 $ 9,008 $ 15,736
Deferred Loans to developers and qualified individuals for housing rehabilitation and to
first time homebuyers are discussed in Note 3.
Related Party Transaction related to the housing loan granted to the City Manager is
discussed in Note 14.
410
64
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
6. RETIREMENT PLAN — NORMAL
a. Summary
Net Pension Liability
Net Pension Liability is reported in the accompanying statement of net position as
follows:
Net Pension
Liability
CalPERS Miscellaneous Plan $ 159,076
CalPERS Safety Plan 263,682
Supplemental Plan (Note 7) 12,057
Total $ 434,815
Deferred Outflows of Resources
Deferred Outflows of Resources are reported in the accompanying statement of net
position as follows:
Deferred employer
Investment earnings Differences between pension contributions
less than Changes Expected and made after
expected earnings in assumptions Actual Experience measurementdate Total
CalPERS Miscellaneous Plan $ $ - $ - $ 16,878 $ 16,878
CalPERS Safety Plan 9,312 1,188 25,848 36,348
Supplemental Plan(Note 7) 1,358 - - 1,358
Total $ 1,358 $ 9,312 $ 1,188 $ 42,726 $ 54,584
Deferred Inflows of Resources
Deferred Inflows of Resources are reported in the accompanying statement of net
position as follows:
Investmentearnings Differences between
less than Changes Expected and
expected earnings in assumptions Actual Experience Total
CalPERS Miscellaneous Plan $ 2,385 $ 727 $ 518 $ 3,630
CalPERS Safety Plan 2,647 1,680 3,404 7,731
Total $ 5,032 $ 2,407 $ 3,922 $ 11,361
411
65
x 5 City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
6. RETIREMENT PLAN — NORMAL (Continued)
b. Plan Description
Substantially all City employees working the equivalent of 1,000 hours per fiscal
year are eligible to participate in the Safety Plan and Miscellaneous Plan Agent
multiple-employer defined benefit plans administered by California Public
Employees Retirement System (CalPERS), which acts as a common investment
and administrative agent for its participating member employers. Benefit Provisions
under the Plans are established by State statutes within the Public Employee's
Retirement Law. Following the passage of AB340, Public Employees' Pension
Reform Act (PEPRA) by the California Legislature, employees hired on or after
January 1, 2013, who were not previously enrolled in the PERS system elsewhere,
or who have had a break in service of at least six months are required to be enrolled
in this retirement program which provides a benefit level that is lower than the
benefits provided for CalPERS employees that do not meet the PEPRA
qualifications previously described. CalPERS issues publicly available reports that
include a full description of the pension plans regarding benefit provisions,
assumptions and membership information that can be found on the CalPERS
website. Copies of the CalPERS annual financial report may be obtained from the
CalPERS Executive Office — 400 P Street, Sacramento, CA 95814.
412
66
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
6. RETIREMENT PLAN — NORMAL (Continued)
Benefits Provided
CalPERS provides retirement and disability benefits, annual cost-of-living
adjustments, and death benefits to plan members and beneficiaries. Benefits are
based on years of credited service, equal to one year of full time employment.
Benefit provisions and all other requirements are established by State statute and
may be amended by city contracts with employee bargaining groups.
Participant is eligible for non-industrial disability retirement if becomes disabled and
has at least 5 years of credited service. There is no special age requirement. The
standard non-industrial disability retirement benefit is a monthly allowance equal to
1.8 percent of final compensation, multiplied by service.
Industrial disability benefits are not offered to miscellaneous employees. The City
provides industrial disability retirement benefit to safety employees. The industrial
disability retirement benefit is a monthly allowance equal to 50 percent of final
compensation.
An employee's beneficiary may receive the basic death benefit if the employee dies
while actively employed. The employee must be actively employed with the City to
be eligible for this benefit. An employee's survivor who is eligible for any other pre-
retirement death benefit may choose to receive that death benefit instead of this
basic death benefit. The basic death benefit is a lump sum in the amount of the
employee's accumulated contributions, where interest is currently credited at 7.5
percent per year, plus a lump sum in the amount of one month's salary for each
completed year of current service, up to a maximum of six months' salary. For
purposes of this benefit, one month's salary is defined as the member's average
monthly full-time rate of compensation during the 12 months preceding death.
Upon the death of a retiree, a one-time lump sum payment of$500 will be made to
the retiree's designated survivor(s), or to the retiree's estate.
Benefit terms provide for annual cost-of-living adjustments to each employee's
retirement allowance. Beginning the second calendar year after the year of
retirement, retirement and survivor allowances will be annually adjusted on a
compound basis by 2 percent.
413
67
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
6. RETIREMENT PLAN — NORMAL (Continued)
The Plans' provisions and benefits in effect at June 30, 2020 are summarized as
follows:
Miscellaneous Agent Plans
Classic PEPRA
Hire date Prior to January 1, 2013 January 1, 2013 and after
Benefit formula 2.5% @ 55 2% @ 62
Benefit vesting schedule 5 years of service 5 years of service
Benefit payments monthly for life monthly for life
Retirement age minimum 50 years minimum 52 years
2.0% -2.5%, 50 years -63+ 1.0% -2.5%, 52 years -67+
Monthly benefits, as a % of eligible compensation years, respectively years, respectively
Required employee contribution rates 8.000% 6.250%
Required employer contribution rates
July 1, 2019-June 30, 2020 35.902% 35.902%
Safety Agent Plans
Classic PEPRA
Hire date Prior to January 1, 2013 January 1, 2013 and after
Benefit formula 3% @ 50 2.7% @ 57
Benefit vesting schedule 5 years of service 5 years of service
Benefit payments monthly for life monthly for life
Retirement age minimum 50 years minimum 52 years
2.0% -2.7%, 50 years -57+
Monthly benefits, as a % of eligible compensation 3%, 50+ years years, respectively
Required employee contribution rates 9.000% 11.750%
Required employer contribution rates
July 1, 2019-June 30, 2020 57.341% 57.341%
414
68
r City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
6. RETIREMENT PLAN — NORMAL (Continued)
c. Contributions
Section 20814(c) of the California Public Employees' Retirement Law ("PERL")
requires that the employer contribution rates for all public employers be determined
on an annual basis by the actuary and shall be effective on the July 1 following
notice of a change in the rate. The total plan contributions are determined through
CaIPERS' annual actuarial valuation process. The actuarially determined rate is the
estimated amount necessary to finance the costs of benefits earned by employees
during the year, with an additional amount to finance any unfunded accrued liability.
The employer is required to contribute the difference between the actuarially
determined rate and the contribution rate of employees. For the measurement
period ended June 30, 2019, miscellaneous participants under the Classic and
PEPRA plans are required to contribute 8% and 6.25% of their annual covered
salary, respectively. Safety participants under the Classic and PEPRA plans are
required to contribute 9% and 11.75% of their annual covered salary, respectively.
In addition, the City is required to make employer contributions at the actuarially
determined rates of 35.902% and 57.341% for the miscellaneous and safety plans,
respectively, for the period July 1, 2019 through June 30, 2020.
At June 30, 2018, the valuation date, the following employees were covered by the
benefit terms for each Plan:
Miscellaneous Safety
Active members 609 384
Transferred members 429 71
Terminated members 301 60
Retired members and beneficiaries 962 592
415
69
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
6. RETIREMENT PLAN — NORMAL (Continued)
d. Net Pension Liability
The City's net pension liability is measured as the total pension liability, less the
pension plan's fiduciary net position. The net pension liability of the Plan is
measured as of June 30, 2019, using an annual actuarial valuation as of June 30,
2018 rolled forward to June 30, 2019 using standard update procedures. A
summary of principal assumptions and methods used to determine the net pension
liability is illustrated below:
Actuarial Assumptions— The total pension liabilities in the June 30, 2018 actuarial
valuation, rolled forward to June 30, 2019 using standard update procedures, were
determined using the following actuarial assumptions:
Actuarial Methods and Assumptions Used to Determine Total Pension Liability
Actuarial Cost Method Entry Age Normal in accordance with the requirement of GASB Statement No.68
Actuarial Assumptions:
Discount Rate 7.15%
Inflation 2.50%
Salary Increases Varies by Entry Age and Service
Investment Rate of Return 7.15% Net of Pension Plan Investment and Administrative Expenses;includes
Inflation
Mortality Rate Table* Derived using CaIPERS'Membership Data for all Funds.
Post Retirement Benefit Increase The lesser of contract COLA or 2.50% until Purchasing Power Protection
Allowance floor on purchasing power applies,2.50%thereafter.
`The mortality table used was developed based on CalPER's specific data.The probabilities of mortality are based on the 2017 CaIPERS Experience Study for the
period from 1997 to 2015.Preretirement and Post-retirement mortality rates include 15 year of projected mortality improvement using 90%of Scale MP-2016 published
by the Society of Actuaries.For more details on this table,please refer to the CaIPERS Experience Study and Review of Actuarial Assumptions report from December
2017 that can be found on the CalPERS website.
416
70
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
6. RETIREMENT PLAN — NORMAL (Continued)
Long-term Expected Rate of Return — The long-term expected rate of return on
pension plan investments was determined using a building-block method in which
expected future real rates of return (expected returns, net of pension plan investment
expense and inflation) are developed for each major asset class.
In determining the long-term expected rate of return, CaIPERS took into account
both short-term and long-term market return expectations as well as the expected
pension fund cash flows. Using historical returns of all of the funds' asset classes,
expected compound (geometric) returns were calculated over the short-term (first 10
years) and the long-term (11+ years) using a building-block approach. Using the
expected nominal returns for both short-term and long-term, the present value of
benefits was calculated for each fund. The expected rate of return was set by
calculating the rounded single equivalent expected return that arrived at the same
present value of benefits for cash flows as the one calculated using both short-term
and long-term returns. The expected rate of return was then set equal to the single
equivalent rate calculated above and adjusted to account for assumed administrative
expenses.
The expected real rates of return by asset class are as follows:
Current Target Real Return Real Return
Asset Class' Allocation Years 1-102 Years 11+3
Global Equity 50.00% 4.80% 5.98%
Fixed Income 28.00% 1.00% 2.62%
Inflation Assets 0.00% 0.77% 1.81%
Private Equity 8.00% 6.30% 7.23%
Real Estate 13.00% 3.75% 4.93%
Liquidity 1.00% 0.00% -0.92%
'In the System's CAFR, Fixed Income is included in Global Debt Securities;Liquidity is included in Short-term
Investments;Inflation Assets are included in both Global Equity Securities and Global Debt Securities.
2An expected inflation of 2.00%used for this period
3An expected inflation of2.92%used for this period.
417
71
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
6. RETIREMENT PLAN - NORMAL (Continued)
Discount Rate - The discount rate used to measure the total pension liability at
June 30, 2019 was 7.15 percent. The projection of cash flows used to determine the
discount rate assumed that contributions from plan members will be made at the
current member contribution rates and that contributions from employers will be
made at statutorily required rates, actuarially determined. Based on those
assumptions, the Plan's fiduciary net position was projected to be available to make
all projected future benefit payments of current plan members. Therefore, the long-
term expected rate of return on plan investments was applied to all periods of
projected benefit payments to determine the total pension liability.
Subsequent Events - There were no subsequent events that would materially
affect the results presented in this disclosure.
e. Changes in the Net Pension Liability
The following table shows the changes in net pension liability recognized over the
measurement period:
Miscellaneous Plan
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability
Balance at June 30,2018(Valuation Date) $ 571,812 $ 415,455 $ 156,357
Changes in the year:
Service cost 8,327 - 8,327
Interest on the total pension liabilities 40,150 40,150
Changes of Assumptions - -
Differences between expected and actual experience (183) (183)
Benefit payments, including refunds of members contribution! (28,508) (28,508) -
Plan to Plan Resource Movement (13) 13
Contributions-employer 14,816 (14,816)
Contributions-employee 3,779 (3,779)
Net investment income 27,288 (27,288)
Administrative expenses (296) 296
Other Miscellaneous Income/Expense 1 (1)
Net changes 19,786 17,067 2,719
Balance at June 30,2019(Measurement Date) $ 591,598 $ 432,522 $ 159,076
Safety Plan
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability
Balance at June 30,2018(Valuation Date) $ 755,812 $ 497,767 $ 258,045
Changes in the year:
Service cost 13,644 - 13,644
Interest on the total pension liabilities 53,048 53,048
Differences between expected and actual experience (1,220) - (1,220)
Plan to Plan Resource Movement 13 (13)
Benefit payments,including refunds of members contribution (38,958) (38,958) -
Contributions-employer 23,064 (23,064)
Contributions-employee 4,336 (4,336)
Net investment income 32,776 (32,776)
Administrative expenses (355) 355
Other Miscellaneous Income/Expense - 1 (1)
Net changes 26,514 20,877 5,637
Balance at June 30,2019(Measurement Date) $ 782,326 $ 518,644 $ 263,682
418
72
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
6. RETIREMENT PLAN — NORMAL (Continued)
Sensitivity of the Net Pension Liability to Changes in the Discount Rate - The
following presents the City's net pension liability, calculated using the discount rate,
as well as what the City's net pension liability would be if it were calculated using a
discount rate that is one percentage point lower or one percentage point higher than
the current rate:
Plan's Aggregate Net Pension Liability/(Asset)
Discount Rate-1% Current Discount Discount Rate+1%
(6.15%) Rate(7.159/6) (8.15%)
Miscellaneous Plan $ 235,849 $ 159,076 $ 95,680
Safety Plan $ 366,739 $ 263,682 $ 178,834
Aggregate Total $ 602,588 $ 422,758 $ 274,514
Pension Plan Fiduciary Net Position — Detailed information about each pension
plan's fiduciary net position is available in the separately issued CalPERS financial
reports.
Pension Expenses and Deferred Outflows/Inflows of Resources Related to
Pensions
Pension expenses for the measurement period ending June 30, 2019 (the
measurement date), are included in the accompanying financial statements as
follows:
Net Pension
Expense
CalPERS Miscellaneous Plan $ 22,530
CalPERS Safety Plan 41,805
Total $ 64,335
The amortization period differs depending on the source of the gain or loss. The
difference between projected and actual earnings is amortized over 5-years straight
line. All other amounts are amortized straight-line over the average expected
remaining service lives of all members that are provided with benefits (active,
inactive and retired) as of the beginning of the measurement period.
419
73
r City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
6. RETIREMENT PLAN — NORMAL (Continued)
The Expected Average Remaining Service Lifetime ("EARSL") is calculated by
dividing the total future service years of active employees by the total number of
plan participants (active, inactive, and retired) in the risk pool. For the 2018-19
measurement period, the EARSL for each plan is as follows:
Miscellaneous Safety
Expected Average Remaining Service Lifetime 2.5 3.9
At June 30, 2020 the City reported deferred outflows of resources and deferred
inflows of resources related to pensions from the following sources:
Miscellaneous Plan
Deferred outflows Deferred inflows
of Resources of Resources
Difference between projected and actual earning on
pension plan investments $ - $ (2,385)
Changes in assumptions - (727)
Difference between expected and actual experience - (518)
Contributions made subsequent to the
measurement date 16,878 -
Total $ 16,878 $ (3,630)
Safety Plan
Deferred outflows Deferred inflows
of Resources of Resources
Difference between projected and actual earning on
pension plan investments $ - $ (2,647)
Changes in assumptions 9,312 (1,680)
Difference between expected and actual experience 1,188 (3,404)
Contributions made subsequent to the
measurement date 25,848 -
Total $ 36,348 $ (7,731)
420
74
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
6. RETIREMENT PLAN — NORMAL (Continued)
For the Miscellaneous Plan and Safety Plan, $16,878,000 and $25,848,000,
respectively, was reported as deferred outflows of resources related to pensions
resulting from City's contributions subsequent to the measurement date will be
recognized as a reduction of the net pension liability in the year ended June 30,
2021. Other amounts reported as deferred outflows of resources and deferred
inflows of resources related to pensions will be recognized in pension expense as
follows:
Measurement Periods Deferred Outflows/(Inflows)of Resources
Ended June 30, Miscellaneous Safety
2020 $ 343 $ 8,145
2021 (3,685) (4,821)
2022 (678) (1,028)
2023 390 473
2024 - -
Thereafter - -
$ (3,630) $ 2,769
7. RETIREMENT PLAN — SUPPLEMENTAL
a. Plan Description and Benefits
The City administers a supplemental single-employer defined benefit retirement
plan (Supplemental Plan) for all employees hired prior to 1997 (exact dates are
different for various associations). The Plan is governed by a three-member
Supplemental Employee Retirement Plan and Trust Board consisting of the City
Treasurer, Chief Financial Officer, and the City Manager, or his/her designee. The
Board has the authority, under the terms of the Trust agreement, to control and
manage the operation and administration of the Plan. 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. 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
on a full accrual basis.
421
75
= City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
7. RETIREMENT PLAN — SUPPLEMENTAL (Continued)
The Supplemental Plan will pay the retiree an additional amount to his or her
CalPERS retirement benefit for life. In order to be eligible for the benefit, the retiree
must retire from the City. 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. This benefit is payable by the City for the duration of the life of the
member, and shall cease upon the employee's death. As of June 30, 2019, the
date of the Plan's most recent actuarial valuation, the average monthly benefit
received by inactive plan members and beneficiaries receiving benefits is $559.
Effective in 1998 (exact dates are different for various associations), new City
employees are ineligible to participate in the Supplemental Employee Retirement
Plan.
Employees Covered: At June 30, 2020, the measurement date, the following
employees were covered by the benefit terms for the Plan:
Inactive employees receiving benefits 728
Active employees 116
Inactive employees not receiving benefits -
Total 844
b. Employer Contributions
The City's policy is to make required contributions as determined by the
Supplemental Plan's actuary. The required contributions were determined as part
of the September 30, 2017 actuarial valuation. The City is required to contribute
the actuarially determined rate of 2.5% of total payroll for all permanent employees
for the year ended June 30, 2020. There are no employee contributions required
for the plan. Survivor and termination benefits are not included in the plan.
Administrative costs of this plan are financed through investment earnings.
For the year ended June 30, 2020, the contributions were (in thousands):
Contributions - employer $ 3,506
422
76
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
7. RETIREMENT PLAN — SUPPLEMENTAL (Continued)
c. Investments
Investments of the Supplemental Plan are held separately from those of other City
funds by investment custodians. The Supplemental Employee Retirement Plan and
Trust Board is responsible for supervising all investments. Changes to the
Investment Policy require approval by the Board. The policy remained the same as
last fiscal year. The most recent policy was reviewed in June 2020 with an effective
date of July 1, 2020. Please refer to Note 2 for a detailed description of the
Supplemental Plan's Investment Policy. The major asset class allocation for the
Supplemental Plan as of June 30, 2020 is listed below:
Long Term
Strategic Allocation as of Expected Rate
Asset Class Allocation June 30, 2019 of Return
Fixed Income 20.00% 20.19% 1.55%
Equities 41.00% 74.49% 5.35%
Real Estate 3.00% 4.04% 0.00%
Commodities 2.00% 0.00% 0.00%
Cash and Equivalents 0.00% 1.28% 0.45%
Total 66.00% 100.00%
Quoted market prices have been used to value investments as of June 30, 2020..
These investments are held by the Trust or by an agent in the Trust's name. A
portion of these investments is subject to credit risk (including custodial credit risk
and concentrations of credit risk), interest rate risk and/or foreign currency risk. The
Governmental Accounting Standards Board (GASB) Statement No. 40 requires the
disclosure of such risk. Please see below for a list of investments held in any one
organization that represents five percent or more of the Plan's investment portfolio
at June 30, 2020:
Concentration of Investments Equaling or Exceeding 5%
Harbor Capital Appreciation Inst 12.48%
Vanguard Intl Grwth Fd 12.46%
Vanguard Equity Income Fund Admiral Shares 10.30%
Ishare Core Msci Eafe ETF 10.17%
Parnassus Core Equity Income Inst 10.42%
Fidelity US Bond Index 7.18%
423
77
=i;m
j City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
7. RETIREMENT PLAN — SUPPLEMENTAL (Continued)
All Supplemental Plan investments are reflected in the schedule included in Section
c of the Note, with the exception of amounts held in the City's investment pool
account. The City maintains an investment pool account for City funds. Monthly
contributions for the Plan are held in the City's investment pool account and are
used to pay recurring expenditures. Refer to Note 2 for a description of the City's
investments.
For the year ended June 30, 2020, the annual money-weighted rate of return on the
Plan's investments, net of pension plan investment expenses, was 3.79%. The
money-weighted rate of return expresses investment performance, net of
investment expenses, adjusted for the changing amounts actually invested.
d. Net Pension Liability
The City's net pension liability is measured as the total pension liability, less the
pension plan's fiduciary net position. The net pension liability of the Plan is
measured as of June 30, 2020, using an annual actuarial valuation as of June 30,
2019 rolled forward to June 30, 2020 using standard update procedures. A
summary of principal assumptions and methods used to determine the City's net
pension liability is shown on the following page.
424
78
h
r City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
7. RETIREMENT PLAN — SUPPLEMENTAL (Continued)
Actuarial Assumptions—The total pension liabilities in the June 30, 2019 actuarial
valuations for the June 30, 2020 measurement date were determined using the
following actuarial assumptions:
Actuarial Methods and Assumptions Used to Determine Total Pension Liability
Actuarial Cost Method Entry Age Normal, Level Percentage of Payroll
Actuarial Assumptions:
Discount Rate 6.25%
Inflation 2.75%
Salary Increases CaIPERS 1997-2015 Experience Study plus 3% aggregate increase
Investment Rate of Return 6.25% Net of Investment Expenses
CalPERS 1997-2015 Experience Study, mortality projected fully
Mortality Rate Table generational with Scale MP-2019
Retirement, Disability, Withdrawal CalPERS 1997-2015 Experience Study plus 23% load on future service
retirement liability added to reflect recent benefits experience.
The changes in actuarial assumptions include the following:
All other actuarial assumptions used in the June 30, 2019 valuation were based on
the results of an actuarial experience study for the period from 1997 to 2015,
including updates to salary increase, mortality, and retirement rates. The future
service retirement liabilities load increased from 15% to 23% to reflect recent
experience of benefits being larger than anticipated.
e. Discount Rate & Sensitivity
The discount rate is used in the measurement of the Total Pension Liability. This
rate considers the ability of the fund to meet benefit obligations in the future. To
make this determination, employee contributions, benefit payments, expenses, and
investment returns are projected into the future. The Plan Net Position (assets) in
future years can then be determined and compared to its obligation to make benefit
payments in those years. As long as assets are projected to be on hand in a future
year, the assumed valuation discount is used. For this valuation, the discount rate
is 6.25%, based on the inflation assumption of 2.75% and a long-term asset
allocation of 70% equities and 30% fixed income. The geometric real rates of return
were assumed to be 5.35% for equities and 1.55% for fixed income. The long-term
expected rate of return is applied to all future projected benefit payments.
425
79
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
7. RETIREMENT PLAN — SUPPLEMENTAL (Continued)
According to Paragraph 30 of Statement 68, the long-term discount rate should be
determined without reduction for pension plan administrative expense. An
investment return excluding administrative expenses would have been 6.25
percent.
The long-term expected rate of return on pension plan investments was determined
using a building-block method in which best-estimate ranges of expected future real
rates of return (expected returns, net of pension plan investment expense and
inflation) are developed for each major asset class.
In determining the long-term expected rate of return, both short-term and long-term
market return expectations were taken into account along with expected pension
fund cash flows. Such cash flows were developed assuming that both members and
employers will make their required contributions on time and as scheduled in all
future years. Using historical returns of all the funds' asset classes, expected
compound (geometric) returns were calculated over the short-term (first 10 years)
and the long-term (11-60 years) using a building-block approach. Using the
expected nominal returns for both short-term and long-term, the present value of
benefits was calculated for each fund. The expected rate of return was set by
calculating the single equivalent expected return that arrived at the same present
value of benefits for cash flows as the one calculated using both short-term and
long-term returns. The expected rate of return was then set equivalent to the single
equivalent rate calculated above and rounded down to the nearest one quarter of
one percent.
426
80
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
7. RETIREMENT PLAN — SUPPLEMENTAL (Continued)
Changes in the Net Pension Liability
Supplemental Plan
Total Plan
Pension Fiduciary Net Pension
Liability Net Position Liability
Balance at June 30, 2019 $ 65,444 $ 58,853 $ 6,591
Changes in the year:
Service cost 338 - 338
Interest on the total pension liabilities 3,954 3,954
Benefit payments, including refunds of members contribution: (5,012) (5,012) -
Contributions -employer - 3,506 (3,506)
Net investment income - 2,114 (2,114)
Administrative expenses - (444) 444
Net changes 5,630 164 5,466
Balance at June 30, 2020 $ 71,074 $ 59,017 $ 12,057
The following table shows the changes in net pension liability recognized over the
measurement period (in thousands):
Sensitivity of the Net Pension Liability to Changes in the Discount Rate - The
following presents the City's net pension liability, calculated using the discount rate,
as well as what the City's net pension liability would be if it were calculated using a
discount rate that is one percentage point lower or one percentage point higher than
the current rate:
Plan's Aggregate Net Pension Liability/(Asset)
(in thousands)
Discount Rate - 1% Current Discount Discount Rate + 1%
(5.25%) Rate (6.25%) (7.25%)
$ 19,068 $ 12,057 $ 6,076
427
81
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
7. RETIREMENT PLAN — SUPPLEMENTAL (Continued)
f. Pension Expenses and Deferred Outflows/Inflows of Resources Related to
Pensions
For the year ended June 30, 2020, the City recognized pension expense in the
amount of$7,083,000 for the Supplemental Plan.
At June 30, 2020, the City reported deferred outflows of resources related to the
supplemental pension plan from the following source (in thousands):
Deferred Outflows
of Resources
Difference between projected and actual earnings on $ 1,358
pension plan investments
For the Supplemental Plan, $1,358,000 was reported as deferred outflows of
resources related to pensions which will be recognized in pension expense as
follows (in thousands):
Deferred Outflows/(Inflows)
Year Ended June 30, of Resources
2021 $ (36)
2022 583
2023 500
2024 311
2025 -
Thereafter -
$ 1,358
428
82
F City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
8. OTHER POST EMPLOYMENT BENEFITS
a. Plan Description
The City administers the following two other post employment benefit(OPEB) plans:
Postemp/oyment Medical Insurance
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, CalPERS 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; 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 12 months. The retiree may use the subsidy for any of the
medical insurance plans that the City's active employees may enroll in. Employees
hired on or after October 1, 2014 are not eligible for this benefit.
PEMHCA
The City provides an agent multiple-employer defined benefit healthcare plan to
retirees through CaIPERS under the California Public Employees Medical and
Hospital Care Act (PEMHCA), commonly referred to as PERS Health. PEMHCA
provides health insurance through a variety of Health Maintenance Organization
(HMO) and Preferred Provider Organization (PPO) options. The PEMHCA benefits
are applied to all safety employee groups, based on retirement plan election. The
benefits continue to the surviving spouse for one year. The Huntington Beach
Firefighters' Association (HBFA) joined PEMHCA in 2011. All other safety groups
(Fire Management Association (FMA), Marine Safety Management Association
(MSOA), Police Management Association (PMA), and Police Officers' Association
POA)joined in 2004.
429
83
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
8. OTHER POST EMPLOYMENT BENEFITS (Continued)
Safety employees are eligible for PEMHCA benefits if they retire from the City on or
after age 50 with at least five years of service or disability, and are eligible for a
PERS pension.
As of the June 30, 2019 measurement date, the following current and former
employees were covered by the benefit terms under the plan:
Postemployment
Medical Insurance PEMHCA
Retirees and beneficiaries receiving benefits 264 189
Inactive employees not yet receiving benefits 303 -
Active Plan Members 853 384
Total Plan Participants 1,420 573
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 $814,000 for year ended June 30, 2020. The
assets of the CERBT are excluded from the accompanying financial statements
since they are in an irrevocable trust administered by CaIPERS. 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. The
City's policy is to make 100% of each year's ARC, with an additional amount to
prefund benefits as determined annually by City Council in order to improve the
funded status of the plan.
For PEMHCA, the City selected the "unequal" method for the contribution. Under
this method, the City offered a lesser contribution for retirees than for active
employees. The City paid the PEMHCA minimum for actives ($133 in 2018, and
$136 in 2019, and $139 in 2020). Beginning in 2008, Assembly Bill 2544 changed
the computation for annual increases to annuitant health care under the unequal
method. Under the new provisions, the City increases annuitant health care
contributions equal to an amount not less than five percent of the active employee
contributions, multiplied by the number of years in PEMHCA. The City's contribution
for retirees is $62.55 per employee for the Huntington Beach Firefighter's
Association (HBFA) and $111.20 for all other Safety groups in 2020. The annual
increase in minimum PEMHCA contribution to CalPERS will continue until the time
that the City contribution for retirees equals the City contribution paid for active
employees.
430
84
r City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
8. OTHER POST EMPLOYMENT BENEFITS (Continued)
The City's net OPEB liability was measured as of June 30, 2019 and the total OPEB
liability used to calculate the net OPEB liability was determined by an actuarial
valuation dated June 30, 2019, based on the following actuarial methods and
assumptions:
• Actuarial Cost Method - Entry Age Normal
• Discount rate - 6.25%
• Projected salary increases for covered employees due to inflation - aggregate
increases of 3.00% per annum
• Investment Rate of Return - 6.25%, assuming actuarially determined
contributions funded into CERBT Investment Strategy 2
• Mortality Rate' - Derived using CaIPERS' membership data for all funds
• Pre-Retirement Turnover - Derived using CaIPERS' membership data for all
funds
• PEMCHA minimum increases for actives - $139 in 2020, with 4.25% annual
increases thereafter
• Healthcare Trend Rate - 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 for the inflation trend assumption used for the
valuation:
Calendar Annual Rate Calendar Annual Rate
Year Non-Medicare Medicare Year Non-Medicare Medicare
2020 7.50% 6.50% 2029 5.40% 4.85%
2021 7.25% 6.30% 2030 5.20% 4.70%
2022 7.00% 6.10% 2031-35 5.05% 4.60%
2023 6.75% 5.90% 2036-45 4.90% 4.50%
2024 6.50% 5.70% 2046-55 4.75% 4.45%
2025 6.25% 5.50% 2056-65 4.60% 4.40%
2026 6.00% 5.30% 2066-75 4.30% 4.20%
2027 5.80% 5.15% 2076+ 4.00% 4.00%
2028 5.60% 5.00%
Mortality information was derived from data collected during 1997 to 2015 CalPERS Experience Study dated December
2017, which may be accessed on the CalPERS website www.calpers.ca.gov under Forms and Publications. Post-
retirement mortality rates include mortality projected fully generational with Scale MP-19.
2,The pre-retirement turnover information was developed based on CalPERS' specific data. For more details, please
refer to the 2007 to 2011 Experience Study Report.The Experience Study Report may be accessed on the CalPERS
website www.calpers.ca.gov under Forms and Publications.
431
85
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
8. OTHER POST EMPLOYMENT BENEFITS (Continued)
Long-Term Expected Rate of Return
The long-term expected rate of return on OPEB plan investments was determined using a
building-block method in which expected future real rates of return (expected returns, net
of OPEB plan investment expense and inflation) are developed for each major asset class.
These ranges are combined to produce the long-term expected rate of return by weighting
the expected future real rates of return by the target asset allocation percentage and by
adding expected inflation.
The target allocation and best estimates of arithmetic real rates of return for each major
asset class are summarized in the following table:
CERBT Strategy 2
Long-Term
Target Expected Real
Asset Class Allocation Rate of Return
Global Equity 40% 4.82%
Fixed Income 43% 1.47%
Treasury Inflation-Protected Securities ("TIPS") 5% 1.29%
Commodities 4% 0.84%
Real Estate Investment Trusts ("REITS") 8% 3.76%
Tota 1 100%
* Long-term expected rate of return is 6.25%
Discount Rate
The discount rate used to measure the total OPEB liability was 6.25 percent. The
projection of cash flows used to determine the discount rate assumed that City
contributions will be made at rates equal to the actuarially determined contribution
rates. Based on those assumptions, the OPEB plan's fiduciary net position was
projected to be available to make all projected OPEB payments for current active
and inactive employees and beneficiaries. Therefore, the long-term expected rate
of return on OPEB plan investments was applied to all periods of projected benefit
payments to determine the total OPEB liability.
432
86
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
8. OTHER POST EMPLOYMENT BENEFITS (Continued)
The changes in the net OPEB Liability for the plan are as follows (in thousands):
Increase/(Decrease)
Total OPEB Plan Fiduciary Net OPEB Liability
Liability Net Position /(Asset)
(a) (b) (c)_(a)-(b)
Balance at June 30, 2019 $ 33,434 $ 26,825 $ 6,609
(Measurement Date June 30,2018)
Changes recognized for the measurement period:
SeNICe Cost 1,241 - 1,241
Interest 1,859 - 1,859
Actual vs. Expected Experience 1,411 - 1,411
Assumption Changes (3,358) - (3,358)
Contributions-Employer 2,270 (2,270)
Net Imestment Income - 1,901 (1,901)
Benefit Payments (1,742) (1,742)
Administrative Expenses - (61) 61
Net Changes (589) 2,368 (2,957)
Balance at June 30,2020 $ 32,845 $ 29,193 $ 3,652
(Measurement Date June 30,2019)
Sensitivity of the Net OPEB Liability to Changes in the Discount Rate
The following presents the net OPEB liability of the City if it were calculated using a
discount rate that is one percentage point lower or one percentage point higher than
the current rate, for the measurement period ended June 30, 2019 (in thousands):
1%Decrease Current Discount Rate 1%Increase
(5.251/6) (6.25%) (7.25%)
Net OPEB Liability $ 7,662 $ 3,652 $ 364
433
87
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
8. OTHER POST EMPLOYMENT BENEFITS (Continued)
Sensitivity of the Net OPEB Liability to Changes in the Health Care Cost Trend
Rates
The following presents the net OPEB liability of the City if it were calculated using health
care cost trend rates that are one percentage point lower or one percentage point
higher than the current rate, for the measurement period ended June 30, 2019 (in
thousands):
1%Decrease Current Trend 1%Increase
(6.50% Non-Medicare/ (7.50% Non-Medicare/ (8.50% Non-Medicare/
5.50% Medicare, 6.50% Medicare, 7.50% Medicare,
decreasing to 3.0% decreasing to 4.0% decreasing to 5.0%
Non-Medicare/ Non-Medicare/ Non-Medicare/
3.0% Medicare) 4.0% Medicare) 5.0% Medicare)
Net OPEB Liability $ 295 $ 3,652 $ 7,905
OPEB Plan Fiduciary Net Position
The CERBT issues a publicly available financial report that includes financial
statements and required supplementary information. That report may be obtained from
the California Public Employees' Retirement System, CERBT, P.O. Box 942703,
Sacramento, CA 94429-2703.
Recognition of Deferred Outflows and Deferred Inflows of Resources
Gains and losses related to changes in total OPEB liability and fiduciary net position
are recognized in OPEB expense systematically over time.
Amount are first recognized in OPEB expense for the year the gain or loss occurs. The
remaining amounts are categorized as deferred outflows and deferred inflows of
resources related to OPEB and are to be recognized in future OPEB expense.
The recognition period differs depending on the source of the gain or loss:
Net difference between projected and actual
earnings on OPEB plan investments 5 Years
434
88
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
8. OTHER POST EMPLOYMENT BENEFITS (Continued)
OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB
As of June 30, 2020, the City recognized OPEB expense of $1,469,000. As of June
30, 2020, the City reported deferred outflows of resources related to OPEB from the
following sources:
Deferred Outflows Deferred Inflows
of Resources of Resources
OPEB Contributions subsequent to the measurement date $ 1,959 $ -
Difference between expected and actual experience 1,218
Changes in Assumptions 2,898
Net difference between projected and actual earnings on
OPEB Plan Investments - 30
$ 3,177 $ 2,928
The $1,959,000 reported as deferred outflows of resources related to contributions
subsequent to the June 30, 2019 measurement date will be recognized as a reduction
of the net OPEB liability during the fiscal year ending June 30, 2021. Other amounts
reported as deferred outflows of resources related to OPEB will be recognized as
expense as follows (in thousands):
Deferred
Measurement Periods Outflows/(Inflows)
Ended June 30, of Resources
2021 $ (217)
2022 (215)
2023 (312)
2024 (353)
2025 (267)
Thereafter (346)
$ (1,710)
435
89
r City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
r
9. 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 the liability claims as expenditures in the Self Insurance
General Liability Internal Service Fund and the workers' compensation claims in the
Self Insurance Workers' Compensation Internal Service Fund.
BICEP was created in 1988 by a joint powers agreement between the City of
Huntington Beach and four other local entities including Oxnard, Ventura, Santa Ana,
and West Covina, 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 to a maximum
coverage limit of $27,000,000 for claims incurred through June 30, 2015, and
$24,000,000 thereafter.
Effective July 1, 2019, the member agencies of BICEP agreed to dissolve the Joint
Powers Authority. BICEP continues to exist for the purpose of disposing of all claims,
the distribution of assets, and any other functions necessary to conclude the affairs of
BICEP as provided in the Bylaws of the Authority. Upon dissolution of BICEP, the City
purchased liability insurance in the open marketplace, which provides insurance for
claims costs exceeding the City's self-insured retention of $1,000,000. The maximum
coverage limit is $30,000,000, which is inclusive of the self-insured retention. Claims
that exceed the maximum limit of liability are covered by the City's Self-Insurance
General Liability Internal Service Fund.
There were no liability claims in the past four years that exceeded the coverage limit.
Liability Claims
Claims up to $1,000,000 are paid from the City's Self Insurance General Liability
Internal Service Fund. Payments for claims from $1,000,000 to the maximum limit
discussed above are covered by the excess liability coverage purchased by the City.
Any claims exceeding the maximum limit are covered by the Self Insurance General
Liability Internal Service Fund. The liability for these claims is recorded as part of long-
term obligations in the Self Insurance General Liability Fund and government-wide
financial statements. Liabilities include amounts incurred, but not reported.
436
90
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
9. RISK MANAGEMENT (Continued)
Workers' Compensation Claims
Workers' compensation claims of up to $1,000,000 per claim are paid from the Self
Insured Workers' Comp Internal Service Fund. Excess workers' compensation
coverage is purchased through the CSAC/Prism-Excess Insurance Authority.
Payments for claims from $1,000,000 to statutory limits are covered by CSAC/Prism-
Excess Insurance Authority.
The Self Insurance Workers' Comp Internal Service Fund has a $14.2 million deficit at
year-end at the 55 percent confidence level. The City has established plans to help
reduce the deficit in this fund. This will be accomplished by additional transfers from
the General Fund, Proprietary funds, and other governmental funds in which
employees are charged over the next nine years.
Claims activity and liabilities relating to the current and prior year are (in thousands):
Workers' General
Compensation Liability Total
Balance June 30, 2018 $ 28,811 $ 11,470 $ 40,281
Additions 2,674 1,479 4,153
Reductions (4,855) (4,553) (9,408)
Net Increase (Decrease) (2,181) (3,074) (5,255)
Balance June 30, 2019 26,630 8,396 35,026
Additions 9,758 3,310 13,068
Reductions (6,782) (4,157) (10,939)
Net Increase (Decrease) 2,976 (847) 2,129
Balance June 30, 2020 $ 29,606 $ 7,549 $ 37,155
437
91
j City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
10. INTERFUND TRANSACTIONS
a. Advances to/from Other Funds
The amounts at year-end were (in thousands):
Advancesto
(Payable):
Redevelopment
Agency Private
Purpose Trust
Advances from (Receivable):
Major Governmental Funds
LMIHAF Capital Projects $ 1,363
There is a $1,363,000 advance from the LMIHAF Capital Projects Fund to the
Redevelopment Agency Private Purpose Trust Fund as of June 30, 2020 for Main
Pier property acquisitions prior to the dissolution of the Redevelopment Agency on
February 1, 2012.
438
92
City of Huntington Beach
Notes to Financial Statements
, . For the Year Ended June 30, 2020
10. INTERFUND TRANSACTIONS (Continued)
b. Transfers In/Out
The amounts at year-end were (in thousands):
Transfers Out
Grants LMIHAF Other Total Hazmat
Special Capital Governmental Governmental Service Total
Transfers In General Fund Revenue Projects Funds Funds Fund Transfers In
General Fund $ - $ 159 $ - $ - $ 159 $ 13 $ 172
Grants Special Revenue 36 - 36 - 36
Other Governmental Funds 8,861 20 405 515 9,801 - 9,801
Total Governmental Funds 8,897 179 405 515 9,996 13 10,009
Refuse Fund 51 - - 51 - 51
Total Enterprise Funds 51 51 51
Total Transfers Out $ 8,948 $ 179 $ 405 $ 515 $ 10,047 $ 13 $ 10,060
The following is a summary of the significant transfers:
• $8,861,000 was transferred from the General Fund to Other Governmental
Funds for debt service payments of $4,611,000 and for infrastructure related
projects including road repairs, police facility repairs and enhancement,
equipment, and other capital improvement projects of$4,250,000.
• $36,000 was transferred from the General Fund to the Grants Special Revenue
Fund for CBDG administration costs of $36,000 that were charged to the grant
fund in excess of the grant amount in prior fiscal years.
• $51,000 was transferred from the General Fund to the Refuse Enterprise Fund
to fund the senior citizen rate reduction on refuse charges.
• $405,000 was transferred from the LMIHAF Fund to Other Governmental Funds
for debt service payments.
• $159,000 was transferred from the Grants Special Revenue Fund to the General
Fund for prior fiscal years CDBG administration costs that are eligible for grant
reimbursement.
• $20,000 was transferred from the Other Governmental Funds to the Grants
Special Revenue Fund for prior fiscal year expenditures that are eligible for grant
reimbursement.
• $515,000 was transferred from the Infrastructure Fund to the 2014A Bond
Project Fund to utilize the bond funds on eligible Police Headquarters
Modernization Project costs.
• $13,000 was transferred from the Hazmat Service Enterprise Fund to the
General Fund to cover administrative and overhead expenditures.
439
93
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
11. LONG-TERM OBLIGATIONS
Below is a schedule of changes in long-term governmental obligations for the year (in
thousands):
June 30, June 30, Accrued Due Within
Governmental Activities: 2019 Additions Retirements 2020 Interest One Year
Public Financing Authority:
2010(a)Lease Revenue Bonds $ 8,235 $ $ (825) $ 7,410 $ 122 $ 865
2011(a)Lease Revenue Bonds 17,770 (2,045) 15,725 205 1,060
2014(a)Lease Revenue Bonds 13,145 (615) 12,530 145 650
Total Public Financing Authority 39,150 (3,485) 35,665 472 2,575
Other Long-Term Obligations:
Compensated Absences 11,295 5,294 (3,956) 12,633 - 4,432
Claims Payable 35,026 13,068 (10,939) 37,155 8,902
Pollution Remediation 2,000 - - 2,000 -
LED Lighting Phase 1 656 (110) 546 3 114
I-Bank CLEEN Loan 2,454 (283) 2,171 21 289
CEC Loan 2,818 - (230) 2,588 261
Leases Payable 5,083 1,172 (1,014) 5,241 72 1,190
Total Other Long-Term Obligations 59,332 19,534 (16,532) 62,334 96 15,188
Total Long-Term Obligations-
Governmental Activities $ 98,482 $ 19,534 $ (20,017) $ 97,999 $ 568 $ 17,763
440
94
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
11. LONG-TERM OBLIGATIONS (Continued)
a. 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 March 1st, September 1st
Principal Payment Dates September 1st
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
June 30
2021 $ 865 $ 349 $ 1,214
2022 905 305 1,210
2023 550 268 818
2024 580 240 820
2025 605 210 815
2026-2030 3,305 560 3,865
2031 600 15 615
Total $ 7,410 $ 1,947 $ 9,357
441
95
` City of Huntington Beach
F S:
Notes to Financial Statements
For the Year Ended June 30, 2020
11. 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 1st, September 1st
Principal Payment Dates September 1st
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
June 30 Principal Interest Total
2021 $ 1,060 $ 607 $ 1,667
2022 1,095 564 1,659
2023 1,150 519 1,669
2024 1,185 482 1,667
2025 1,225 440 1,665
2026-2030 6,855 1,421 8,276
2031-2032 3,155 142 3,297
Total $ 15,725 $ 4,175 $ 19,900
442
96
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
11. LONG-TERM OBLIGATIONS (Continued)
(3) 2014(a) Public Financing Authority Lease Revenue Bonds
Year of Issuance 2014
Type of Debt Lease Revenue Bonds
Original Principal Amount $15,295,000
Security Lease with City
Interest Rates 3.0% to 5.0%
Interest Payment Dates March 1st, September 1st
Principal Payment Dates September 16t
Purpose of Debt Finance the construction of a new Senior
Center
Debt service requirements to maturity are (in thousands):
Year Ending principal Interest Total
June 30
2021 $ 650 $ 431 $ 1,081
2022 665 411 1,076
2023 685 384 1,069
2024 720 352 1,072
2025 750 319 1,069
2026-2030 4,175 1,196 5,371
2031-2035 4,885 469 5,354
Total $ 12,530 1 $ 3,562 $ 16,092
b. Other Long-Term Obligations
(1) Compensated Absences
There is no repayment schedule to pay the compensated absences amount
of $12,633,000 relating to governmental operations. The General Fund
typically liquidates the vacation and sick leave liability.
443
97
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
11. LONG-TERM OBLIGATIONS (Continued)
(2) Claims Payable
There is no repayment schedule for the claims payable for governmental
activities of$37,155,000 described in Note 9. The City pays the claims upon
final settlement. The General Fund typically liquidates the claims payable
liability.
(3) 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.
444
98
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
11. LONG-TERM OBLIGATIONS (Continued)
(4) LED Lighting Phase I
Year of Issuance 2016
Type of Debt Leaseback from Capital One
Public Funding, LLC
Principal Amount Original $1,062,924
Security Loan Agreement with Capital One
Public Funding, LLC
Interest Rates Original 2.32%
Interest Payment Dates February 1 st and August 1 st
Principal Payment Dates August 1st
Purpose of Debt To purchase and upgrade street,
area and pole lighting to energy
efficient LED light sources
Debt service requirements to maturity are (in thousands):
Year Ending principal Interest Total
June 30
2021 $ 114 $ 18 $ 132
2022 119 14 133
2023 122 10 132
2024 126 5 131
2025 65 1 66
Total $ 546 1 $ 48 $ 594
445
99
City of Huntington Beach
Notes to Financial Statements
r n. For the Year Ended June 30, 2020
11. LONG-TERM OBLIGATIONS (Continued)
(5) I-Bank CLEEN Loan
Year of Issuance 2016
Type of Debt CLEEN Loan from the California
Infrastructure and Economic
Development Bank (I-Bank)
Principal Amount Original $3,000,000
Security Edwards Fire Station
Interest Rates Original 2.32%
Interest Payment Dates February 1st and August 1st
Principal Payment Dates August 1st
Purpose of Debt To purchase and upgrade street
pole lighting to energy efficient
LED light sources
Debt service requirements to maturity are (in thousands):
Year Ending
June 30 Principal Interest Total
2021 $ 289 $ 47 $ 336
2022 296 40 336
2023 303 33 336
2024 310 26 336
2025 317 19 336
2026-2027 656 15 671
Total $ 2,171 $ 180 $ 2,351
446
100
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
11. LONG-TERM OBLIGATIONS (Continued)
(6) California Energy Commission (CEC) Loan
Year of Issuance 2016
Type of Debt Loan from the California Energy
Commission CEC
Principal Amount Ori inal $3,000,000
Security Loan Agreement with CEC
Interest Rates Original 1.00%
Interest Payment Dates June 22nd and December 22nd
Principal Payment Dates June 22nd and December 22nd
Purpose of Debt To upgrade street pole lighting to
energy efficient LED light sources
Debt service requirements to maturity are (in thousands):
Year Ending principal Interest Total
June 30
2021 $ 261 $ 25 $ 286
2022 264 22 286
2023 266 20 286
2024 269 17 286
2025 272 14 286
2026-2030 1,256 32 1,288
Total $ 2,588 1 $ 130 $ 2,718
447
101
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
11. LONG-TERM OBLIGATIONS (Continued)
(7) Leases Payable
Year of Issuance 2016
Type of Debt Capital Leases
Principal Amount Various
Security Master Lease Agreement
Interest Rates 1.54% and 1.71%
Interest Payment Dates Semi-Annually
Principal Payment Dates Semi-Annually
Purpose of Debt Equipment Financing
In December 2019, a new seven-year lease agreement was approved by City
Council in the amount of$1,172,59 to finance the replacement of a fire engine and
ambulance.
Debt service requirements to maturity are (in thousands):
Year Ending
June 30 Principal Interest Total
2021 1,190 104 1,294
2022 1,066 81 1,147
2023 1,087 61 1,148
2024 1,109 38 1,147
2025 435 8 443
2026-2027 354 12 366
Total $ 5,241 j $ 304 j $ 5,545
448
102
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
11. LONG-TERM OBLIGATIONS (Continued)
c. 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 June 30, June 30, Due Within
Activities: 2019 Additions Retirements 2020 One Year
Compensated Absences $ 1,416 $ 590 $ (391) $ 1,615 $ 440
Total Long-Term Obligations-
Business-Type Activities $ 1,416 $ 590 $ (391) $ 1,615 $ 440
(1) Compensated Absences
There is no repayment schedule for the compensated absences amount of
$1,615,000 relating to business-type activities. The balance for the
outstanding business-type compensated absences is predominately related
to the Water and Sewer funds.
d. 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):
June 30, June 30,
Community Facilities Districts: 2019 Additions Retirements 2020
Community Facilities District No. 1990-1
Special Tax Refunding Bonds $ 330 $ - $ (160) $ 170
Community Facilities District No.2000-1
2013 Special Tax Refunding Bonds 10,275 - (600) 9,675
Community Facilities District No.2002-1
Special Assessment Tax Bonds 4,090 - (145) 3,945
Community Facilities District No.2003-1
2013 Special Tax Refunding Bonds 17,235 - (820) 16,415
Total Community Facilities Districts 31,930 - (1,725) 30,205
Residential Redevelopment Bonds 2,900 - - 2,900
Total Obligations Not Recorded in
Financial Statements $ 34,830 $ - $ (1,725) $ 33,105
449
103
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
11. LONG-TERM OBLIGATIONS (Continued)
(1) 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 1 $ 2,9001 $ 9,500
12. CAPITAL ASSETS
a. Changes in Capital Assets
Capital asset activity for the year was (in thousands):
June 30, June 30,
Governmental Activities 2019 Additions Dispositions 2020
Capital Assets, Not Depreciated:
Land $ 362,534 $ - $ (465) $ 362,069
Construction in Progress 7,631 2,423 (2,539) 7,515
Total Capital Assets-Not Depreciated 370,165 2,423 (3,004) 369,584
Capital Assets Being Depreciated
Buildings 208,771 5,250 (2,743) 211,278
Machinery and Equipment 64,038 3,335 (370) 67,003
Infrastructure 419,321 15,552 (801) 434,072
Total Capital Assets Being Depreciated 692,130 24,137 (3,914) 712,353
Less Accumulated Depreciation:
Buildings (80,143) (4,447) 91 (84,499)
Machinery and Equipment (50,771) (2,640) 370 (53,041)
Infrastructure (222,912) (7,527) 801 (229,638)
Total Accumulated Depreciation (353,826) (14,614) 1,262 (367,178)
Total Depreciated-Net 338,304 9,523 (2,652) 345,175
Total Capital Assets 1,062,295 26,560 (6,918) 1,081,937
Total Accumulated Depreciation (353,826) (14,614) 1,262 (367,178)
Capital Assets of Governmental Activities-Net $ 708,469 $ 11,946 $ (5,656) $ 714,759
450
104
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
12. CAPITAL ASSETS (Continued)
June 30, June 30,
Business-Type Activities: 2019 Additions Dispositions 2020
Capital Assets, Not Depreciated:
Land $ 3,907 $ - $ - $ 3,907
Construction in Progress 5,701 236 (5,495) 442
Total Capital Assets-Not Depreciated 9,608 236 (5,495) 4,349
Capital Assets Being Depreciated
Buildings 92,567 7,515 100,082
Machinery and Equipment 20,313 344 - 20,657
Infrastructure 145,671 506 (216) 145,961
Total Capital Assets Being Depreciated 258,551 8,365 (216) 266,700
Less Accumulated Depreciation:
Buildings (29,211) (2,512) - (31,723)
Machinery and Equipment (12,537) (1,095) - (13,632)
Infrastructure (80,715) (2,410) 216 (82,909)
Total Accumulated Depreciation (122,463) (6,017) 216 (128,264)
Total Depreciated-Net 136,088 2,348 - 138,436
Total Capital Assets 268,159 8,601 (5,711) 271,049
Total Accumulated Depreciation (122,463) (6,017) 216 (128,264)
Capital Assets of Business Activities-Net $ 145,696 $ 2,584 $ (5,495) $ 142,785
b. Depreciation Expense
Depreciation in governmental activities was charged to the following
functions/programs in the Statement of Activities (in thousands):
Department:
City Manager $ 21
Finance 27
Community Development 76
Fire 199
Information Services 6
Police 252
Community Services 2,032
Library Services 295
Public Works 11,188
Internal Service Fund depreciation charged to functions 518
Total $ 14,614
451
105
E
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
12. CAPITAL ASSETS (Continued)
Depreciation in business-type activities was charged to the following
functions/programs in the Statement of Activities (in thousands):
Fund:
Water $ 3,910
Sewer Service 2,086
Refuse 21
Total $ 6,017
13. INVESTMENT IN JOINT VENTURES
The City participates in a firefighter training center called Central Net Operations
Authority (CNOA)through a joint powers agreement with the City of Fountain Valley.
The City of Huntington Beach records 76.00% of CNOA net assets as Joint Venture
Investments.
In July 2019, the City formally withdrew its membership from PCTA, a Joint Powers
Authority that manages the cable television and video provider franchising. The City
started collecting 100% of the franchise and PEG fees generated from the
Huntington Beach cable subscribers directly from the cable providers in fiscal year
2019-2020. The collected PEG fees are deposited into a restricted fund called "Surf
City 3" and will be used to fund the City's own cable channel operations and
programming costs.
14. RELATED PARTY TRANSACTION
The City has entered into a housing loan and equity sharing agreement in the
principal sum of $1,510,000 with City Manager Oliver Chi in October 2019 to use
as funding for the purchase of a home within the City. The property is held as
security for repayment of the loan until it is paid, and will remain subject to the
provisions of the loan agreement until sold. When or if the property is sold, the City
will receive 50% of the increase in the value of the home. This housing loan and
equity sharing agreement has a term of thirty (30) years. The balance as of the
loan as of June 30, 2020 is $1,490,685.
452
106
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
15. 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.
453
107
t City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
15. SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER
REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH
(Continued)
a. Long-Term Debt
Below is a schedule of changes in long-term obligations of the Successor Agency for
the year (in thousands):
June 30, June 30, Accrued Due Within
Successor Agency: 2019 Additions Retirements 2020 Interest One Year
Bonds Payable
1999 Tax Allocation Refunding Bonds $ 2,560 $ $ (625) $ 1,935 $ 40 $ 365
2002 Tax Allocation Bonds 5,585 (1,370) 4,215 88 800
Total Bonds Payable 8,145 (1,995) 6,150 128 1,165
Other Long-Term Obligations
Mayer DDA 2,409 (555) 1,854 30 554
Bella Terra OPA(Parking) 7,622 (1,294) 6,328 - 1,296
Bella Terra AHA(Phase II) 14,196 (643) 13,553 - 643
CIM DDA(Parking&Infrastructure) 5,836 (269) 5,567 292 288
CIM DDA(Additional Parking) 376 (12) 364 27 13
Section 108 Loan RDA 520 (520) - - -
Compensated Absences 48 (48) - - -
Total Other Long-Term Obligations 31,007 (3,341) 27,666 349 2,794
Total Long-Term Obligations $ 39,152 $ $ (5,336) $ 33,816 $ 477 $ 3,959
454
108
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
15. 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
Security Tax Increment
Interest Rates 3.00% to 5.05%
Interest Payment Dates February 1st and August 1st
Principal Payment Dates August 1 st
Purpose of Debt Prepay Agency's 1992 Loans to
Public Financing Authority
Debt service requirements to maturity are (in thousands):
Year Ending
June 30 Principal Interest Total
2021 $ 365 $ 88 $ 453
2022 380 69 449
2023 405 49 454
2024 425 29 454
2025 360 9 369
Total $ 1,935 $ 244 $ 2,179
455
109
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
15. 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 1 st and August 1 st
Principal Payment Dates August 1st
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
June 30
2021 $ 800 $ 191 $ 991
2022 840 150 990
2023 875 107 982
2024 920 62 982
2025 780 20 800
Total $ 4,215 $ 530 $ 4,745
Pledged Revenues
The Successor Agency will repay a total of$6,924,000, principal and interest,
for the outstanding 1999 and 2002 Tax Allocation Refunding Bonds as of
June 30, 2020 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.
456
110
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
15. 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 $1,854,000. 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%. 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 $6,327,000. 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) Bella Terra Phase II
In fiscal year 2010-11, the Agency entered into an affordable housing
agreement with BTDJM Phase II Associates (DJM). The agreement would
facilitate the construction of a 467 unit mixed use project, including 43
moderate units and 28 very low units. Under the terms of the agreement,
the Agency would reimburse DJM for the construction of the affordable units
up to $17,000,000. DJM has transferred the site to UDR, and as of year-end,
the Successor Agency obligation under the agreement amounted to
$13,553,000. 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. The interest rate of this
obligation is 4.00%. The agreement has been approved as an enforceable
obligation by the DOF.
457
111
City of Huntington Beach
Notes to Financial Statements
., . For the Year Ended June 30, 2020
15. SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER
REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH
(Continued)
(6) 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 30tn
Principal Payment Dates September 30tn
Purpose of Debt Strand Parking Structure and
Infrastructure
As of year-end, the Successor Agency obligation under the agreement
amounted to $5,567,000. 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). The DDA has been approved
as an enforceable obligation by the DOF.
458
112
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
15. SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER
REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH
(Continued)
(7) CIM/Huntington 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 30tn
Principal Payment Dates September 30tn
Purpose of Debt Additional Strand Parking
Structure and Infrastructure
As of year-end, the Successor Agency obligation under the agreement
amounted to $364,000. 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). The DDA has been approved
as an enforceable obligation by the DOF.
459
113
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
15. SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER
REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH
(Continued)
b. Advances from the City Housing Fund
The Successor Agency has recorded advances from the City Housing Fund totaling
$1,363,000 from the Low-Income Housing Fund to the Redevelopment Agency
Capital Projects Fund for Main Pier property acquisitions.
16. 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 has agreed to provide sales tax rebates to various companies, based
upon various factors such as increased job-base or new sales tax to the City. The
sales tax rebates serve to attract and retain various companies in the City of
Huntington Beach. The City of Huntington Beach has four sales tax sharing
agreements that extend until 2020, 2024, 2033, and 2038. Sales tax rebates totaled
$689,230 for the year ended June 30, 2020. Sales tax sharing agreements include
an agreement with Surf City Auto Group II, Inc. wherein the sales tax sharing is a
50%/50% Auto Group/City split with base sales of$1,681,797 (Jeep sales for 2016)
and increases by 1% each year. The other sales tax sharing agreements are with
Pinnacle Petroleum through 2024, with base sales of $100,000, McKenna Subaru
Huntington Beach through 2033 with a 45%/55% McKenna/City split with base
sales of$150,800, and ACS (Applied Computer Solutions)with a rebate percentage
of 25% of the annual sales tax increment above the base sales of $200,000. If the
annual sales tax revenue net of base sales exceeds $600,000, the rebate
percentage will increase to 30% with a total not to exceed rebate amount of
$200,000 annually. The agreement with ACS ended on June 30, 2020.
460
114
' City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
16. COMMITMENTS AND CONTINGENCIES (Continued)
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. The
Successor Agency received its Finding of Completion notice from the Department
of Finance on May 13, 2014. The Oversight Board (to the Successor Agency) have
approved and reauthorization of the loans between the City and former
Redevelopment Agency in FY 16/17. The State Department of Finance has denied
the validity of the loans and the City has filed suit against the State.
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. In accordance with Health and Safety Code Section 34191.4(b)(3),
all other loans between the city and former Redevelopment Agency will begin to be
repaid, at a 3% interest rate, as determined by SB 107 upon approval of the
Oversight Board and the Department of Finance. The Oversight Board (to the
Successor Agency) have approved and reauthorization of the loans between the
City and former Redevelopment Agency in FY 16/17. The State Department of
Finance has denied the validity of the loans and the City has filed suit against the
State. Below is a schedule of the activity for the year (in thousands):
461
115
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
16. COMMITMENTS AND CONTINGENCIES (Continued)
d. Redevelopment Successor Agency Debt to City (Continued)
June 30, June 30,
2019 Additions Reductions 2020
General Fund
Direct Advances $ 2,312 $ $ $ 2,312
Indirect Advances 6,567 - 6,567
Land Sales 32,833 32,833
Interest 29,023 1,457 30,480
Total General Fund 70,735 1,457 72,192
Sewer Fund
Direct Advances 292 6 298
Deferred Development Fees 182 4 186
Total Sewer Fund 474 10 484
Drainage Fund
Direct Advances 706 14 720
Deferred Development Fees 195 4 199
Total Drainage Fund 901 18 919
Park Acquisition and Development Fund
Direct Advances 5,807 120 5,927
Deferred Development Fees 431 9 440
Total Park Acquisition and Development Fund 6,238 129 6,367
Water Fund
Direct Advances 4,371 90 4,461
Total Water Fund 4,371 90 4,461
Total All Funds $ 82,719 $ 19704 $ $ 84,423
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 16f). Below is a schedule of the activity for the
year (in thousands):
June 30, June 30,
2019 Additions Reductions 2020
General Fund
Emerald Cove $ 3,245 $ - $ - $ 3,245
462
116
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
16. COMMITMENTS AND CONTINGENCIES (Continued)
f. Successor Agency Litigation
Until 2012, the Huntington Beach Redevelopment Agency existed and received
property tax increment from property within the "City Redevelopment Project Area."
In 2012, the State Legislature dissolved all redevelopment agencies, and all tax
increment was returned to the County for payment to other taxing entities. The only
exception was that tax increment would continue to be paid to the Successor
Agency to the City Redevelopment Agency to pay any pre-dissolution, legally
binding obligations established prior to the dissolution of the agencies. Further, the
City transferred the former Redevelopment Agency's housing obligations to the
Huntington Beach Housing Authority pursuant to Health and Safety Code section
34176.
The Successor Agency contended that its payments to retire the former
Redevelopment Agency's portion of the 2010 Lease Revenue Bonds used to
finance the Emerald Cove low income housing project were such an obligation. The
annual payment on these bonds is approximately $400,000 a year. The amount
that the City contends to be due to pay the former Redevelopment Agency's share
of the bonds is $3,245,000.
The Successor Agency also contended that the 2012 Pacific City Development
Agreement was a pre-dissolution, legally binding obligation. Pacific City is a
development project that was conditioned on providing 77 affordable housing units,
of which the Successor Agency now was obliged to construct 26 units off-site, at a
cost of$6,500,000. This would not be a City General Fund obligation.
The State Department of Finance rejected the City's "Recognized Obligation
Payment Schedule" ("ROPS") to establish these two obligations as entitled to be
funded through tax increment. In response, the City sued the Department of
Finance.
All post-redevelopment matters are being heard in Sacramento before a select
panel of judges. On January 29, 2014, the Superior Court held that the Emerald
Cove Bonds and the Pacific City housing were not preexisting Authority obligations
payable with tax increment. The Successor Agency appealed the judgment. The
appellate decision was received in 2018 and the Successor Agency lost the appeal.
The Housing Authority is reviewing options on meeting the affordable housing
requirements for Pacific City with other projects. The City itself does not require a
reserve for either case.
463
117
City of Huntington Beach
_ Notes to Financial Statements
., ;,. For the Year Ended June 30, 2020
16. COMMITMENTS AND CONTINGENCIES (Continued)
f. Successor Agency Litigation (continued)
In addition, as stated above in section (c) and (d), the City of Huntington Beach has
filed suit against the State of California regarding the Department of Finance's
denial of loans which were between the Redevelopment Agency and the City of
Huntington Beach.
17. OTHER INFORMATION
a. Fund and Accumulated Deficits
The following funds have total fund deficits at year-end (in thousands)..
Enterprise Funds:
Refuse Fund $ 83
Internal Service Fund:
Self Insurance Workers' Comp 14,180
The fund deficit in the Refuse Fund is due to fees and charges below the costs to
provide services and the implementation of GASB Nos. 68 and 75 that require the
net pension liability and net other postemployment benefits liability to be reported
on the face of the financial statement. The Self Insurance Workers' Comp fund has
a deficit due to increases in statutory benefits related to workers' comp claims, rising
healthcare costs, and the implementation of GASB Nos. 68 and 75.
The City has established plans to reduce and eliminate the deficits in these funds.
The City has increased refuse rates to address the deficit in the Refuse Fund.
Additional transfers will be made over the next ten to twenty years from the General
Fund, Proprietary funds, and other governmental funds to address the deficit in the
Self Insurance Workers' Comp Internal Service Fund.
18. SUBSEQUENT EVENTS
a. Huntington Beach Public Financing Authority Lease Revenue Refunding
Bonds
Staff regularly monitors the market for municipal securities and determined that in
will be economically beneficial to refinance its existing callable bonds in 2020. On
July 2020, the City Council approved the refunding of the Huntington Beach Public
Financing Authority's outstanding 2010 Lease Revenue Refunding Bonds, Series A
($7,410,000) and 2011 Lease Revenue Refunding Bonds, Series A ($15,725,000)
in an amount not to exceed $21,000,000. On July 29, 2020, the Tax-Exempt Lease
464
118
♦ r
City of Huntington Beach
Notes to Financial Statements
For the Year Ended June 30, 2020
18. SUBSEQUENT EVENTS (Continued)
Revenue Refunding Bonds, 2020 Series A and Taxable Lease Lease Revenue
Refunding Bonds, 2020 Series B were issued in principal amounts of $4,835,000
and $14,440,000, respectively. Through this refunding, the General Fund debt
service expenditures will be reduced by over $900,000 in the first two years and an
average annual savings of$390,000 will be realized thereafter through 2032.
b. Pension Obligation Bonds
On November 18, 2019, the City Council approved a resolution providing for the
possible issuance of taxable Pension Obligation Bonds to refund all or a portion of
the City's CaIPERS unfunded accrued liability, totaling $436.2 million as of the June
30, 2018 actuarial valuation. On November 21, 2019, the City submitted the
necessary documents to the Orange County Superior Court to begin the judicial
validation process, which was finalized on May 18, 2020. The resolution also
approves a not-to-exceed bond amount with the following conditions: (a) an
aggregate principal amount not to exceed the City's unfunded accrued actuarial
liability under the PERS Contract pursuant to the Retirement Law as of the date of
issuance of the Initial Series of Bonds (as determined by PERS), plus the
underwriter's discount on the Initial Series of Bonds, plus any original issue discount
on the Initial Series of Bonds, plus the costs of issuance of the Initial Series of
Bonds, (b) the true interest cost to the City on the Initial Series of Bonds shall not
exceed 5.00%, and (c) the Initial Series of Bonds shall mature not later June 30,
2044 (the current PERS final amortization of the City's unfunded accrued actuarial
liability as set forth in the Actuarial Reports).
c. Infectious Disease Outbreak — COVID-19
The outbreak of coronavirus disease 2019 (COVID-19), a respiratory disease
caused by a new strain of coronavirus, has been characterized as a pandemic by
the World Health Organization and the effects of the outbreak and governmental
actions responsive to it are altering the behavior of businesses and consumers in a
manner that is having significant impacts on global and local economies. In
addition, financial markets in the United States and globally have seen significant
declines and experienced significant volatility attributed to COVID-19 concerns.
Potential impacts to the City associated with the COVID-19 outbreak include, but
are not limited to, increasing costs and challenges to maintain a safe community,
cancellation of public events, and disruption of the regional and local economy with
corresponding decreases in the City's revenues.
The COVID-19 outbreak is ongoing, and the duration and severity of the outbreak
and the economic and other actions that may be taken by governmental authorities
to contain the outbreak or to treat its impact are uncertain. The ultimate impact of
COVID-19 on the operations and finances of the City is unknown. The City
465
119
City of Huntington Beach
Notes to Financial Statements
~' _, ,, For the Year Ended June 30, 2020
18. SUBSEQUENT EVENTS (Continued)
implemented various cost containment measures during the year and amended its
Fiscal Year 2020-21 budget, which includes consideration of the effect of the
COVID-19 outbreak and an anticipated recession.
The City continues to actively monitor the regional and local economy so that any
further financial impacts can be anticipated and disruption to services can be
avoided.
d. CARES Act Funding
In May 2020, the State of California (State) received CARES Act funding, including
Coronavirus Relief Funds (CRF) from the U.S. Treasury Office. The State
developed a plan to pass through a portion of the CRF assistance to cities and
counties within California. The City will be receiving $2,485,243 of CRF assistance
during fiscal year 2020/21, for eligible expenditures incurred beginning March 1,
2020 through December 31, 2020. The State did not make the appropriations of
the CRF funds available to recipients until after July 1, 2020, therefore, the City will
recognize the CRF revenue in fiscal year 2020-21.
466
120
THIS PAGE INTENTIONALLY LEFT BLANK
467
121
REQUIRED SUPPLEMENTARY INFORMATION
468
122
THIS PAGE INTENTIONALLY LEFT BLANK
469
123
City of Huntington Beach
° Notes to Required Supplementary Information
For the Year Ended June 30, 2020
Budgetary Information
The City Council must annually adopt a budget by June 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 Chief Financial Officer'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 February 28t" of each year, each department submits data to the City Manager 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 May 1st, 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).
470
124
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2020
(In Thousands)
General Fund
Variance with
Final Budget
Positive
REVENUES Original Budget Final Budget Actual (Negative)
Property Taxes $ 89,732 $ 87,497 $ 87,497 $ -
Sales Taxes 41,203 41,063 41,063 -
Utility Taxes 17,906 18,149 18,149 -
Other Taxes 20,926 17,489 17,499 10
Licenses and Permits 7,858 8,418 8,368 (50)
Fines, Forfeitures and Penalties 4,519 3,403 3,403 -
Use of Money and Property 17,272 17,148 17,510 362
Intergovernmental 3,074 3,591 4,102 511
Charges for Current Service 27,132 26,263 25,501 (762)
Other 1,460 2,854 2,395 (459)
Total Revenues 231,082 225,875 225,487 (388)
EXPENDITURES
Current:
City Council 454 436 394 42
City Manager 3,872 4,070 4,045 25
City Treasurer 260 298 297 1
City Attorney 2,811 2,906 2,898 8
City Clerk 926 917 874 43
Finance 6,481 6,591 6,174 417
Community Development 9,600 9,971 9,184 787
Fire 52,623 55,030 55,030 -
Information Services 7,766 8,010 7,812 198
Police 84,506 85,993 85,993 -
Community Services 9,930 9,119 9,064 55
Library Services 4,930 5,611 4,752 859
Public Works 27,838 28,009 27,264 745
Debt Service:
Principal 1,078 1,806 1,637 169
Interest 195 271 218 53
Total Expenditures 213,270 219,038 215,636 3,402
Excess of Revenues
Over Expenditures 17,812 6,837 9,851 3,014
OTHER FINANCING SOURCES(USES)
Transfers In 1,514 1,690 172 (1,518)
Transfers Out (19,190) (8,948) (8,948) -
Total Other Financing Sources(Uses) (17,676) (7,258) (8,776) (1,518)
Net Change In Fund Balances 136 (421) 1,075 1,496
Fund Balance-Beginning of Year 79,013 79,013 79,013 -
Fund Balance-End of Year $ 79,149 $ 78,592 $ 80,088 $ 1,496
471
125
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES -BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30,2020
(In Thousands)
Grants Special Revenue
Variance with
Final Budget
Positive
REVENUES Original Budget Final Budget Actual (Negative)
Use of Money and Property $ 100 $ 100 $ 2,508 $ 2,408
Intergovernmental 2,672 13,087 5,292 (7,795)
Other - - 989 989
Total Revenues 2,772 13,187 8,789 (4,398)
EXPENDITURES
Current:
City Manager 16 5,744 11 5,733
City Clerk - 12 12 -
Finance - 5 5 -
Community Development 1,512 3,896 1,859 2,037
Fire - 2,452 1,447 1,005
Information Systems - 198 105 93
Police 724 3,051 1,689 1,362
Community Services 286 856 809 47
Library Services 66 344 290 54
Public Works 696 9,579 3,927 5,652
Debt Service:
Principal 221 221 - 221
Interest 5 - -
Total Expenditures 3,526 26,358 10,154 16,204
Excess (Deficiency)of Revenues Over(Under)
Expenditures (754) (13,171) (1,365) 11,806
OTHER FINANCING USES
Transfers In - 36 36 -
Transfers Out - (179) (179) -
Total Other Financing Uses - (143) (143) -
Net Change In Fund Balances (754) (13,314) (1,508) 11,806
Fund Balance -Beginning of Year 6,069 6,069 6,069 -
Fund Balance -End Of Year $ 5,315 $ (7,245) $ 4,561 $ 11,806
472
126
City of Huntington Beach
Required Supplementary Information
Schedule of Changes in the Net Pension Liability and Related Ratios During the Measurement Period
(in Thousands)
Last Ten Fiscal Years*
CalPERS City Miscellaneous Plan-99
Measurement Period 2018-19 2017-18 2016-17 2015-16 2014-15 2013-14
Total Pension Liability
Service cost $ 8,327 $ 8,314 $ 8,084 $ 7,436 $ 7,102 $ 7,263
Interest on total pension liability 40,150 38,769 37,749 37,194 35,653 34,412
Differences between expected and actual experience (183) (2,042) (9,148) 1,072 (2,900) -
Changes in assumptions - (3,634) 30,762 - (8,565)
Benefit payments,including refunds of employee contributions (28,508) (26,685) (25,312) (24,316) (23,377) (22,444)
Net change in total pension liability 19,786 14,722 42,135 21,386 7,913 19,231
Total pension liability-beginning 571,812 557,090 514,955 493,569 485,656 466,425
Total pension liability-ending(a) $ 591,598 $ 571,812 $ 557,090 $ 514,955 $ 493,569 $ 485,656
Plan Fiduciary Net Position
Contributions-employer $ 14,816 $ 13,495 $ 12,316 $ 10,982 $ 9,747 $ 9,066
Contributions-employee 3,779 3,649 3,869 3,736 3,790 3,909
Investment income 27,288 32,963 40,328 1,856 8,230 56,429
Administrative Expense (296) (614) (536) (226) (418) (472)
Benefit payments (28,508) (26,685) (25,312) (24,316) (23,377) (22,444)
Plan to Plan Resource Movement (13) 1
Other 1 (1,166) 2 -
Net change in plan fiduciary net position 17,067 21,643 30,665 (7,968) (2,026) 46,488
Plan fiduciary net position-beginning 415,455 393,812 363,147 371,115 373,141 326,653
Plan fiduciary net position-ending(b) $ 432,522 $ 415,455 $ 393,812 $ 363,147 $ 371,115 $ 373,141
Net pension liability-beginning 156,357 163,278 151,808 122,454 112,515 139,771
Net pension liability-ending(a)-(b) $ 159,076 $ 156,357 $ 163,278 $ 151,808 $ 122,454 $ 112,515
Plan fiduciary net position as a percentage of the
total pension liability 73.11% 72.66% 70.69% 70.52% 75.19% 76.83%
Covered payroll $ 45,419 $ 45,431 $ 44,848 $ 44,365 $ 44,233 $ 41,142
Net pension liabilityas a percentage of covered
payroll 350.24% 344.16% 364.07% 342.18% 276.84% 273.48%
Notes to Schedule:
Benefit changes:the figures above do not include any liability impact that may have resulted from plan changes which occurred after the June 30,2017 valuation
date.This applies for voluntary benefit changes as well as any offers of Two Years Additional Service Credit(a.k.a.Golden Handshakes).
Changes in assumptions: None in 2019. In 2018,demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study
and Review of Actuarial Assumptions December 2017.There were no changes in the discount rate. In 2017,the accounting discount rate reduced from 7.65
percent to 7.15 percent. In 2016,there were no changes. In 2015,amounts reported reflect an adjustment of the discount rate from 7.5 percent(net of
administrative expense)to 7.65 percent(without a reduction for pension plan administrative expense). In 2014,amounts reported were based on the 7.5 percent
discount rate.
*Fiscal year2013/14 was the first year of implementation,therefore onlysixyears are shown.
473
127
City of Huntington Beach
Required Supplementary Information
Schedule of Changes in the Net Pension Liability and Related Ratios During the Measurement Period
(in Thousands)
Last Ten Fiscal Years*
CaIPERS City Safety Plan-100
Measurement Period 2018-19 2017-18 2016-17 2015-16 2014-15 2013-14
Total Pension Liability
Service cost $ 13,644 $ 13,509 $ 13,657 $ 12,159 $ 11,119 $ 11,096
Interest on total pension liability 53,048 51,223 49,350 48,390 46,160 44,246
Differences between expected and actual experience (1,220) 2,584 (10,819) 2,678 (820) -
Changes in assumptions (3,657) 40,352 - (11,054)
Benefit payments,including refunds ofemployee contributions (38,958) (37,128) (34,222) (32,116) (30,535) (29,540)
Net change in total pension liability 26,514 26,531 58,318 31,111 14,870 25,802
Total pension liability-beginning 755,812 729,281 670,963 639,852 624,982 599,180
Total pension liability-ending(a) $ 782,326 $ 755,812 $ 729,281 $ 670,963 $ 639,852 $ 624,982
Plan Fiduciary Net Position
Contributions-employer $ 23,063 $ 21,058 $ 20,629 $ 18,703 $ 17,791 $ 15,152
Contributions-employee 4,337 4,164 4,570 4,058 4,110 3,850
Investment income 32,776 39,336 48,413 2,144 9,661 66,805
Administrative Expense (355) (736) (640) (270) (497) (555)
Benefit payments (38,958) (37,128) (34,222) (32,116) (30,535) (29,540)
Net Plan to Plan Resource Movement 13 (3) (29)
Other 1 (1,398) - - - -
Net change in plan fiduciary net position 20,877 25,293 38,750 (7,510) 530 55,712
Plan fiduciary net position-beginning 497,767 472,474 433,724 441,234 440,704 384,992
Plan fiduciary net position-ending(b) $ 518,644 $ 497,767 $ 472,474 $ 433,724 $ 441,234 $ 440,704
Net pension liability-beginning 258,045 256,807 237,239 198,618 184,278 214,188
Net pension liability-ending(a)-(b) $ 263,682 $ 258,045 $ 256,807 $ 237,239 $ 198,618 $ 184,278
Plan fiduciary net position as a percentage ofthe
total pension liability 66.30% 65.86% 64.79% 64.64% 68.96% 70.51%
Covered payroll $ 43,684 $ 43,371 $ 43,283 $ 42,619 $ 42,252 $ 38,397
Net pension liabilityas a percentage ofcovered
payroll 603.61% 594.97% 593.32% 556.65% 470.08% 479.93%
Notes to Schedule:
Benefit changes:the figures above do not include any liability impact that may have resulted from plan changes which occurred after the June 30,2017 valuation
date.This applies for voluntary benefit changes as well as any offers of Two Years Additional Service Credit(a.k.a.Golden Handshakes).
Changes in assumptions: None in 2019. In 2018,demographic assumptions and inflation rate were changed in accordance to the CaIPERS Experience Study and
Review of Actuarial Assumptions December 2017.There were no changes in the discount rate. In 2017,the accounting discount rate reduced from 7.65 percent to
7.15 percent. In 2016,there were no changes. In 2015,amounts reported reflect an adjustment of the discount rate from 7.5 percent(net of administrative expense)
to 7.65 percent(without a reduction for pension plan administrative expense). In 2014,amounts reported were based on the 7.5 percent discount rate.
*Fiscal year 2013/14 was the first year of implementation,therefore onlysixyears are shown.
474
128
City of Huntington Beach
Required Supplementary Information
Schedule of Changes in the Net Pension Liability and Related Ratios During the Measurement Period
(in Thousands)
Last Ten Fiscal Years*
Supplemental Retirement Plan
Total Pension Liability 2019-20 2018-19 2017-18** 2016-17 2015-16 2014-15 2013-14
Service cost $ 338 $ 398 $ 344 $ 487 $ 552 $ 495 $ 544
Interest on total pension liability 3,954 3,990 2,964 3,976 3,945 3,919 3,828
Differences between expected and actual experience 4,594 - (794) - 982 - -
Changes in assumptions 1,756 2,115 1,515 2,928
Benefit payments,including refunds of employee contributions (5,012) (4,771) (3,388) (4,144) (3,773) (3,588) (3,548)
Net change in total pension liability 5,630 (383) 1,241 1,834 4,634 826 824
Total pension liability-beginning 65,444 65,827 64,586 62,752 58,118 57,292 56,468
Total pension liability-ending(a) $ 71,074 $ 65,444 $ 65,827 $ 64,586 $ 62,752 $ 58,118 $ 57,292
Plan Fiduciary Net Position
Contributions-employer $ 3,506 $ 4,962 $ 3,507 $ 5,346 $ 7,277 $ 4,678 $ 4,539
Contributions-employee - - - - - - -
Investment income 2,114 2,582 2,128 6,373 4,282 (1,313) 3,465
Administrative Expense (444) (191) (145) (182) (189) (170) (176)
Benefit payments (5,012) (4,771) (3,388) (4,144) (3,773) (3,588) (3,548)
Section 115 Trust Segregation (3,788) - -
Other - - - - 3,183 258
Net change in plan fiduciary net position 164 2,582 (1,686) 7,393 7,597 2,790 4,538
Plan fiduciary net position-beginning 58,853 56,271 57,957 50,564 42,967 40,177 35,639
Plan fiduciary net position-ending(b) $ 59,017 $ 58,853 $ 56,271 $ 57,957 $ 50,564 $ 42,967 $ 40,177
Net pension liability-beginning 6,591 9,556 6,629 12,188 15,151 17,115 20,829
Net pension liability-ending(a)-(b) $ 12,057 $ 6,591 $ 9,556 $ 6,629 $ 12,188 $ 15,151 $ 17,115
Plan fiduciary net position as a percentage ofthe
total pension liability 83.04% 89.93% 85.48% 89.74% 80.58% 73.93% 70.13%
Covered payroll $ 8,469 $ 12,863 $ 10,890 $ 17,167 $ 19,517 $ 22,069 $ 22,004
Net pension Iiabilityas a percentage ofcovered payroll 142.37% 51.24% 87.75% 38.61% 62.45% 68.65% 77.78%
* Fiscal year 2013/14 was the first year of implementation,therefore only seven years are shown.
**The 2017-18 period reflects nine months of activity only as the fiscal year change resulted in a nine-month reporting period from October 1,2017 to June 30,2018.
475
129
City of Huntington Beach
Required Supplementary Information
Schedule of Changes in Net OPEB Liability and Related Ratios
For the Measurement Periods Ended June 30
(in Thousands)
Last Ten Fiscal Years*
Other Post Employment Benefits Plan
Measurement Period 2019 2018 2017
Total OPEB Liability
Service cost $ 1,241 $ 1,205 $ 877
Interest on the total OPEB liability 1,859 1,787 1,293
Actual and expected experience difference 1,411 - -
Changes in assumptions (3,358) -Benefit payments (1,742) (1,683) (1,036)
Net change in total OPEB liability (589) 1,309 1,134
Total OPEB liability-beginning 33,434 32,125 30,991
Total OPEB liability-ending(a) $ 32,845 $ 33,434 $ 32,125
Plan Fiduciary Net Position
Contribution-employer $ 2,270 $ 4,191 $ 1,036
Net investment income 1,901 1,126 471
Benefit payments (1,742) (1,683) (1,036)
Administrative expense (61) (131) (9)
Net change in plan fiduciary net position 2,368 3,503 462
Plan fiduciary net position-beginning 26,825 23,322 22,860
Plan fiduciary net position-ending (b) $ 29,193 $ 26,825 $ 23,322
Net OPEB liability-ending(a)-(b) $ 3,652 $ 6,609 $ 8,803
Plan fiduciary net position as a percentage of the total OPEB liability 88.88% 80.23% 72.60%
Covered employee payroll $ 79,682 $ 81,458 $ 60,985
Net OPEB liability as a percentage of covered employee payroll 4.58% 8.11% 14.43%
Notes to Schedule:
Fiscal year 2017/18 was the first year of implementation,therefore onlythree years of information are shown.
476
130
City of Huntington Beach
Required Supplementary Information
Schedule of Contributions
For the Year Ended June 30, 2020
(in Thousands)
Last Ten Fiscal Years*
CaIPERS City Miscellaneous Plan-99
2019-20' 2018-19' 2017-181'2 2016-17 2015-16' 2014-15' 2013-14'
Actuarially determined contribution $ 16,878 $ 14,819 $ 9,734 $ 11,921 $ 11,238 $ 10,510 $ 8,685
Contributions in relation to the actuarially determined contributions (16,878) (14,819) (9,734) (11,921) (11,238) (10,510) (8,685)
Contribution deficiency(excess) $ - $ - $ - $ - $ - $ - $
Covered payroll $ 45,952 $ 45,419 $ 33,210 $ 45,118 $ 44,253 $ 46,337 $ 43,327
Contributions as a percentage of covered payroll 36.73% 32.63% 29.31% 26.42% 25.39% 22.68% 20.05%
'Historical information is required onlyfor measurement periods forwhich GASB 68 is applicable.
2 The 2017-18 period reflects nine months of activity only as the fiscal year change resulted in a nine-month reporting period from October 1,2017 to June 30,2018.
Notes to Schedule
Valuation dates: 6/30/2012 through 6/3 012 0 1 7
Methods and assumptions used to determine contribution rates:
Actuarial cost method Entry Age Normal
Amortization method/period For details,see Funding Valuation Reports for the years ended June 30,2012-2017.
Asset valuation method For 10/1/14-6/30/15,15 Year Smoothed Market(for details,see June 30,2012 Funding Valuation Report).For 7/1/15-
6/30/20,Fair Value(for details,see the Funding Valuation Reports for the years ended June 30,2013,2014,2015
and 2016).
Inflation 2.75%
Salary increases Varies by entry age and service
Payroll growth 3.00%
Discount Rate 7.25%,net of pension plan investment and administrative expenses;includes inflation. On December21,2016,the
CalPERS Board ofAdministration lowered the discount rate from 7.50 percent to 7.00 percent using a three year
phase-in beginning with the June 30,2016 actuarial valuations. The discount rate will be lowered to 7.00 percent
next year as adopted by the Board.
Retirement age For 10/1/13-6/30/16,the probabilities of retirement are based on the 2014 CalPERS Experience studyfor the period
from 1997 to 2007. For 7/1/16-6/30/19,the probabilities of retirement are based on the 2014 CaIPERS Experience
studyfor the period from 1997 to 2011.
Mortality For 10/1/13-6/30/16,the probabilities of mortality are based on the 2010 CalPERS Experience Study for the period
from 1997 to 2007.For 7/1/16-6/30/19,the probabilities of mortality are based on the 2014 CaIPERS Experience
Studyforthe period from 1997 to 2011. For7/1/16-6/30/18,Pre-retirementand Post-retirement mortality rates include
5 years of projected morta I ityimprovement using Scale AApubI is hed by the Society of Actuaries. For7/1/18-6/30/19,
Pre-retirement and Post-retirement morta I ity rates include 20 years of projected mortaIity imp rovementusing Scale
BB published by the Society of Actuaries.
`Beginning with the June 30,2013 valuations,CalPERS employed an amortization and smoothing pol i cy that wi I I 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.
477
131
City of Huntington Beach
Required Supplementary Information
Schedule of Contributions
For the Year Ended June 30, 2020
(in Thousands)
Last Ten Fiscal Years*
CaIPERS City Safety Plan-100
2019-20 9 2018-19' 2017-18 1,2 2016-17 1 2015-16 2014-15 1 2013-14 1
Actuariallydetermined contribution $ 25,847 $ 23,062 $ 15,223 $ 19,468 $ 19,129 $ 18,125 $ 14,759
Contributions in relation to the actuarially determined contributions (25,847) (23,062) (15,223) (19,468) (19,129) (19,125) (14,759)
Contribution deficiency(excess) $ - $ - $ - $ - $ - $ (1,000) $ -
Covered payroll $ 43,783 $ 43,684 $ 31,943 $ 43,269 $ 42,607 $ 44,055 $ 41,167
Contributions as a percentage of covered payroll 59.03% 52,79% 47.66% 44.99% 44.90% 43.41% 35.85%
Historical information is required onlyfor measurement periods forwhich GASB 68 is applicable.
2 The 2017-18 period reflects nine months of activity only as the fiscal year change resulted in a nine-month reporting period from October 1,2017 to June 30,2018.
Notes to Schedule
Valuation dates: 6/30/2012 through 6/30/2017
Methods and assumptions used to determine contribution rates:
Actuarial cost method Entry Age Normal
Amortization method/period For details,see Funding Valuation Reports for the years ended June 30,2012-2017.
Asset valuation method For 10/1/14-6/30/15,15 Year Smoothed Market(for details,see June 30,2012 Funding Valuation Report).For 7/1/15-
6/30/19,Fair Value(for details,see the Funding Valuation Reports for the years ended June 30,2013,2014,2015,
and 2016).
Inflation 2.75%
Salary increases Varies by entry age and service
Payroll growth 3.00%
Discount Rate 7.25%,net of pension plan investment and administrative expenses;includes inflation. On December 21,2016,the
CalPERS Board of Administration lowered the discount rate from 7.50 percentto 7.00 percent using a three year
phase-in beginning with the June 30,2016 actuarial valuations. The discount rate will be lowered to 7.00 percent
next year as adopted bythe Board.
Retirement age For 10/1/13-6/30/16,the probabilities of retirement are based on the 2014 CalPERS Experience studyfor the period
from 1997 to 2007. For 7/1/16-6/30/19,the probabilities of retirement are based on the 2014 CalPERS Experience
study for the period from 1997 to 2011.
Mortality For 10/1/13-6/30/16,the probabilities of mortality are based on the 2010 CalPERS Experience Studyfor the period
from 1997 to 2007.For 7/1/16-6/30/19,the probabilities of mortality are based on the 2014 CalPERS Experience
Studyfor the period from 1997 to 2011. For 7/1/16-6/30/18,Pre-retirement and Post-retirement mortality rates
include 5 years of projected mortality im provement using Scale AA published by the Society of Actuaries. For7/1/18-
6/30/19,Pre-retirement and Post-retirement mortality rates include 20 years of projected mortality improvement
using Scale BB published by the Society of Actuaries.
'Beginning with the June 30,2013 valuations,CalPERS employed an amortization and 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.
478
132
City of Huntington Beach
Required Supplementary Information
Schedule of Contributions
For the Year Ended June 30, 2020
(in Thousands)
Last Ten Fiscal Years*
Supplemental Retirement Plan
2019-20' 2018-19' 2017-18 2016-17' 2015-16 2014-15 1 2013-14'
Actuariallydetermined contribution $ 1,689 $ 2,258 $ 2,879 $ 3,895 $ 3,576 $ 3,634 $ 4,534
Contributions in relation to the actuarially determined contributions (3,506) (4,962) (3,507) (5,346) (7,277) (4,678) (4,539)
Contribution deficiency(excess) $ (1,817) $ (2,704) $ (628) $ (1,451) $ (3,701) $ (1,044) $ (5)
Covered payroll $ 8,469 $ 12,863 $ 10,890 $ 17,167 $ 19,517 $ 22,069 $ 22,004
Contributions as a percentage of covered payroll 41.40% 38.58% 32.20% 31.14% 37.29% 21.20% 20.63%
'Historical information is required onlyfor measurement periods forwhich GASB 68 is applicable.
2 The 2017-18 period reflects nine months of activityonlyas the fiscal year change resulted in a nine-month reporting period from October 1,2017 to June 30,2018.
Notes to Schedule
Valuation date: 6/30/2019 9/30/2017 9/30/2017 9/30/2015 9/30/2013 9/30/2013 9/30/2011
Methods and assumptions used to determine contribution rates:
Actuarial cost method Entry Age Normal,Level Percentage of Payroll
9/30/12 UAAL:fixed 10-year period,Gains/Losses:fixed 15-year period,Discount rate change loss:10-year period,6/30/18
Amortization method/period UAAL:fixed 5-year period fresh start. Level dollar amortization.
Asset valuation method Investment gains/losses spread over a 3-year rolling period
Inflation 3.00%
Salary increases Varies by entry age and service
Payroll growth Merit - CaIPERS 1997-2011 Experience Study plus 3.25% aggregate increase for the October 1, 2013 to June 30, 2018
measurement period. 3%aggregate increase forthe July 1,2018-June 30,2019 measurement period,
6.5%,net of pension plan investment and administrative expenses,including inflation for the October 1,2013 to June 30,2018
Investment rate of return measurement period. 6.25%,net of pension plan investment and administrative expenses,for the July 1,2019-June 30,2020
Retirement age The probabilities of retirement are based on the CalPERS 1997-2011 Experience Study
Mortality The probabilities of mortalityare based on the CalPERS 1997-2011 Experience Study.Pre-retirement and Post-retirement
mortality rates include mortality projected fully generational with Scale MP-14,modified to converge to ultimate improvement
rates in 2022 for the October 1,2013 to June 30,2018 measurement period. Mortality projected fully generational with Scale MP-
17 for the July 1,2019 to June 30,2020 measurement period.
Schedule of Money Weighted Rate of Return
2020' 20192 20182 2017 2016 2015 2014
Annual Money Weighted Rate of Return,net of investment expense 3.79% 4.79% 4.04% 12.87% 10.20% -2.82% 9.20%
'Historical information is required only for measurement periods for which GASB 68 is applicable.
2 The 2017-18 period reflects nine months of activity onlyas the fiscal year change resulted in a nine month reporting period from October 1,2017 to June 30,20 18.
479
133
City of Huntington Beach
Required Supplementary Information
Schedule of Contributions
For the Year Ended June 30, 2020
(in Thousands)
Last Ten Rscal Years*
Other Post Employment Benefits Plan
Fiscal Year Ended June 30 2020 2019 2018**
Actuarially Determined Contribution(ADC) $ 1,793 $ 1,746 $ 2,022
Contributions in relation to the ADC (1,959) (2,270) (4,192)
Contribution deficiency(excess) $ (166) $ (524) $ (2,170)
Covered-employee payroll** $ 76,521 $ 79,682 $ 59,589
Contributions as a percentage of covered-employee payroll 2.56% 2.85% 7.03%
Notes to Schedule:
Valuation date: 6/30/2017 6/30/2017 6/30/2015
Methods and assumptions used to determine contributions:
Actuarial Cost Method Entry Age Normal
Amortization Method/Period Level percent of payroll over a closed rolling 15-year period
Asset Valuation Method Fair value
Inflation 3%for 10/1/17-6/30/18 and 2.75% per annum for 7/1/18-6/30/20.
Payroll Growth 3% per annum, in aggregate
Investment Rate of Return 6%for the October 1, 2017-June 30, 2018 period. 6.25%for the July 1, 2018-June 30, 2020.
Assumes investing in California Employers'Retiree Benefit Trust asset allocation Strategy 3,
moving to Strategy 2 in March 2019.
Healthcare cost-trend rates 7.0% initial, 1.0%-2.0% near term increase then decreasing 0.5% per year to trend rate that
reflects medical price inflation to an ultimate rate of 4.0% in 2076.
Retirement Age Tier 1 employees-2.5% @55 and Tier 2 employees-2.0% @62. The probabilities of
retirement are based on the 2014 CalPERS Experience Study for the period from 1997-2011.
Mortality Pre-retirement mortality probability based on 2014 CalPERS 1997-2011 Experience Study
covering CalPERS participants. Post-retirement mortality probability based on CalPERS
Experience Study 2007-2011 covering participants in CalPERS.
*Historical information is required only for measurement periods for which GASB 75 is applicable.
Future years'information will be displayed up to 10 years as information becomes available.
**For the nine-month period ending June 30, 2018. The City changed its fiscal year effective October 1, 2017,
480
134
THIS PAGE INTENTIONALLY LEFT BLANK
481
135
SUPPLEMENTARY INFORMATION
482
136
THIS PAGE INTENTIONALLY LEFT BLANK
483
137
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 monies allocated under the Streets and Highways Code of California.
Expenditures may be made for any street related purpose allowed under the code.
• 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 Surf City "3" Fund accounts for revenues and expenditures related to a 1% fee on cable television and
other video subscription services to fund the purchase and acquisition of capital equipment and facilities
necessary to program and broadcast PEG (public, education and government) events on the City's cable
channel.
• The ELM Automation Fund accounts for automation fee revenues and Enterprise Land Management (ELM)
replacement costs and maintenance expenditures.
• 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 Pension Liability fund accounts for the City's contribution to its pension plan obligations, as provided by
the voter-approved property tax override and other sources of revenue, including the allocable share from
Enterprise Funds and Other Governmental Funds.
• The Public Financinq 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 Infrastructure Fund records activity for certain designate infrastructure related expenditures.
• The Lease Capital Project Fund records activity for capital lease project 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 Senior Center Development Fund records construction activity for the Senior Center Development at
Central Park.
• The Sewer Development Fund accounts for fees received from developers to construct and maintain sewer
facilities.
• The Technology Fund accounts for technology infrastructure project expenditures
484
138
CITY OF HUNTINGTON BEACH
COMBINING BALANCE SHEET
OTHER GOVERNMENTAL FUNDS
June 30,2020
(In Thousands)
SPECIAL REVENUE FUNDS
Development Fourth of July
ASSETS Air Quality Impact Fee Disability Access Drainage Parade Gas Tax
Cash and Imestments $ 1,194 $ 17,036 $ 230 $ 2,510 $ 38 $ 6,915
Taxes Receivable - - - - - 539
Other Receivables 68 60 1 9 24
Total Assets $ 1,262 $ 17,096 $ 231 $ 2,519 $ 38 $ 7,478
LIABILITIES
Accounts Payable $ - $ 50 $ - $ $ - $ 364
Accrued Payroll 7 8
Total Liabilities 57 372
FUND BALANCES
Restricted
Pollution Remediation - -
Highways, Streets and Transportation 7,106
Low Income Housing - -
Air Quality 1,262 -
Other Capital Projects - 17,039 - 2,519 -
Other Purposes - 231 - 38
Committed
Parks - - - - - -
Total Fund Balances 1,262 17,039 231 2,519 38 7,106
Total Liabilities and Fund Balances $ 1,262 $ 17,096 $ 231 $ 2,519 $ 38 $ 7,478
485
139
CITY OF HUNTINGTON BEACH
COMBINING BALANCE SHEET
OTHER GOVERNMENTAL FUNDS
June 30,2020
(In Thousands)
(continued)
SPECIAL REVENUE FUNDS
Housing Park Acquisition Traffic
Residual and ELM Automation Congestion Traffic Impact Total Special
Receipt Development SurfCity"3" Fund Relief Fee Transportation Revenue Funds
$ 1,214 $ 2,395 $ 1,165 $ 365 $ 2,039 $ 2,897 $ 2,085 $ 40,083
- - 136 - - - 423 1,098
4 8 4 1 6 10 7 202
$ 1,218 $ 2,403 $ 1,305 $ 366 $ 2,045 $ 2,907 $ 2,515 $ 41,383
$ - $ 97 $ 13 $ - $ 262 $ 167 $ 56 $ 1,009
- - 6 - - 39 60
97 13 6 262 167 95 1,069
355 - - - - - 355
- - 1,783 2,740 2,420 14,049
1,218 - - - 1,218
- 1,262
- - 19,558
- 1,292 360 1,921
- 1,951 - - - - - 1,951
1,218 2,306 1,292 360 1,783 2,740 2,420 40,314
$ 1,218 $ 2,403 $ 1,305 $ 366 $ 2,045 $ 2,907 $ 2,515 $ 41,383
486
140
CITY OF HUNTINGTON BEACH
COMBINING BALANCE SHEET
OTHER GOVERNMENTAL FUNDS
June 30,2020
(In Thousands)
(continued)
DEBT SERVICE FUNDS CAPITAL PROJECT FUNDS
Public
Pension Financing Total Debt Affordable
ASSETS Liability Authority Service Fund Housing In-Lieu Infrastructure
Cash and Investments $ 7,860 $ 4,502 $ 12,362 $ 1,203 $ 12,311
Cash and Investments with Fiscal Agent - 4,610 4,610 - -
Taxes Receivable - - - -
Other Receivables - 16 16 4 43
Total Assets $ 7,860 $ 9,128 $ 16,988 $ 1,207 $ 12,354
LIABILITIES
Accounts Payable $ - $ 2 $ 2 $ 75 $ 197
Accrued Payroll - - - - -
Total Liabilities 2 2 75 197
FUND BALANCES
Restricted
Pollution Remediation - - - - -
Debt Service 7,860 9,126 16,986 - -
Highways, Streets and Transportation - - - - -
Low Income Housing - - - 1,132 -
Air Quality - - - - -
Other Capital Projects - - -
Other Purposes - - -
Committed
Parks - - - -
Other Capital Projects - - - 12,157
Assigned
Capital Improvement Reserve - - - - -
Total Fund Balances 7,860 9,126 16,986 1,132 12,157
Total Liabilities, Deferred Inflows
of Resources and Fund Balances $ 7,860 $ 9,128 $ 16,988 $ 1,207 $ 12,354
487
141
CITY OF HUNTINGTON BEACH
COMBINING BALANCE SHEET
OTHER GOVERNMENTAL FUNDS
June 30,2020
(In Thousands)
(continued)
CAPITAL PROJECT FUNDS
Total Other
Lease Capital Senior Center Sewer Total Capital Governmental
Project Parking In-Lieu Development Development Technology TProjects Funds Funds
$ 3 $ 540 $ 16 $ 7,062 $ 3,515 $ 24,650 $ 77,095
1,175 - - - - 1,175 5,785
- - - - - 1,098
3 - 25 12 87 305
$ 1,178 $ 543 $ 16 $ 7,087 $ 3,527 $ 25,912 $ 84,283
$ - $ - $ 3 $ - $ 275 $ 1,286
- - - - - 60
3 - 275 1,346
- - - - - 355
- - - - - 16,986
- - - 14,049
- - - 1,132 2,350
- - - - 1,262
1,178 16 - - 1,194 20,752
- - - - - 1,921
- - - - - 1,951
543 - 7,084 - 19,784 19,784
- - - 3,527 3,527 3,527
1,178 543 16 7,084 3,527 25,637 82,937
$ 1,178 $ 543 $ 16 $ 7,087 $ 3,527 $ 25,912 $ 84,283
488
142
CITY OF HUNTINGTON BEACH
COMBINING STATEMENT OF REVENUES,EXPENDITURES
AND CHANGES IN FUND BALANCES
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30,2020
(In Thousands)
SPECIAL REVENUE FUNDS
Development Disability Fourth of July
REVENUES Air Quality Impact Fee Access Drainage Parade Gas Tax
Sales Taxes $ $ $ $ $ $
Other Taxes 6,538
Licenses and Permits 74 -
Use of Money and Property 35 496 7 74 122 188
Intergovernmental 258 - - - 11 -
Charges for Current Service - 775 704 84
Other - 17 - - 41 -
Total Revenues 293 1,288 81 778 258 6,726
EXPENDITURES
Current:
City Manager - - - - - -
Community Development -
Finance 12
Information Systems - - -
Community Services 2,950 368
Library Services - 157 - -
Public Works 102 - - - 6,451
Total Expenditures 102 3,107 12 - 368 6,451
Net Change in Fund Balances 191 (1,819) 69 778 (110) 275
Fund Balances-Beginning Of Year 1,071 18,858 162 1,741 148 6,831
Fund Balances-End Of Year $ 1,262 $ 17,039 $ 231 $ 2,519 $ 38 $ 7,106
489
143
CITY OF HUNTINGTON BEACH
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30,2020
(In Thousands)
SPECIAL REVENUE FUNDS
Housing Park ELM Traffic
Residual Acquisition and Automation Congestion Traffic Impact Total Special
Receipt Development Surf City"3" Fund Relief Fee Transportation Revenue Funds
$ $ $ - $ $ $ $ 3,553 $ 3,553
541 - 7,079
- - 74
33 70 37 11 58 84 62 1,277
- - - - 1,634 - - 1,903
- - 415 - 564 2,542
797 - 1,000 - - - 1,855
830 70 1,578 426 1,692 648 3,615 18,283
- - 286 - - - - 286
44 - 44
- - 12
- 360 360
1,203 - 4,521
- - - - 157
- - - - 1,152 2,157 3,156 13,018
44 1,203 286 360 1,152 2,157 3,156 18,398
786 (19133) 1,292 66 540 (1,509) 459 (115)
432 3,439 294 1,243 4,249 1,961 40,429
$ 1,218 $ 2,306 $ 1,292 $ 360 $ 1,783 $ 2,740 $ 2,420 $ 40,314
490
144
CITY OF HUNTINGTON BEACH
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30,2020
(In Thousands)
(continued)
DEBT SERVICE FUNDS CAPITAL PROJECT FUNDS
Public
Pension Financing Total Debt Affordable
REVENUES Liability Authority Service Funds Housing In-Lieu Infrastructure
Property Taxes $ 6,766 $ - $ 6,766 $ - $ -
Sales Taxes - - -
Other Taxes -
Licenses and Permits - - - 2,806 Use of Money and Property - 95 95 125 330
Intergovernmental - - - _ _
Charges for Current Service 1,094 - 1,094 -
Other - - _ 10
Total Revenues 7,860 95 7,955 2,931 340
EXPENDITURES
Current:
City Manager - - - _ _
Community Development - - - 21266 -
Finance - 9 9 _ _
Information Systems - - - _ _
Community Services - - - - 35
Library Services - - - _ _
Public Works - - - - 3,046
Debt Service: -
Principal - 3,485 3,485 - -
Interest - 1,521 1,521 - -
Total Expenditures - 5,015 5,015 2,266 3,081
Excess Of Revenues Over
(Under)Expenditures 7,860 (4,920) 2,940 665 (2,741)
Other Financing Sources(Uses):
Transfers In - 5,016 5,016 - 4,785
Issuance of Long-Term Debt - - - _ _
Transfers Out - - _ _ _
Total Other Financing Sources
Sources(Uses) - 5,016 5,016 - 4,785
Net Change in Fund Balances 7,860 96 7,956 665 2,044
Fund Balances-Beginning of Year - 9,030 9,030 467 10,113
Fund Balances-End of Year $ 7,860 $ 9,126 $ 16,986 $ 1,132 $ 12,157
491
145
CITY OF HUNTINGTON BEACH
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30,2020
(in Thousands)
(continued)
CAPITAL PROJECT FUNDS
Total Other
Lease Capital Senior Center Sewer Total Capital Governmental
Project Parking In-Lieu Development Development Technology Projects Funds Funds
$ - $ - $ - $ - $ - $ - $ 6,766
- 3,553
- - - - - 7,079
18 - - - 2,824 2,898
5 - 8 208 109 785 2,157
- - - 12 - 12 1,915
- - - 386 - 386 4,022
- - - - 10 1,865
5 18 8 606 109 4,017 30,255
- - - - - - 286
- - - 2,266 2,310
- - - - - 21
- - - - 196 196 556
- - - - 35 4,556
- - - - 157
- - 315 85 - 3,446 16,464
- - - - - - 3,485
9 - - - - 9 1,530
9 - 315 85 196 5,952 29,365
(4) 18 (307) 521 (87) (1,935) 890
- - - - - 4,785 9,801
1,172 - - - 1,172 1,172
- - (515) - - (515) (515)
1,172 - (515) - - 5,442 10,458
1,168 18 (822) 521 (87) 3,507 11,348
10 525 838 6,563 3,614 22,130 71,589
$ 1,178 $ 543 $ 16 $ 7,084 $ 3,527 $ 25,637 $ 82,937
492
146
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES,AND
CHANGES IN FUND BALANCES-BUDGET AND ACTUAL
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30,2020
(In Thousands)
Air Quality
Variance with
Final Budget
Positive
REVENUES: Original Budget Final Budget Actual (Negative)
Use of Money and Property $ - $ - $ 35 $ 35
Intergovernmental 240 240 258 18
TOTAL REVENUES 240 240 293 53
EXPENDITURES:
Current:
Public Works 139 884 102 782
NET CHANGE IN FUND BALANCE 101 (644) 191 835
Fund Balance-Beginning of Year 1,071 1,071 1,071 -
Fund Balance-End of Year $ 1,172 $ 427 $ 1,262 $ 835
Development Impact Fee
Variance with
Final Budget
Positive
REVENUES: Original Budget Final Budget Actual (Negative)
Use of Money and Property $ - $ - $ 496 $ 496
Charges for Current Service 3,323 3,323 775 (2,548)
Other Revenue - - 17 17
TOTAL REVENUES 3,323 3,323 1,288 (2,035)
EXPENDITURES:
Current:
Fire 620 620 - 620
Community Services 4,144 6,481 2,950 3,531
Library Services 200 200 157 43
Principal 11 11 - 11
TOTAL EXPENDITURES 4,975 7,312 3,107 4,205
NET CHANGE IN FUND BALANCE (1,652) (3,989) (1,819) 2,170
Fund Balance-Beginning of Year 18,858 18,858 18,858 -
Fund Balance-End of Year $ 17,206 $ 14,869 $ 17,039 $ 2,170
Disability Access
Variance with
Final Budget
Positive
REVENUES: Original Budget Final Budget Actual (Negative)
Licenses and Permits $ 84 $ 84 $ 74 $ (10)
Use of Money and Property - 7 7
TOTAL REVENUES 84 84 81 (3)
EXPENDITURES:
Current:
Finance 84 84 12 72
NET CHANGE IN FUND BALANCE - - 69 69
Fund Balance-Beginning of Year 162 162 162 -
Fund Balance-End of Year $ 162 $ 162 $ 231 $ 69
493
147
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES,EXPENDITURES,AND
CHANGES IN FUND BALANCES -BUDGET AND ACTUAL
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30,2020
(In Thousands)
Drainage
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
From Use of Money and Property $ $ $ 74 $ 74
Charges for Current Service 704 704
TOTAL REVENUES 778 778
EXPENDITURES:
Current:
Public Works
NET CHANGE IN FUND BALANCE 778 778
Fund Balance-Beginning of Year 1,741 1,741 1,741 -
Fund Balance-End of Year $ 1,741 $ 1,741 $ 2,519 $ 778
Fourth of July Parade
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Use of Money and Property $ 120 $ 120 $ 122 $ 2
Intergovemmental 65 65 11 (54)
Charges for Current Service 139 139 84 (55)
Other 96 96 41 (55)
TOTAL REVENUES 420 420 258 (162)
EXPENDITURES:
Current:
Community Services 420 490 368 122
NET CHANGE IN FUND BALANCE - (70) (110) (40)
Fund Balance-Beginning of Year 148 148 148 -
Fund Balance-End of Year $ 148 $ 78 $ 38 $ (40)
Gas Tax
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Use of Money and Property $ - $ - $ 188 $ 188
Other Taxes 6,709 6,709 6,538 (171)
TOTAL REVENUES 6,709 6,709 6,726 17
EXPENDITURES:
Current:
Public Works 6,504 13,102 6,451 6,651
NET CHANGE IN FUND BALANCE 205 (6,393) 275 6,668
Fund Balance-Beginning of Year 6,831 6,831 6,831 -
Fund Balance-End of Year $ 7,036 $ 438 $ 7,106 $ 6,668
494
148
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES,AND
CHANGES IN FUND BALANCES -BUDGET AND ACTUAL
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30,2020
(In Thousands)
Housing Residual Receipt
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Use of Money and Property $ - $ - $ 33 $ 33
Other 475 475 797 322
TOTAL REVENUES 475 475 830 355
EXPENDITURES:
Current:
Community Development 50 50 44 6
NET CHANGE IN FUND BALANCE 425 425 786 361
Fund Balance -Beginning of Year 432 432 432 -
Fund Balance -End of Year $ 857 $ 857 $ 1,218 $ 361
Park Acquisition and Development
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Use of Money and Property $ - $ - $ 70 $ 70
Charges for Current Service 65 65 - (65)
TOTAL REVENUES 65 65 70 5
EXPENDITURES:
Current:
Community Services 418 2,414 1,203 1,211
NET CHANGE IN FUND BALANCE (353) (2,349) (1,133) 1,216
Fund Balance -Beginning of Year 3,439 3,439 3,439 -
Fund Balance -End of Year $ 3,086 $ 1,090 $ 2,306 $ 1,216
Surf City "Y'
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Other Taxes $ 605 $ 605 $ 541 $ (64)
Use of Money and Property - - 37 37
Other - - 1,000 1,000
TOTAL REVENUES 605 605 1,578 973
EXPENDITURES:
Current:
City Manager 605 605 286 319
NET CHANGE IN FUND BALANCE - - 1,292 1,292
Fund Balance -Beginning of Year - - - -
Fund Balance -End of Year $ - $ - $ 1,292 $ 1,292
495
149
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES,AND
CHANGES IN FUND BALANCES -BUDGET AND ACTUAL
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30,2020
(In Thousands)
ELM Automation Fund
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
From Use of Money and Property $ - $ - $ 11 $ 11
Charges for Current Service 360 360 415 55
TOTAL REVENUES 360 360 426 66
EXPENDITURES:
Current:
Information Systems 360 360 360 -
NET CHANGE IN FUND BALANCE - - 66 66
Fund Balance -Beginning of Year 294 294 294 -
Fund Balance -End of Year $ 294 $ 294 $ 360 $ 66
Traffic Congestion Relief
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Use of Money and Property $ - $ - $ 58 $ 58
Intergovernmental 1,957 1,957 1,634 (323)
TOTAL REVENUES 1,957 1,957 1,692 (265)
EXPENDITURES:
Current:
Public Works 1,727 2,925 1,152 1,773
NET CHANGE IN FUND BALANCE 230 (968) 540 1,508
Fund Balance -Beginning of Year 1,243 1,243 1,243 -
Fund Balance -End of Year $ 1,473 $ 275 $ 1,783 $ 1,508
Traffic Impact Fee
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Use of Money and Property $ - $ - $ 84 $ 84
Charges for Current Service - - 564 564
TOTAL REVENUES - - 648 648
EXPENDITURES:
Current:
Public Works - 2,684 2,157 527
NET CHANGE IN FUND BALANCE - (2,684) (1,509) 1,175
Fund Balance -Beginning of Year 4,249 4,249 4,249 -
Fund Balance -End of Year $ 4,249 $ 1,565 $ 2,740 $ 1,175
496
150
CITYOF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES,AND
CHANGES IN FUND BALANCES -BUDGET AND ACTUAL
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30,2020
(In Thousands)
Transportation
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Sales Taxes $ 3,514 $ 3,514 $ 3,553 $ 39
Use of Money and Property - 62 62
TOTAL REVENUES 3,514 3,514 3,615 101
EXPENDITURES:
Current:
Public Works 3,181 4,561 3,156 1,405
NET CHANGE IN FUND BALANCE 333 (1,047) 459 1,506
Fund Balance -Beginning of Year 1,961 1,961 1,961 -
Fund Balance -End of Year $ 2;294 $ 914 $ 2,420 $ 1,506
Pension Liability
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Property Taxes $ - $ 6,228 $ 6,766 $ 538
Charges for Current Service - - 1,094 1,094
TOTAL REVENUES - 6,228 7,860 1,632
EXPENDITURES:
TOTAL EXPENDITURES - - - -
NET CHANGE IN FUND BALANCE - 6,228 7,860 1,632
Fund Balance -Beginning of Year - - - -
Fund Balance -End of Year $ $ 6,228 $ 7,860 $ 1,632
Public Financing Authority
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Use of Money and Property $ - $ - $ 95 $ 95
EXPENDITURES:
Current:
Finance 10 11 9 2
Debt Service:
Principal 3,485 3,485 3,485 -
Interest 1,521 1,521 1,521 -
TOTAL EXPENDITURES 5,016 5,017 5,015 2
EXCESS OF REVENUES OVER
(UNDER)EXPENDITURES (5,016) (5,017) (4,920) 97
OTHER FINANCING SOURCES (USES):
Transfers In 5,016 5,016 5,016 -
NET CHANGE IN FUND BALANCE - (1) 96 97
Fund Balance -Beginning of Year 9,030 9,030 9,030 -
Fund Balance -End of Year $ 9,030 $ 9,029 $ 9,126 $ 97
151
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES,AND
CHANGES IN FUND BALANCES -BUDGET AND ACTUAL
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30,2020
(In Thousands)
Affordable Housing In-Lieu
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Licenses and Permits $ 100 $ 100 $ 2,806 $ 2,706
Use of Money and Property - - 125 125
TOTAL REVENUES 100 100 2,931 2,831
EXPENDITURES:
Current:
Community Development 300 2,567 2,266 301
NET CHANGE IN FUND BALANCE (200) (2,467) 665 3,132
Fund Balance -Beginning of Year 467 467 467 -
Fund Balance -End of Year $ 267 $ (2,000) $ 1,132 $ 3,132
Infrastructure
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Use of Money and Property $ - $ - $ 330 $ 330
Other - - 10 10
TOTAL REVENUES - - 340 340
EXPENDITURES:
Current:
Community Services 250 309 35 274
Public Works 2,805 7,691 3,046 4,645
Principal 945 945 - 945
TOTAL EXPENDITURES 4,000 8,945 3,081 5,864
EXCESS OF REVENUES OVER
(UNDER)EXPENDITURES (4,000) (8,945) (2,741) 6,204
OTHER FINANCING SOURCES (USES):
Transfers In 4,000 4,785 4,785 -
NET CHANGE IN FUND BALANCE - (4,160) 2,044 6,204
Fund Balance -Beginning of Year 10,113 10,113 10,113 -
Fund Balance -End of Year $ 10,113 $ 5,953 $ 12,157 $ 6,204
498
152
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES,AND
CHANGES IN FUND BALANCES -BUDGET AND ACTUAL
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30,2020
(In Thousands)
Lease Capital Project
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Use of Money and Property $ - $ - $ 5 $ 5
EXPENDITURES:
Fire - 1,180 - 1,180
Debt Service:
Interest - - 9 (9)
TOTAL EXPENDITURES - 1,180 9 1,171
EXCESS OF REVENUES OVER
(UNDER)EXPENDITURES - (1,180) (4) 1,176
OTHER FINANCING SOURCES (USES):
Issuance of Long-Term Debt - 1,173 1,172 (1)
TOTAL OTHER FINANCING SOURCES (USES) - 1,173 1,172 (1)
NET CHANGE IN FUND BALANCE - (7) 1,168 1,175
Fund Balance -Beginning of Year 10 10 10 -
Fund Balance -End of Year $ 10 $ 3 $ 1,178 $ 1,175
Parking In-Lieu
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Licenses and Permits $ 68 $ 68 $ 18 $ (50)
EXPENDITURES:
Current:
Economic De\elopment 60 60 - 60
NET CHANGE IN FUND BALANCE 8 8 18 10
Fund Balance -Beginning of Year 525 525 525 -
Fund Balance -End of Year $ 533 $ 533 $ 543 $ 10
499
153
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES,AND
CHANGES IN FUND BALANCES -BUDGET AND ACTUAL
OTHER GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30,2020
(In Thousands)
Senior Center Development
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Use of Money and Property $ $ - $ 8 $ 8
EXPENDITURES:
Current:
Public Works - 320 315 5
EXCESS OF REVENUES OVER
(UNDER)EXPENDITURES (320) (307) 13
OTHER FINANCING SOURCES (USES):
Transfers Out - (515) (515) -
TOTAL OTHER FINANCING SOURCES (USES) (515) (515) -
NET CHANGE IN FUND BALANCE (835) (822) 13
Fund Balance -Beginning of Year 838 838 838 -
Fund Balance -End of Year $ 838 $ 3 $ 16 $ 13
Sewer Development
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Use of Money and Property $ - $ $ 208 $ 208
Intergovernmental - - 12 12
Charges for Current Service 150 150 386 236
TOTAL REVENUES 150 150 606 456
EXPENDITURES:
Current:
Public Works 2,500 5,005 85 4,920
NET CHANGE IN FUND BALANCE (2,350) (4,855) 521 5,376
Fund Balance -Beginning of Year 6,563 6,563 6,563 -
Fund Balance -End of Year $ 4,213 $ 1,708 $ 7,084 $ 5,376
Technology
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Use of Money and Property - - 109 109
EXPENDITURES:
Current:
Information Systems 616 616 196 420
NET CHANGE IN FUND BALANCE (616) (616) (87) 529
Fund Balance -Beginning of Year 3,614 3,614 3,614 -
Fund Balance -End of Year $ 2,998 $ 2,998 $ 3,527 $ 529
500
154
CITY OF HUNTINGTON BEACH
SCHEDULE OF REVENUES, EXPENDITURES,AND
CHANGES IN FUND BALANCES -BUDGET AND ACTUAL
MAJOR GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30,2020
(In Thousands)
LMIHAF Capital Projects Fund
Variance with
Final Budget
Original Positive
REVENUES: Budget Final Budget Actual (Negative)
Use of Money and Property $ 406 $ 406 $ 5,688 $ 5,282
EXPENDITURES:
Current:
Community Development 411 4,606 1,339 3,267
Excess of Revenues Over(Under)Expenditures (5) (4,200) 4,349 8,549
OTHER FINANCING SOURCES (USES):
Transfers Out (405) (405) (405) -
Total Other Financing Sources (Uses) (405) (405) (405) -
Net Change in Fund Balance (410) (4,605) 3,944 8,549
Fund Balance -Beginning of Year 5,541 5,541 5,541 -
Fund Balance -End of Year $ 5,131 $ 936 $ 9,485 $ 8,549
501
155
THIS PAGE INTENTIONALLY LEFT BLANK
502
156
THIS PAGE INTENTIONALLY LEFT BLANK
503
157
City of Huntington Beach
f Internal Service Funds
Internal Services Funds are used to accumulate and allocate costs internally among the City's various functions.
• The Self Insurance Workers'Comp Fund accounts for the City's self insurance workers'compensation program.
• The Self Insurance General Liability Funds accounts for the City's self insurance general liability program.
• The Equipment Replacement Fund accounts for the City's equipment replacement needs.
504
158
THIS PAGE INTENTIONALLY LEFT BLANK
505
159
CITY OF HUNTINGTON BEACH
STATEMENT OF NET POSITION
INTERNAL SERVICE FUNDS
June 30,2020
(In Thousands)
Governmental Activities
Self Insurance Equipment
Self Insurance General Replacement Internal Service
Workers'Comp Liability Fund Fund Total
ASSETS
Current Assets:
Cash and Investments $ 16,369 $ 15,718 $ 6,839 $ 38,926
Other Receivables, Net 55 55 24 134
Prepaids 600 - - 600
Total Current Assets 17,024 15,773 6,863 39,660
Capital Assets:
Machinery and Equipment - - 4,871 4,871
Less Accumulated Depreciation (813) (813)
Total Capital Assets - - 4,058 4,058
Total Assets 17,024 15,773 10,921 43,718
DEFERRED OUTFLOWS OF RESOURCES
Deferred Outflows Related to Pensions 141 - - 141
Deferred Outflows Related to Other Postemployment Benefits 11 5 16
Total Deferred Outflows of Resources 152 5 157
LIABILITIES
Current Liabilities:
Accounts Payable 304 132 102 538
Accrued Payroll 23 - - 23
Current Portion of Claims Payable 5,650 3,252 8,902
Current Portion of Compensated Absences 12 - - 12
Total Current Liabilities 5,989 3,384 102 9,475
Non-Current Liabilities:
Compensated Absences 32 - - 32
Net Pension Liability 1,328 - 1,328
Net Other Postemployment Benefits Liability 12 5 17
Claims Payable 23,956 4,297 28,253
Total Non-Current Liabilities 25,328 4,302 29,630
Total Liabilities 31,317 7,686 102 39,105
DEFERRED INFLOWS OF RESOURCES
Deferred Inflows Related to Pensions 29 - - 29
Deferred Inflows Related to Other Postemployment Benefits 10 4 14
Total Deferred Inflows of Resources 39 4 - 43
NET POSITION
Net Investment in Capital Assets - - 4,058 4,058
Unrestricted (14,180) 8,088 6,761 669
Total Net Position $ (14,180) $ 8,088 $ 10,819 $ 4,727
506
160
CITY OF HUNTINGTON BEACH
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION
INTERNAL SERVICE FUNDS
FOR THE YEAR ENDED JUNE 30, 2020
(In Thousands)
Governmental Activities
Equipment
Self Insurance Self Insurance Replacement Internal Service
Workers'Comp General Liability Fund Fund Total
OPERATING REVENUES
Fees and Charges for Service $ 7,187 $ 4,977 $ 4,651 $ 16,815
Other 75 - - 75
Total Operating Revenues 7,262 4,977 4,651 16,890
OPERATING EXPENSES
Supplies and Operations 1,790 875 2,191 4,856
Claims and Judgments 7,969 3,075 - 11,044
Depreciation - - 518 518
Total Operating Expenses 9,759 3,950 2,709 16,418
Operating Income (2,497) 1,027 1,942 472
NON-OPERATING REVENUES(EXPENSES)
Interest Income 510 379 155 1,044
Change in Net Position (1,987) 1,406 2,097 1,516
Net Position -Beginning Of Year (12,193) 6,682 8,722 3,211
Net Position-End Of Year $ (14,180) $ 8,088 $ 10,819 $ 4,727
507
161
CITY OF HUNTINGTON BEACH
STATEMENT OF CASH FLOWS
INTERNAL SERVICE FUNDS
FOR THE YEAR ENDED JUNE 30,2020
(In Thousands)
Governmental Activities
Self Insurance Equipment
Self Insurance General Replacement Internal Service
Workers'Comp Liability Fund Fund Total
CASH FLOWS FROM OPERATING ACTIVITIES
Cash Received from Customers and Users $ 7,275 $ 4,992 $ 4,655 $ 16,922
Cash Paid to Employees for Services (540) (141) - (681)
Cash Paid to Suppliers of Goods and Services (5,992) (4,607) (1,584) (12,183)
Net Cash and Investment Provided by
Operating Activities 743 244 3,071 4,058
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Purchase of Capital Assets - - (2,402) (2,402)
Net Cash and Investments(Used)by
Capital and Related Financing Activities - - (2,402) (2,402)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest Received 510 379 155 1,044
Net Cash and Investments Provided by
Investing Activities 510 379 155 1,044
Net Increase in Cash and Investments 1,253 623 824 2,700
Cash and Investments-Beginning of Year 15,116 15,095 6,015 36,226
Cash and Investments-End of Year $ 16,369 $ 15,718 $ 6,839 $ 38,926
RECONCILIATION OF OPERATING
INCOME(LOSS)TO NET CASH AND INVESTMENTS
PROVIDED(USED)BY OPERATING ACTIVITIES
Operating(Loss) $ (2,497) $ 1,027 $ 1,942 $ 472
Adjustments to Reconcile Operating
Income (Loss)to Net Cash and Investments
Provided(Used)by Operating Activities
Depreciation - - 518 518
Decrease in Other Receivables, Net 13 15 4 32
Decrease in Prepaids - - 818 818
Increase(Decrease)in Accounts Payable 163 89 (211) 41
Increase(Decrease)in Accrued Payroll 10 (7) - 3
Increase(Decrease)in Claims Payable 2,977 (848) 2,129
Increase(Decrease)in Compensated Absences 19 (30) (11)
Decrease in Deferred Pension Outflow 24 - 24
(Decrease)in Deferred Pension Inflow (8) (8)
Increase in Net Pension Liability 44 - 44
(Increase)in Deferred Other Postemployment Benefits Outflow (2) (1) (3)
Increase in Deferred Other Postemployment Benefits Inflow 10 4 14
(Decrease)in Ending Net Other Postemployment Benefits Liability (10) (5) - (15)
Net Cash and Investments Provided
by Operating Activities $ 743 $ 2" $ 3,071 $ 4,058
NONCASH INVESTING,CAPITAL,AND FINANCING ACTIVITIES
There were no noncash investing, capital, or financing activities during the year ended June 30, 2020.
508
162
THIS PAGE INTENTIONALLY LEFT BLANK
509
163
City of Huntington Beach
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.
510
164
THIS PAGE INTENTIONALLY LEFT BLANK
511
165
CITY OF HUNTINGTON BEACH
COMBINING STATEMENT OF FIDUCIARY FUND ASSETS AND LIABILITIES
FIDUCIARY FUNDS
JUNE 30,2020
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 $ 181 $ 2,667 $ 321 $ 351 $ 4,828 $ 1,460 $ 9,808
Cash with Fiscal Agent - 3,449 - - - - 3,449
Accounts Receivable,Net - - 534 17 6 557
Total Assets $ 181 $ 6,116 $ 855 $ 351 $ 4,845 $ 1,466 $ 13,814
Liabilities:
Accounts Payable $ - $ - $ 231 $ 3 $ 858 $ 4 $ 1,096
Accrued Payroll - - 9 - - 9
Due to Bondholders - 6,116 - - - - 6,116
Held for Others 181 624 339 3,987 1,462 6,593
Total Liabilities $ 181 $ 6,116 $ 855 $ 351 $ 4,845 $ 1,466 $ 13,814
512
166
CITY OF HUNTINGTON BEACH
COMBINING STATEMENT OF CHANGES IN FIDUCIARY ASSETS AND LIABILITIES
ALL AGENCY FUNDS
FOR THE YEAR ENDED JUNE 30, 2020
Balance Balance
June 30,2019 Additions Deletions June 30,2020
General Deposit
Assets:
Cash and Investments $ 181 $ - $ - $ 181
Total Assets $ 181 $ - $ - $ 181
Liabilities:
Held for Others $ 181 $ - $ - $ 181
Total Liabilities $ 181 $ - $ - $ 181
Community Facilities Districts
Assets:
Cash and Investments $ 2,740 $ 4,035 $ (4,108) $ 2,667
Cash with Fiscal Agent 3,451 57 (59) 3,449
Accounts Receivable, Net 13 4 (17) -
Total Assets $ 6,204 $ 4,096 $ (4,184) $ 6,116
Liabilities:
Accounts Payable $ - $ 3,245 $ (3,245) $ -
Due to Bondholders 6,204 - (88) 6,116
Total Liabilities $ 6,204 $ 3,245 $ (3,333) $ 6,116
Business Improvement Districts
Assets:
Cash and Investments $ 1,079 $ 4,865 $ (5,623) $ 321
Accounts Receivable, Net 544 628 (638) 534
Total Assets $ 1,623 $ 5,493 $ (6,261) $ 855
Liabilities:
Accounts Payable $ 1,565 $ 5,787 $ (7,121) $ 231
Held for Others 58 566 - 624
Total Liabilities $ 1,623 $ 6,353 $ (7,121) $ 855
Central Net Operations Authority
Assets:
Cash and Investments $ 303 $ 32,767 $ (32,719) $ 351
Accounts Receivable, Net 82 50 (132) -
Total Assets $ 385 $ 32,817 $ (32,851) $ 351
Liabilities:
Accounts Payable $ 1 $ 46 $ (44) $ 3
Accrued Payroll 8 9 (8) 9
Held for Others 376 - (37) 339
Total Liabilities $ 385 $ 55 $ (89) $ 351
513
167
CITY OF HUNTINGTON BEACH
COMBINING STATEMENT OF CHANGES IN FIDUCIARY ASSETS AND LIABILITIES
ALL AGENCY FUNDS
FOR THE YEAR ENDED JUNE 30, 2020
(CONTINUED)
Balance Balance
June 30, 2019 Additions Deletions June 30,2020
Parking Structures
Assets:
Cash and Investments $ 4,402 $ 2,214 $ (1,788) $ 4,828
Accounts Receivable, Net 21 17 (21) 17
Total Assets $ 4,423 $ 2,231 $ (1,809) $ 4,845
Liabilities:
Accounts Payable $ 459 $ 2,222 $ (1,823) $ 858
Held for Others 3,964 23 - 3,987
Total Liabilities $ 4,423 $ 2,245 $ (1,823) $ 4,845
West Orange County Water Board
Assets:
Cash and Investments $ 1,874 $ 2,771 $ (3,185) $ 1,460
Accounts Receivable, Net 10 163 (167) 6
Total Assets $ 1,884 $ 2,934 $ (3,352) $ 1,466
Liabilities:
Accounts Payable $ 265 $ 1,022 $ (1,283) $ 4
Held for Others 1,619 - (157) 1,462
Total Liabilities $ 1,884 $ 1,022 $ (1,440) $ 1,466
Total -All Agency Funds
Assets:
Cash and Investments $ 10,579 $ 46,652 $ (47,423) $ 9,808
Cash with Fiscal Agent 3,451 57 (59) 3,449
Accounts Receivable, Net 670 862 (975) 557
Total Assets $ 14,700 $ 47,571 $ (48,457) $ 13,814
Liabilities:
Accounts Payable $ 2,290 $ 12,322 $ (13,516) $ 1,096
Accrued Payroll 8 9 (8) 9
Due to Bondholders 6,204 - (88) 6,116
Held for Others 6,198 589 (194) 6,593
Total Liabilities $ 14,700 $ 12,920 $ (13,806) $ 13,814
514
168
THIS PAGE INTENTIONALLY LEFT BLANK
515
169
4
City of Huntington Beach
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 help the reader understand how the City's
financial performance has changed over time.
Revenue Capacity — contains information to help the reader assess the City's most significant
local revenue source, the property tax.
Debt Capacity - presents 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.
516
170
CITY OF HUNTINGTON BEACH
NET POSITION BY COMPONENT- LAST TEN FISCAL YEARS
(In Thousands)
Fiscal Year Ended
June 30, September 30,
Governmental Activities 2020 2019 2018*** 2017 2016
Net investment in capital assets $ 673,498 $ 664,281 $ 650,466 $ 646,336 $ 624,180
Restricted 79,926 66,089 58,537 41,888 41,555
Unrestricted (274,523) (251,022) (254,528) (262,874) (222,863)
Total Governmental Activities Net Position $ 478,901 $ 479,348 $ 454,475 $ 425,350 $ 442,872
Business-Type Activities
Net investment in capital assets $ 142,785 $ 145,696 $ 143,954 $ 140,478 $ 142,566
Restricted 22,248 21,153 25,886 30,444 32,049
Unrestricted 38,482 36,747 27,492 22,228 21,997
Total Business-Type Activities Net Position $ 203,515 $ 203,596 $ 197,332 $ 193,150 $ 196,612
Primary Government
Net investment in capital assets $ 816,283 $ 809,977 $ 794,420 $ 786,814 $ 766,746
Restricted 102,174 87,242 84,423 72,332 73,604
Unrestricted (236,041) (214,275) (227,036) (240,646) (200,866)
Total Primary Government Net Position $ 682,416 $ 682,944 $ 651,807 $ 618,500 $ 639,484
CITY OF HUNTINGTON BEACH
CHANGES IN NET POSITION -LAST TEN FISCAL YEARS
(In Thousands)
Fiscal Year Ended
Expenses: June 30, September 30,
Governmental Activities: 2020 2019 2018*** 2017 2016
City Council $ 405 $ 360 $ 218 $ 347 $ 321
City Manager 3,328 4,501 2,063 4,691 3,849
City Treasurer 317 246 101 216 208
City Attorney 3,136 2,886 1,536 3,307 2,598
City Clerk 949 976 475 889 806
Finance 6,661 6,245 3,455 6,201 5,765
Human Resources***** - 6,261 4,760 5,693 6,814
Community Development* 15,722 6,144 4,301 7,576 7,208
Fire 62,840 56,494 26,688 52,941 47,965
Information Services 8,643 7,530 4,375 7,047 6,852
Police 97,204 87,355 42,109 84,786 74,943
Economic Development** - - - - -
Community Services 12,539 13,369 6,768 15,558 9,935
Library Services 5,776 5,206 2,890 5,064 4,611
Public Works 45,834 40,803 23,898 35,373 31,791
Non-Departmental**** - - 18,164 29,368 35,240
Interest on Long-Term Debt 1,686 1,823 1,467 2,063 2,119
Total Governmental Activities 265,040 240,199 143,268 261,120 241,025
Business-Type Activities
Water Utility 44,463 43,405 28,414 45,940 41,643
Sewer Service 9,828 9,442 6,127 9,351 8,729
Refuse Collection 12,609 12,051 8,916 10,821 11,277
Hazmat Service 235 234 117 224 244
Total Business-Type Activities 67,135 65,132 43,574 66,336 61,893
Total Business and Government Type Activities $ 332,175 $ 305,331 $ 186,842 $ 327,456 $ 302,918
* Planning and Building departments were combined in the year ended September 30,2011.The combined department was later renamed to Community
Development in the year ended September 30,2016.
** Economic Development was combined with Community Development in the year ended June 30,2020. Previously,it was combined with the City Manager's
Office as of the year ended September 30,2014.
*** The 2018 period reflects nine months of activity only as the fiscal year change resulted in reporting period from October 1,2017 to June 30,2018.
**** Beginning with the fiscal year ended June 30,2019, non-departmental expenditures are no longer presented separately but are included as part of
functional expenditures.
*****Human Resources was combined with the City Manager's Office in the year ended June 30,2020.
517
171
CITY OF HUNTINGTON BEACH
NET POSITION BY COMPONENT-LAST TEN FISCAL YEARS
(In Thousands)
(continued)
Fiscal Year Ended
September 30,
Governmental Activities 2015 2014 2013 2012 2011
Net investment in capital assets $ 615,512 $ 618,825 $ 617,267 $ 612,346 $ 569,497
Restricted 52,270 34,018 51,867 44,220 51,195
Unrestricted (222,787) 89,524 54,076 53,098 41,239
Total Governmental Activities Net Position $ 444,995 $ 742,367 $ 723,210 $ 709,664 $ 661,931
Business-Type Activities
Net investment in capital assets $ 142,616 $ 140,770 $ 145,886 $ 134,129 $ 134,882
Restricted 28,096 27,951 27,488 27,804 27,988
Unrestricted 28,476 53,166 65,595 63,686 59,260
Total Business-Type Activities Net Position $ 199,188 $ 221,887 $ 238,969 $ 225,619 $ 222,130
Primary Government
Net investment in capital assets $ 758,128 $ 759,595 $ 763,153 $ 746,475 $ 704,379
Restricted 80,366 61,969 79,355 72,024 79,183
Unrestricted (194,311) 142,690 119,671 116,784 100,499
Total Primary Government Net Position $ 644,183 $ 964,254 $ 9625179 $ 935,283 $ 884,061
CITY OF HUNTINGTON BEACH
CHANGES IN NET POSITION - LAST TEN FISCAL YEARS
(In Thousands)
(continued)
Fiscal Year Ended
Expenses: September 30,
Governmental Activities: 2015 2014 2013 2012 2011
City Council $ 270 $ 258 $ 271 $ 310 $ 300
City Manager 3,302 3,878 1,583 1,767 1,502
City Treasurer 158 169 132 141 1,274
City Attorney 2,284 2,321 2,221 2,313 2,354
City Clerk 855 747 797 689 813
Finance 5,208 5,314 4,825 4,573 3,423
Human Resources-' 5,169 4,616 5,032 4,743 4,792
Community Development` 6,605 7,091 6,155 6,123 6,036
Fire 42,162 43,194 36,323 35,336 35,393
Information Services 6,552 6,456 6,096 5,857 5,909
Police 64,048 66,681 60,466 60,690 60,192
Economic Development- - - 8,395 3,703 10,876
Community Services 13,809 12,509 15,521 15,586 16,104
Library Services 4,246 4,024 3,873 3,777 3,838
Public Works 27,979 31,691 28,500 26,508 27,232
Non-Departmental**** 24,080 21,602 25,563 19,190 19,595
Interest on Long-Term Debt 2,245 1,946 2,289 2,376 6,287
Total Governmental Activities 208,972 212,497 208,042 193,682 205,920
Business-Type Activities
Water Utility 38,614 41,499 38,446 37,437 31,712
Sewer Service 8,192 9,712 7,253 7,623 6,338
Refuse Collection 11,308 11,145 10,882 10,785 10,690
Hazmat Service 204 231 220 216 243
Total Business-Type Activities 585318 62,587 56,801 56,061 48,983
Total Business and Government Type Activities $ 267,290 $ 275,084 $ 264,843 $ 249,743 $ 254,903
518
172
CITY OF HUNTINGTON BEACH
CHANGES IN NET POSITION-LAST TEN FISCAL YEARS
(In Thousands)
Fiscal Year Ended
Program Revenues: June 30, September 30,
Governmental Activities: 2020 2019 2018*** 2017 2016
Charges for Services
City Council $ 177 $ 149 $ 91 $ 108 $ 116
City Manager 5,315 3,300 2,374 3,515 3,029
City Treasurer 163 135 81 100 101
City Attorney 7 7 4 5 4
City Clerk 220 327 229 257 201
Finance 3,302 2,899 1,746 2,047 2,277
Human Resources***** - 751 373 654 513
Community Development* 10,037 7,459 5,448 7,448 9,252
Fire 10,122 9,831 9,104 10,296 9,894
Information Services 636 628 381 501 521
Police 5,329 6,044 4,703 4,968 5,958
Economic Development** 17,631 - - - -
Community Services 266 23,530 19,245 21,693 18,853
Library Services 6,614 308 237 476 408
Public Works - 6,368 4,392 5,392 5,733
Non-Departmental**** - - 916 1,116 1,290
Total Charges for Services 59,819 61,736 49,324 58,576 58,150
Operating Grants 8,141 6,644 3,976 7,329 4,723
Capital Grants 14,483 8,361 6,055 3,408 5,939
Total Governmental Activities Program Revenue 82,443 76,741 59,355 69,313 68,812
Business-Type Activities:
Water Utility 40,518 43,958 29,530 39,938 35,765
Sewer Service 10,900 11,868 8,362 10,854 11,280
Refuse Collection 12,573 12,022 8,820 11,282 11,215
Hazmat Service 279 276 25 287 235
Total Business-Type Activities Program Revenues 64,270 68,124 46,737 62,361 58,495
Total Primary Government Program Revenue 146,713 144,865 106,092 131,674 127,307
Net(Expense)Revenue:
Governmental Activities: (182,597) (163,458) (83,913) (191,807) (172,213)
Business-Type Activities (2,865) 2,992 3,163 (3,975) (3,398)
Total Net(Expense)Revenue (185,462) (160,466) (80,750) (195,782) (175,611)
General Revenue and Other Changes in Net Position
Governmental Activities:
Property Taxes 94,263 89,124 61,185 82,925 87,128
Sales Taxes 44,616 47,437 33,844 43,551 34,289
Utility Taxes 18,149 18,788 14,014 19,303 19,482
Other Taxes 18,635 20,227 14,883 17,991 17,313
Use of Money and Property 3,208 8,746 2,158 3,370 3,618
From Other Agencies 3,317 4,046 2,263 3,896 4,397
Other - - 2,811 2,438 5,693
Transfers (38) (37) (332) (51) (38)
Total Governmental Activities General Revenues 182,150 188,331 130,826 173,423 171,882
Business-Type Activities:
Use of Money and Property 2,746 3,235 279 462 939
Transfers 38 37 332 51 38
Total Business-Type Activities General Revenues 2,784 3,272 611 513 977
Total General Revenues and Transfers 184,934 191,603 131,437 173,936 172,859
Extraordinary Gain - - - - -
Changes in Net Position-Governmental Activities (447) 24,873 46,913 (18,384) (331)
Changes in Net Position-Business-Type Activities (81) 6,264 3,774 (3,462) (2,421)
Net Position-Beginning of Year 682,944 651,807 618,500 639,484 642,236
Prior Period Adjustment-Governmental Activities - - (17,788) 862 -
Prior Period Adjustment-Business-Type Activities - - 408 - -
Net Position-Beginning of Year as restated 682,944 651,807 601,120 640,346 642,236
Net Position-End of Year $ 682,416 $ 682,944 $ 651,807 $ 618,500 $ 639,484
* Planning and Building departments were combined in the year ended September 30,2011.The combined department was later renamed to Community
Development in the year ended September 30,2016.
* Economic Development was combined with Community Development in the year ended June 30,2020.Previously,it was combined with the City Manager's
Office as of the year ended September 30,2014.
*** The 2018 period reflects nine months of activity only as the fiscal year change resulted in reporting period from October 1,2017 to June 30,2018.
**** Beginning with the fiscal year ended June 30,2019,non-departmental expenditures are no longer presented separately but are included as part of
functional expenditures.
*****Human Resources was combined with the City Manager's Office in the year ended June 30,2020.
519
173
CITY OF HUNTINGTON BEACH
CHANGES IN NET POSITION-LAST TEN FISCAL YEARS
(In Thousands)
(continued)
Fiscal Year Ended
Program Revenues: September 30,
Governmental Activities: 2015 2014 2013 2012 2011
Charges for Services
City Council $ 71 $ 68 $ 66 $ 65 $ 63
City Manager 2,994 2,835 134 130 127
City Treasurer 639 621 602 585 568
City Attorney 143 139 135 131 127
City Clerk 199 321 248 170 98
Finance 1,353 1,313 1,275 1,238 1,202
Human Resources***** 1,263 2,499 1,236 1,150 1,117
Community Development* 10,670 9,357 9,411 7,706 6,084
Fire 8,625 8,672 9,482 9,497 8,632
Information Services 834 809 786 763 741
Police 5,512 5,170 4,653 5,073 5,207
Economic Development** - - 2,505 2,303 2,800
Community Services 18,569 18,055 17,832 17,792 15,345
Library Services 495 434 634 466 325
Public Works 6,474 6,367 7,315 5,482 5,638
Non-Departmental**** 327 318 306 281 273
Total Charges for Services 58,168 56,978 56,620 52,832 48,347
Operating Grants 7,458 7,958 7,303 5,088 8,914
Capital Grants 9,809 5,486 7,191 6,624 5,198
Total Governmental Activities Program Revenue 75,435 70,422 71,114 64,544 62,459
Business-Type Activities:
Water Utility 35,350 36,944 38,679 35,926 34,583
Sewer Service 11,239 10,665 12,267 11,546 10,532
Refuse Collection 11,221 11,006 10,950 10,786 10,631
Hazmat Service 222 183 278 154 383
Total Business-Type Activities Program Revenues 58,032 58,798 62,174 58,412 56,129
Total Primary Government Program Revenue 133,467 129,220 133,288 122,956 118,588
Net(Expense)Revenue:
Governmental Activities: (133,537) (142,075) (136,928) (129,138) (143,461)
Business-Type Activities (286) (3,789) 5,373 2,351 7,146
Total Net(Expense)Revenue (133,823) (145,864) (131,555) (126,787) (136,315)
General Revenue and Other Changes in Net Position
Governmental Activities:
Property Taxes 82,615 81,355 74,795 74,856 86,056
Sales Taxes 33,063 29,243 30,276 30,051 25,339
Utility Taxes 20,229 20,621 20,764 20,152 19,135
Other Taxes 16,464 15,601 14,568 12,930 13,368
Use of Money and Property 5,551 3,725 2,816 3,434 3,239
From Other Agencies 5,653 4,279 6,003 6,585 5,647
Other 4,440 6,903 5,240 4,941 3,060
Transfers 35 (38) (38) (38) (38)
Total Governmental Activities General Revenues 168,050 161,689 154,424 152,911 155,806
Business-Type Activities:
Use of Money and Property 1,281 1,015 137 1,100 1,135
Transfers (35) 38 38 38 38
Total Business-Type Activities General Revenues 1,246 1,053 175 1,138 1,173
Total General Revenues and Transfers 169,296 162,742 154,599 154,049 156,979
Extraordinary Gain - - (4,669) 23,960
Changes in Net Position-Governmental Activities 34,513 19,614 12,827 47,733 12,345
Changes in Net Position-Business-Type Activities 960 (2,736) 5,548 3,489 8,319
Net Position-Beginning of Year 964,254 962,179 935,283 884,061 863,397
Prior Period Adjustment-Governmental Activities (333,677) (457) 719 - -
Prior Period Adjustment-Business-Type Activities (23,814) (14,346) 7,802 - -
Net Position-Beginning of Year as restated 606,763 947,376 943,804 884,061 863,397
Net Position-End of Year $ 642,236 $ 964,254 $ 962,179 $ 935,283 $ 884,061
520
174
CITY OF HUNTINGTON BEACH
FUND BALANCES -GOVERNMENTAL FUNDS - LAST TEN FISCAL YEARS
(In Thousands)
(Modified Accrual Basis of Accounting)
Fiscal Year Ended June 30, Fiscal Year Ended September 30,
2020 2019 2018 2017 2016
General Fund:
Nonspendable $ 120 $ 23 $ 41 $ - $ -
Restricted 9,320 8,154 6,384 2,671 2,637
Committed 25,010 25,011 25,011 25,011 25,011
Assigned 45,638 45,825 34,464 33,498 35,199
Unassigned - - 2,734 - -
Total General Fund $ 80,088 $ 79,013 $ 68,634 $ 61,180 $ 62,847
Other Governmental Funds:
Nonspendable $ - $ 64 $ 726 $ - $ -
Restricted 57,675 59,213 52,742 40,588 40,293
Committed 21,735 20,308 20,800 17,686 21,368
Assigned 3,527 3,614 2,701 826 838
Total Other Governmental Funds $ 82,937 $ 83,199 $ 76,969 $ 59,100 $ 62,499
Fiscal Year Ended September 30,
2015 2014 2013 2012 2011
General Fund:
Nonspendable $ 4,479 $ 4,378 $ 4,040 $ 4,633 $ 10,841
Restricted 2,871 2,070 1,878 1,387 1,304
Committed 25,011 25,011 24,011 - -
Assigned 32,431 29,595 24,578 48,415 42,411
Unassigned - - - - -
Total General Fund $ 64,792 $ 61,054 $ 54,507 $ 54,435 $ 54,556
Other Governmental Funds:
Restricted $ 45,515 $ 27,214 $ 27,425 $ 27,722 $ 32,519
Committed 21,659 16,447 11,098 6,745 4,049
Assigned 161 151 316 1,181 1,711
Unassigned - - (210) (395) (4,377)
Total Other Governmental Funds $ 67,335 $ 43,812 $ 38,629 $ 35,253 $ 33,902
521
175
THIS PAGE INTENTIONALLY LEFT BLANK
522
176
CITY OF HUNTINGTON BEACH
CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS -LAST TEN FISCAL YEARS
(In Thousands)
(Modified Accrual Basis of Accounting)
Fiscal Year Ended
June 30, September 30,
2020 2019 2018* 2017 2016
REVENUES:
Property Taxes $ 94,263 $ 89,367 $ 80,614 $ 80,826 $ 86,382
Sales Taxes 44,616 47,437 33,844 43,551 39,305
Utility Taxes 18,149 18,788 14,014 19,303 19,482
Other Taxes 24,578 27,196 18,409 17,991 17,313
Licenses and Permits 11,266 8,574 6,293 8,812 9,820
Fines and Forfeitures 3,403 4,300 3,048 3,995 5,144
From Use of Money and Property 27,863 23,276 11,600 17,210 18,055
From Other Agencies 11,309 13,072 10,384 15,293 13,712
Charges for Current Service/Other Revenue 34,772 33,787 30,216 32,351 32,506
TOTAL REVENUES 270,219 265,797 208,422 239,332 241,719
EXPENDITURES
Current:
City Council 394 369 279 333 318
City Manager 4,342 6,598 3,143 4,116 3,092
City Treasurer 297 248 134 201 204
City Attorney 2,898 2,874 2,037 3,052 2,539
City Clerk 886 981 602 830 790
Finance 6,200 6,484 4,376 5,763 5,659
Human Resources****** - 6,362 5,323 5,535 6,776
Community Development** 14,692 8,138 5,554 6,963 7,062
Fire 56,477 54,431 36,347 46,831 46,200
Information Systems 8,473 8,342 5,385 6,603 6,742
Police 87,682 83,546 57,916 75,015 72,612
Economic Development*** - - - - -
Community Services 14,429 11,720 7,958 14,124 10,768
Library Services 5,199 4,944 3,436 4,422 4,247
Public Works 47,655 46,878 30,357 38,635 23,659
Non-Departmental-" - - 22,432 28,396 24,670
Capital Outlay**** - - - - 27,269
Debt Service:
Principal 5,122 5,346 311 5,091 5,933
Interest 1,748 1,890 965 2,066 2,138
TOTAL EXPENDITURES 256,494 249,151 186,555 247,976 250,678
EXCESS(DEFICIENCY)OF
REVENUES OVER(UNDER)
EXPENDITURES 13,725 16,646 21,867 (8,644) (8,959)
OTHER FINANCING SOURCES(USES):
Transfers In 10,009 11,190 13,261 6,692 9,034
Issuance of Long-Term Debt 1,172 - - 2,767 10,197
Issuance Premium - - -
Payments to Escrow - - - - -
Transfers Out (10,047) (11,227) (13,593) (6,743) (17,053)
TOTAL OTHER FINANCING SOURCES(USES) 1,134 (37) (332) 2,716 2,178
Extraordinary Item-Dissolution of RDA - - - - -
INCREASE(DECREASE)IN FUND BALANCES $ 14,859 $ 16,609 $ 21,535 $ (5,928) $ (6,781)
DEBT SERVICE AS A PERCENTAGE OF
NON-CAPITAL EXPENDITURES 3.0% 3.3% 0.7% 3.2% 3.6%
* The 2017-18 period reflects nine months of activity only as the fiscal year change resulted in a nine month reporting period from
October 1,2017 to June 30,2018.
** Planning and Building departments were combined in the year ended September 30,2011.The department was later renamed to
Community Development in the year ended September 30,2016.
*** Economic Development was combined with Community Development in the year ended June 30,2020. Previously, it was combined with
the City Manager's Office as of the year ended September 30,2014.
**** Beginning with the fiscal year ended September 30,2017,capital outlay expenditures are no longer presented separately but are included
as part of functional expenditures.However,capital outlay expenditures are excluded in the calculation of debt service as a percentage
of non-capital expenditures.
***** Beginning with the fiscal year ended June 30,2019, non-departmental expenditures are no longer presented separately but are
included as part of functional expenditures.
******Human Resources was combined with the City Manager's Office in the year ended June 30,2020.
523
177
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,
2015 2014 2013 2012 2011
REVENUES:
Property Taxes $ 82,472 $ 79,460 $ 74,442 $ 74,554 $ 85,869
Sales Taxes 32,234 30,454 29,763 29,126 25,034
Utility Taxes 20,229 20,621 20,764 20,152 19,135
Other Taxes 16,464 15,601 14,568 12,930 13,368
Licenses and Permits 9,270 7,976 9,880 7,773 6,728
Fines and Forfeitures 4,746 4,392 4,058 4,252 4,334
From Use of Money and Property 17,473 16,695 16,046 16,855 15,660
From Other Agencies 18,634 16,804 18,237 18,537 17,659
Charges for Current Service/Other Revenue 35,869 33,886 34,150 30,051 26,996
TOTAL REVENUES 237,391 225,889 221,908 214,230 214,783
EXPENDITURES
Current:
City Council 278 258 260 310 300
City Manager 2,703 3,040 1,574 1,758 1,493
City Treasurer 167 169 132 141 1,274
City Attorney 2,425 2,321 2,221 2,313 2,354
City Clerk 895 747 797 689 798
Finance 5,452 5,314 4,825 4,573 3,423
Human Resources****** 4,606 4,298 5,661 5,213 6,106
Community Development** 6,954 7,091 6,155 6,119 6,034
Fire 45,008 42,602 35,920 35,145 34,546
Information Systems 6,846 6,456 6,096 5,857 5,879
Police 68,940 66,628 60,460 60,249 59,546
Economic Development*** - - 7,012 3,389 13,784
Community Services 10,223 10,040 13,952 14,082 13,724
Library Services 4,146 3,739 3,588 3,492 3,546
Public Works 23,820 22,872 22,169 22,666 19,006
Non-Departmental-" 20,067 21,033 19,684 15,455 14,914
Capital Outlay**** 14,986 10,729 10,745 11,096 6,872
Debt Service:
Principal 5,454 4,797 9,381 6,012 9,446
Interest 2,226 1,987 2,321 2,564 6,397
TOTAL EXPENDITURES 225,196 214,121 212,953 201,123 209,442
EXCESS(DEFICIENCY)OF
REVENUES OVER(UNDER)
EXPENDITURES 12,195 11,768 8,955 13,107 5,341
OTHER FINANCING SOURCES(USES):
Transfers In 12,158 9,832 9,501 18,904 27,385
Issuance of Long-Term Debt - - - - 36,275
Issuance Premium 1,884
Payments to Escrow - - - - (37,601)
Transfers Out (14,238) (9,870) (10,339) (18,942) (27,423)
TOTAL OTHER FINANCING SOURCES(USES) (2,080) (38) (838) (38) 520
Extraordinary Item-Dissolution of RDA - - (4,669) (11,839)
INCREASE(DECREASE)IN FUND BALANCES $ 10,115 $ 11,730 $ 3,448 $ 1,230 $ 5,861
DEBT SERVICE AS A PERCENTAGE OF
NON-CAPITAL EXPENDITURES 3.7% 3.3% 5.8% 4.5% 7.8%
524
178
CITY OF HUNTINGTON BEACH
ASSESSED AND ACTUAL VALUATION
OF ALL TAXABLE PROPERTY (EXCLUDING REDEVELOPMENT AGENCY)
LAST TEN FISCAL YEARS
(In Thousands)
Common Total Assessed Total Direct Tax
Fiscal Year Property Public Utilities Total Secured Unsecured Valuation Rate
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 28,045,478 0.17082
2013-2014 28,005,989 53,702 28,059,691 1,106,038 29,165,729 0.17082
2014-2015 29,723,274 74,102 29,797,376 989,809 30,787,185 0.17082
2015-2016 31,193,211 66,802 31,260,013 1,132,728 32,392,741 0.17082
2016-2017 32,540,317 55,802 32,596,119 1,067,760 33,663,879 0.17082
2017-2018 34,199,035 41,102 34,240,137 1,100,077 35,340,214 0.17082
2018-2019 35,941,648 61,202 36,002,850 1,117,879 37,120,729 0.17082
2019-2020 37,741,095 518 37,741,613 1,145,838 38,887,451 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
City Basic Rate Metro Water Total Direct and
Fiscal Year (1), (2) City Other School Districts District Others Overlapping
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
2013-2014 0.15582 0.01500 0.59841 0.00350 0.31444 1.08717
2014-2015 0.15582 0.01500 0.62448 0.00350 0.29444 1.09324
2015-2016 0.15582 0.01500 0.07615 0.00350 0.84418 1.09465
2016-2017 0.15582 0.01500 0.07786 0.00350 0.83599 1.08817
2017-2018 0.15582 0.01500 0.09970 0.00350 0.84418 1.11820
2018-2019 0.15582 0.01500 0.09246 0.00350 0.84418 1.11096
2019-2020 0.15582 0.01500 0.08788 0.00350 0.84418 1.10638
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 property tax 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 over
the 1% base rate for voter approved general obligation debt. Valuations of real property are frozen at the value of the
property in 1975,with an allowable adjustment up to 2% per year for inflation. 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.
525
179
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
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%
2013-2014 49,808 48,452 97.3% 656 49,108 98.6% 545 1.1%
2014-2015 52,188 50,759 97.3% 576 51,335 98.4% 519 1.0%
2015-2016 55,886 53,916 96.5% 546 54,462 97.5% 1,263 2.3%
2016-2017 58,258 56,481 96.9% 525 57,006 97.9% 1,253 2.2%
2017-2018 62,418 59,731 95.7% 474 60,205 96.5% 2,073 3.3%
2018-2019 63,934 62,222 97.3% 622 62,844 98.3% 920 1.4%
2019-2020 66,411 64,767 97.5% 496 65,263 98.3% 1,092 1.6%
Unsecured Taxes
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%
2013-2014 1,922 1,693 88.1% 33 1,726 89.8% 76 4.0%
2014-2015 2,016 1,839 91.2% 37 1,876 93.1% 69 3.4%
2015-2016 1,925 1,740 90.4% 35 1,775 92.2% 39 2.0%
2016-2017 1,899 1,692 89.1% 23 1,715 90.3% 34 1.8%
2017-2018 1,964 1,829 93.1% 28 1,857 94.6% 26 1.3%
2018-2019 1,964 1,804 91.9% 20 1,824 92.9% 29 1.5%
2019-2020 2,038 1,906 93.5% 15 1,921 94.3% 43 2.1%
Community Facilities Districts
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%
2013-2014 3,968 3,957 99.7% 6 3,963 99.9% - 0.0%
2014-2015 3,981 3,967 99.6% 1 3,968 99.7% 2 0.1%
2015-2016 4,121 4,106 99.6% 9 4,115 99.9% 2 0.0%
2016-2017 4,098 4,085 99.7% 2 4,087 99.7% - 0.0%
2017-2018 4,141 4,128 99.7% 5 4,133 99.8% - 0.0%
2018-2019 4,099 4,086 99.7% 3 4,089 99.8% 1 0.0%
2019-2020 4,053 4,027 99.4% 2 4,029 99.4% 14 0.3%
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
Note:
2002/2003 to current fiscal year includes the following:
Secured: includes supplemental,st Itg reorg, nuisance abatement,weed abatement, retirement override,
tax admin charges, and community interest. Does not include CFD.
Unsecured: includes aircraft unsecured tax. Does not include CFD.
Miscellaneous: excluded from all tables.
Delinquency Amount: reflects the"unpaid"amounts as stated in the OC auditor-controller website.
526
180
CITY OF HUNTINGTON BEACH
TOP TEN PROPERTY TAXPAYERS
CURRENT YEAR AND NINE YEARS AGO
2019-2020
Taxable Assessed Value Percent
In Thousands of Total TAV
AES Huntington Beach Energy, LLC $ 420,264 1.08%
Bella Terra Associates LLC 381,693 0.98%
SoCal Holdings LLC 274,824 0.71%
McDonnell Douglas/Boeing 221,121 0.57%
PCH Beach Resort LLC 219,135 0.56%
DCO Pacific City LLC 217,022 0.56%
Elan Multifamily LLC 136,292 0.35%
Monogram Residential HB Proj 135,586 0.35%
The Waterfront Hotel LLC 125,333 0.32%
One Pacific Plaza Owner LLC 124,500 0.32%
Total Top Ten 2,255,770 5.80%
All Other Property Taxpayers 36,631,681 94.20%
City Total $ 38,887,451 100.00%
2010-2011
Taxable Assessed Value Percent
(In Thousands) of Total TAV
The Boeing Company/McDonnell Douglas Corporation $ 371,433 1.39%
Bella Terra Associates LLC 299,105 1.12%
Mayer Financial LP 185,072 0.69%
CIM Huntington LLC 145,017 0.54%
Pacific Sands LLC 83,339 0.31%
AES Huntington Beach LLC 70,600 0.26%
United Dominion Realty LP 68,156 0.26%
Seacliff Village Shopping Center Inc 64,001 0.24%
Cambro Manufacturing Company 62,458 0.23%
NF Huntington Plaza LP 60,861 0.23%
Total Top Ten 1,410,042 5.29%
All Other Property Taxpayers 25,265,013 94.71%
City Total $ 26,675,055 100.00%
Source: HdL Coren&Cone
Note: Information provided for the period from July 1st through June 30th.
527
181
THIS PAGE INTENTIONALLY LEFT BLANK
528
182
CITY OF HUNTINGTON BEACH
RATIOS OF OUTSTANDING DEBT BY TYPE
LAST TEN FISCAL YEARS
(In Thousands)
Fiscal Year Ended
June 30, September 30,
Long-Term Indebtedness 2020 2019 2018*** 2017 2016
Governmental Activities:
Judgement Obligation Bonds $ - $ - $ - $ - $ 659
Public Financing Authority:
2010(a) Lease Revenue Bond 7,410 8,235 9,030 9,030 9,795
2011(a) Lease Revenue Bond 15,725 17,770 19,735 19,735 21,650
2014(a) Lease Revenue Bond 12,530 13,145 13,740 13,740 14,315
Total Public Financing Authority 35,665 39,150 42,505 42,505 45,760
Redevelopment Agency:
1999 Tax Allocation Refunding Bonds - - - - -
2002 Tax Allocation Refunding Bonds - - - - -
Mayer Disposition and Development Agreement - - - - -
Bella Terra OPA(Parking) - - - - -
CIM DDA(Parking & Infrastructure) - - - - -
CIM DDA(Additional Parking) - - - - -
Section 108 Loan RDA/Bowen Court - - - - -
Total Redevelopment Agency - - - -
Other Long-Term Obligations:
Capital Leases Payable 5,241 5,083 6,079 6,286 4,130
PARS Payable - - - - -
Section 108 Loan City - - 430 430 625
LED Lighting Phase 1 546 656 762 866 966
CEC 2,588 2,818 3,000 3,000 3,000
I-Bank 2,171 2,454 2,730 2,730 3,000
Total Other Long-Term Obligations 10,546 11,011 13,001 13,312 11,721
Total Long-Term Obligations-Governmental Activities $ 46,211 $ 50,161 $ 55,506 $ 55,817 $ 58,140
Long-Term Obligations -Business-Type Activities:
Leases Payable $ - $ - $ - $ - $ -
Total Long-Term Obligations -Business-Type Activities $ - $ - $ - $ - $ -
Total Long Term Obligations-Governmental Activities and
Business-Type Activities $ 46,211 $ 50,161 $ 55,506 $ 55,817 $ 58,140
2020 2019 2018*** 2017 2016
Population 200,748 202,265 201,761 202,413 201,919
Debt Per Capita $ 230 $ 248 $ 275 $ 276 $ 288
Total Personal Income(In Thousands)* $9,450,814 $9,222,677 $8,849,843 $8,878,441 $8,880,801
Per Capita Personal Income* $ 47,078 $ 45,597 $ 43,863 $ 43,863 $ 43,982
Unemployment Rate** 8.60% 2.60% 2.70% 2.80% 3.90%
Total Employment** 96,200 110,500 109,900 103,200 107,200
* Source: Claritas, Inc.
** Source: State of California Employment Development Department
***The 2017-18 period reflects nine months of activity only as the fiscal year change resulted in a nine month reporting period from October 1,2017 to
June 30,2018.
529
183
CITY OF HUNTINGTON BEACH
RATIOS OF OUTSTANDING DEBT BY TYPE
LAST TEN FISCAL YEARS
(In Thousands)
Fiscal Year Ended
September 30,
Long-Term Indebtedness 2015 2014 2013 2012 2011
Governmental Activities:
Judgement Obligation Bonds $ 1,634 $ 2,574 $ 3,474 $ 4,339 $ 5,179
Public Financing Authority:
2010(a) Lease Revenue Bond 10,525 11,230 11,910 12,565 13,200
2011(a) Lease Revenue Bond 24,985 28,165 31,195 34,155 36,275
2014(a) Lease Revenue Bond 14,865 - - - -
Total Public Financing Authority 50,375 39,395 43,105 46,720 49,475
Redevelopment Agency:
1999 Tax Allocation Refunding Bonds - - - - 6,180
2002 Tax Allocation Refunding Bonds - - - - 13,525
Mayer Disposition and Development Agreement - - - - 5,803
Bella Terra OPA(Parking) - - - - 13,922
CIM DDA(Parking &Infrastructure) - - - - 7,288
CIM DDA(Additional Parking) - - - - 435
Section 108 Loan RDA/Bowen Court - - - - 3,997
Total Redevelopment Agency - - - - 51,150
Other Long-Term Obligations:
Capital Leases Payable - - - 290 572
PARS Payable - 29 56 4,517 5,868
Section 108 Loan City 805 975 1,135 1,285 1,425
LED Lighting Phase 1 1,063 - - - -
CEC - - - - -
I-Bank - - - - -
Total Other Long-Term Obligations 1,868 1,004 1,191 6,092 7,865
Total Long-Term Obligations -Governmental Activities $ 53,877 $ 42,973 $ 47,770 $ 57,151 $ 113,669
Long-Term Obligations -Business-Type Activities:
Leases Payable $ - $ - $ - $ 3 $ 6
Total Long-Term Obligations-Business-Type Activities $ - $ - $ - $ 3 $ 6
Total Long Term Obligations -Governmental Activities and
Business-Type Activities $ 53,877 $ 42,973 $ 47,770 $ 57,154 $ 113,675
2015 2014 2013 2012 2011
Population 198,389 195,999 193,616 192,524 190,377
Debt Per Capita $ 272 $ 219 $ 247 $ 297 $ 597
Total Personal Income(In Thousands)* $8,725,545 $8,278,410 $ 7,839,899 $7,573,894 $ 7,356,548
Per Capita Personal Income* $ 43,982 $ 42,237 $ 40,492 $ 39,340 $ 38,642
Unemployment Rate** 3.90% 3.60% 3.60% 4.30% 6.30%
Total Employment** 104,000 120,200 120,200 119,600 115,100
530
184
CITY OF HUNTINGTON BEACH
LEGAL DEBT MARGIN
LAST TEN FISCAL YEARS
(In Thousands)
Assessed Debt Limit - 12% of Debt Applicable Legal Debt
Fiscal Year Valuation Assessed Valuation to Limit Margin
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 28,045,478 3,365,457 - 3,365,457
2013-2014 29,165,729 3,499,887 - 3,499,887
2014-2015 30,787,185 3,694,462 - 3,694,462
2015-2016 32,392,741 3,887,129 - 3,887,129
2016-2017 33,663,879 4,039,665 - 4,039,665
2017-2018 35,340,214 4,240,826 - 4,240,826
2018-2019 37,120,729 4,454,487 - 4,454,487
2019-2020 38,887,451 4,666,494 - 4,666,494
531
185
CITY OF HUNTINGTON BEACH
STATEMENT OF DIRECT AND
OVERLAPPING BONDED DEBT
JUNE 30, 2020
2019/20 Assessed Valuation: $42,462,946,112
Debt Repaid with Property Taxes (Tax and Assessment Debt):
Percent Debt Applicable
Overlapping Tax and Assessment Debt Applicable* to City
Metropolitan Water District 1.371% 511,383
Coast Community College District 28.561% 259,348,377
Huntington Beach Union High School District 73.021% 126,194,891
Fountain Valley School District 26.739% 14,027,279
Huntington Beach City School District 99.947% 88,821,861
Ocean View School District 93.503% 36,330,591
Westminster School District 23.804% 23,832,829
Los Alamitos Unified School District Facilities District No. 1 1.189% 1,812,395
City of Huntington Beach Community Facilities Districts(1990-1, 2000-1, 2002-1, 2003-1) 100.000% 30,205,000
Total Overlapping Tax and Assessment Debt $ 581,084,606
Direct and Overlapping General Fund Debt
Orange County General Fund Obligations 6.786% 26,244,516
Orange County Pension Obligations 6.786% 31,681,374
Orange County Board of Education Certificates of Participation 6.786% 877,430
North Orange County Regional Occupation Program Certificates of Participation 0.087% 7,787
Coast Community College District General Fund Obligations 28.561% 742,586
Huntington Beach Union High School District Certificates of Participation 73.021% 45,697,338
Los Alamitos Unified School District Certificates of Participation 1.068% 408,895
Huntington Beach School District Certificates of Participation 99.947% 12,099,969
Ocean View School District Certificates of Participation 93.503% 18,321,913
Westminster School District Certificates of Participation 23.804% 8,499,765
City of Huntington Beach General Fund Obligations: 100.000% 45,038,000
Total Direct and Overlapping General Fund Obligation Debt $ 189,619,573
Overlapping Tax Increment Debt(Successor Agency) 100.000% 6,150,000
Total Direct Debt $ 45,038,000
Total Overlapping Debt 731,816,179
Combined Total Debt $ 776,854,179 (1)
(1) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue, and non-bonded capital lease obligations.
Ratios to Adjusted Assessed Valuations
Combined Direct Debt($45,038,000) 0.11%
Combined Total Debt 1.83%
Ratios to Redevelopment Successor Agency Incremental Valuation ($3,323,791,483)
Total Overlapping Tax Increment Debt 0.19%
The percentage of overlapping debt applicable to the city is estimated using taxable assessed property value. Applicable percentages were estimated by
determining the portion of the overlapping district's assessed value that is within the boundaries of the city divided by the district's total taxable assessed
value.
Source:California Municipal Statistics and City of Huntington Beach Finance Department
532
186
CITY OF HUNTINGTON BEACH
PRINCIPAL PRIVATE EMPLOYERS
CURRENT YEAR AND NINE YEARS AGO
2020 % of total
The Boeing Company 3,112 2.96%
No Ordinary Moments 646 0.61%
Hyatt Regency Huntington Beach 641 0.61%
Safran Cabin Galleys US Inc 631 0.60%
Q S Wholesale 580 0.55%
Safran Cabin Inc 555 0.53%
Cambro Manufacturing 550 0.52%
Huntington Beach Hospital 527 0.50%
Wal-Mart 462 0.44%
Waterfront Hilton Beach Resort 450 0.43%
Total of top 10 8,154 7.75%
All others 97,046 92.25%
Total employment(public and private) 105,200 100.00%
2011 % of total
The Boeing Company 4,609 4.17%
Quiksilver 1,230 1.11%
Cambro Manufacturing 951 0.86%
Hyatt Regency Huntington Beach 641 0.58%
C & D Aerospace 555 0.50%
Huntington Beach Hospital 503 0.45%
Rainbow Disposal 408 0.37%
Huntington Beach Healthcare 381 0.34%
Waterfront Hilton Beach Ressort 343 0.31%
Cleveland Golf/Srixon 280 0.25%
Total of top 10 9,901 8.95%
All others 100,699 91.05%
Total employment(public and private) 110,600 100.00%
Source: Finance Department, City of Huntington Beach
533
187
CITY OF HUNTINGTON BEACH
FULL-TIME ACTUAL AND BUDGETED CITY EMPLOYEES BY FUNCTION/PROGRAM
LAST TEN FISCAL YEARS
Actual
General Government: 2020 2019 2018*** 2017 2016 2015 2014 2013 2012 2011
City Council 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
City Manager 22.00 12.50 12.50 11.50 11.50 11.50 11.50 7.00 7.00 7.00
City Treasurer 2.00 2.00 2.00 2.00 1.50 1.50 1.50 1.50 1.50 1.50
City Attorney 11.00 11.00 11.00 12.00 11.00 11.00 11.00 11.00 11.00 11.00
City Clerk 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00
Finance 33.00 33.00 33.00 33.00 32.50 31.50 31.50 29.50 29.50 29.50
Human Resources** - 15.00 15.00 15.00 15.00 15.00 15.00 14.50 15.00 15.00
Community Development 49.50 44.00 44.00 44.00 43.50 44.00 43.00 42.75 42.75 43.75
Information Systems 30.00 30.00 30.00 30.00 30.00 30.00 30.00 29.50 29.50 29.50
Economic Development* - - - - - - 4.50 5.50 11.50
Library Services 28.25 28.25 28.25 28.25 28.25 28.25 28.25 27.75 27.75 29.75
Fire 198.00 198.00 198.00 198.00 198.00 198.00 196.50 176.50 176.50 176.50
Police 365.50 364.50 364.50 364.50 364.50 361.50 360.50 358.50 363.00 367.00
Community Services 36.00 36.00 36.00 44.00 44.00 43.00 43.00 56.00 61.00 61.00
Public Works 207.00 207.00 207.00 199.00 199.00 198.00 196.00 196.00 196.00 203.00
987.25 986.25 986.25 986.25 983.75 978.25 972.75 960.00 971.00 991.00
Source: Finance Department,City of Huntington Beach
* Economic Development was combined with Community Development in the year ended June 30,2020. Previously,it was combined with
the City Manager's Office as of the year ended September 30,2014.
**Human Resources was combined with the City Manager's Office in the year ended June 30,2020.
***The 2017-18 period reflects nine months of activity only as the fiscal year change resulted in a nine month reporting period from
October 1,2017 to June 30,2018.
534
188
CITY OF HUNTINGTON BEACH
OPERATING INDICATORS BY FUNCTION/ACTIVITY
LAST TEN FISCAL YEARS
Function/Program 2020 2019 2018*** 2017 2016
Finance:
Water Bills Processed 636,708 639,245 476,290 632,997 635,052
Active Business Licenses 20,910 21,414 21,782 22,074 21,420
Accounts Receivable Billings Processed 25,687 30,217 25,000 34,963 30,826
City Clerk:
Passports Issued 4,579 7,024 5,757 7,408 5,623
Planning:
Entitlements Processed 162 221 206 216 221
Plan Reviews 1,358 1,542 1,466 1,376 1,653
Field Inspection Complaints 11,610 8,183 7,005 8,459 7,951
Code Violation Cases 3,260 4,786 4,219 3,981 4,324
Building:
Number of Permits Issued 8,855 9,807 7,490 9,728 10,981
Number of Inspections Completed 32,859 36,562 30,501 38,796 39,380
Value of Construction Permits(Thousands of Dollars) 169,393 135,910 109,462 216,252 283,910
Processed Number of Certificate of Occupancies* 515 686 523 740 n/a
Completed Plan Reviews 3,469 3,491 2,771 4,172 4,172
Counter Visits 14,922 21,409 16,498 21,731 23,492
Fire:
Inspections 5,965 6,140 3,963 2,758 5,132
Responses 21,068 20,354 14,490 20,555 20,279
Ocean Rescues 2,487 4,953 3,530 3,639 3,977
Estimated Beach Visitors 6,712,125 10,577,290 12,522,640 13,339,518 12,272,030
Police:
Physical Arrests 5,785 5,979 4,614 5,298 5,112
Parking Violations 59,484 79,069 54,500 70,846 90,361
Traffic Violations 12,105 13,314 11,869 19,916 17,639
Community Services:
Park/Open Space Acreage 1,066 1,066 1,065 1,065 1,062
Enrollment in Recreation Classes 28,952 37,978 27,152 37,968 34,424
Public Works:
Water Sold (Acre Feet)** 25,966 26,251 19,777 25,944 24,505
Gallons of Sewage Pumped Per Day** 19 million 19 million 19 million 22 million 19 million
Library:
Items in Collection 294,849 293,995 292,037 288,599 285,814
Items Borrowed 779,124 942,821 655,626 943,642 921,105
* Beginning the 2013/14 Fiscal Year,the Building Department no longer processes Certificate of Occupancies.
**Reduction of estimate is the result of the Governor's executive order to reduce water consumption.
***The 2017-18 period reflects nine months of activity only as the fiscal year change resulted in a nine month reporting period from
October 1,2017 to June 30,2018.
Source:Various departments of the City of Huntington Beach
535
189
CITY OF HUNTINGTON BEACH
OPERATING INDICATORS BY FUNCTION/ACTIVITY
LAST TEN FISCAL YEARS
(Continued)
Function/Program 2015 2014 2013 2012 2011
Finance:
Water Bills Processed 536,684 630,240 628,207 646,229 630,268
Active Business Licenses 21,424 20,450 21,127 22,304 21,903
Accounts Receivable Billings Processed 38,594 42,360 45,422 45,422 42,968
City Clerk:
Passports Issued 5,121 4,598 4,220 3,850 3,082
Planning:
Entitlements Processed 280 204 231 205 195
Plan Reviews 1,595 1,466 1,575 1,184 1,524
Field Inspection Complaints 8,233 7,030 7,301 6,105 6,064
Code Violation Cases 4,710 2,545 2,385 2,573 2,521
Building:
Number of Permits Issued 10,670 9,348 8,970 8,444 8,413
Number of Inspections Completed 38,320 36,142 33,962 31,224 29,905
Value of Construction Permits(Thousands of Dollars) 234,946 216,343 248,246 190,992 104,238
Processed Number of Certificate of Occupancies* n/a n/a 477 647 765
Completed Plan Reviews 3,815 3,148 n/a n/a n/a
Counter Visits 21,893 21,326 20,854 19,777 20,288
Fire:
Inspections 6,499 6,641 5,087 6,974 7,858
Responses 19,562 15,815 15,608 15,040 15,940
Ocean Rescues 5,371 6,426 4,195 4,669 3,845
Estimated Beach Visitors 11,803,943 12,035,134 11,016,615 8,906,592 7,840,968
Police:
Physical Arrests 4,854 4,303 4,237 5,774 6,457
Parking Violations 83,453 74,668 72,347 77,282 77,261
Traffic Violations 17,596 16,330 13,016 16,916 16,770
Community Services:
Park/Open Space Acreage 1,062 1,062 1,062 1,062 998
Enrollment in Recreation Classes 30,228 30,184 30,218 32,817 32,565
Public Works:
Water Sold (Acre Feet)** 24,763 29,279 28,354 27,784 26,868
Gallons of Sewage Pumped Per Day** 19 million 22 million 22 million 22 million 22 million
Library:
Items in Collection 343,655 332,092 385,901 420,956 427,707
Items Borrowed 908,656 937,533 892,543 888,019 943,695
536
190
CITY OF HUNTINGTON BEACH
CAPITAL ASSET STATISTICS BY FUNCTION/ACTIVITY
JUNE 30, 2020
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 1,066
Community Centers 6
Public Works:
Centerline Square Miles of Streets Maintained 450
Miles of Beach Maintained 4.7
Miles of Storm Drains Maintained 120
Miles of Sewer Maintained 363
Source:Various departments of the City of Huntington Beach
537
191
Davis Farr LLP
*IlDavisFarr
2301 Dupont Drive I Suite 200 1 Irvine.CA 92612
CERTIFIED PUBLIC ACCOUNTANTS Main:949,474,2020 1 Fax:949.263.5520
REQUIRED AUDIT COMMUNICATIONS
Honorable Mayor and City Council
City of Huntington Beach
Huntington Beach, California
We have audited the financial statements of the governmental activities, the business-type
activities, each major fund, and the aggregate remaining fund information of the City of Huntington
Beach for the year ended June 30, 2020. Professional standards require that we provide you with
information about our responsibilities under generally accepted auditing standards, Government
Auditing Standards and the Uniform Guidance, as well as certain information related to the planned
scope and timing of our audit. We have communicated such information in our letter to you dated
December 16, 2020. Professional standards also require that we communicate to you the following
information related to our audit.
Significant Audit Findings
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The
significant accounting policies used by the City of Huntington Beach are described in Note 1 to the
financial statements. No new accounting policies were adopted, and the application of existing
policies was not changed during 2020. We noted no transactions entered into by the City of
Huntington Beach during the year for which there is a lack of authoritative guidance or consensus.
All significant transactions have been recognized in the financial statements in the proper period.
Accounting estimates are an integral part of the financial statements prepared by management and
are based on management's knowledge and experience about past and current events and
assumptions about future events. Certain accounting estimates are particularly sensitive because of
their significance to the financial statements and because of the possibility that future events
affecting them may differ significantly from those expected. The most sensitive estimate(s)
affecting the City of Huntington Beach's financial statements was (were):
• Judgements involving the estimated useful lives and depreciation methodology used for
capital assets, including certain infrastructure
• Judgements as to which City capital projects should be capitalized and depreciated in
the government-wide financial statements and proprietary funds
• Judgements relating to the collectability of accounts and notes receivable
• Estimated Other Post Employment Benefit obligations
• Judgements with respect to recording claims payable and remediation obligations
• Estimated Net Pension liabilities
The financial statement disclosures are neutral, consistent, and clear.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and
completing our audit.
538
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified
during the audit, other than those that are clearly trivial, and communicate them to the appropriate
level of management. The following immaterial misstatements detected as a result of audit
procedures were not corrected by management: reporting of certain investments at fair market
value, deposits payable that should be reported as revenues, understatement of interest revenue,
understatement of unbilled receivables, and understatement of claims payable. In addition, none of
the misstatements detected as a result of audit procedures and corrected by management were
material, either individually or in the aggregate, to each opinion unit's financial statements taken
as a whole.
Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting,
or auditing matter, whether or not resolved to our satisfaction, that could be significant to the
financial statements or the auditor's report. We are pleased to report that no such disagreements
arose during the course of our audit.
Management Representations
We have requested certain representations from management that are included in the
management representation letter dated December 16, 2020.
Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and
accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation
involves application of an accounting principle to the City of Huntington Beach's financial
statements or a determination of the type of auditor's opinion that may be expressed on those
statements, our professional standards require the consulting accountant to check with us to
determine that the consultant has all the relevant facts. To our knowledge, there were no such
consultations with other accountants.
Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and
auditing standards, with management each year prior to retention as the City of Huntington
Beach's auditors. However, these discussions occurred in the normal course of our professional
relationship and our responses were not a condition to our retention.
Other Matters
We applied certain limited procedures to management's discussion and analysis, budgetary
comparison information for the General Fund and each major special revenue fund, schedule of
funding progress, schedule of changes in net pension liability and related ratios, schedule of
pension contributions, schedule of money-weighted rate of return, schedule of changes in net OPEB
liability and related ratios and schedule of OPEB contributions, which are required supplementary
information (RSI) that supplements the basic financial statements. Our procedures consisted of
inquiries of management regarding the methods of preparing the information and comparing the
information for consistency with management's responses to our inquiries, the basic financial
statements, and other knowledge we obtained during our audit of the basic financial statements.
We did not audit the RSI and do not express an opinion or provide any assurance on the RSI.
539
We were engaged to report on supplementary information, which accompany the financial
statements but are not RSI. With respect to this supplementary information, we made certain
inquiries of management and evaluated the form, content, and methods of preparing the
information to determine that the information complies with accounting principles generally
accepted in the United States of America, the method of preparing it has not changed from the
prior period, and the information is appropriate and complete in relation to our audit of the
financial statements. We compared and reconciled the supplementary information to the underlying
accounting records used to prepare the financial statements or to the financial statements
themselves.
We were not engaged to report on introductory section and the statistical section, which
accompany the financial statements but are not RSI. Such information has 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 it.
Restriction on Use
This information is intended solely for the information and use of the City Council and management
of the City of Huntington Beach and is not intended to be, and should not be, used by anyone other
than these specified parties.
Irvine, California
December 16, 2020
540
•
OlDavisFarr
Davis Farr LI_P
2301 Dupont Drive i Suite 200 1 Irvine,CA 92612
CERTIFIED PUBLIC ACCOUNTANTS Main:949.474.2020 ( Fax:949.263.5520
Independent Accountants' Report on Agreed-Upon Procedures
Applied to Appropriations Limit Worksheets
City Council
City of Huntington Beach
Huntington Beach, California
We have performed the procedures enumerated below, which were agreed to by the City of
Huntington Beach, California and the League of California Cities (as presented in the League
publication entitled Article XIIIB Appropriations Limitation Uniform Guidelines) on the
Appropriations Limit Worksheets for the year ended June 30, 2020. The City of Huntington
Beach's management is responsible for the Appropriations Limit Worksheets. The sufficiency
of these procedures is solely the responsibility of the parties specified in this report.
Consequently, we make no representation regarding the sufficiency of the procedures
enumerated below either for the purpose for which this report has been requested or for
any other purpose.
The procedures performed and the results of those procedures were as follows:
1. We obtained the worksheets referred to above and compared the limit and annual
adjustment factors included in those worksheets to the limit and annual adjustment
factors that were adopted by resolution of the City Council. We also compared the
population and inflation options included in the aforementioned worksheets to those
that were selected by a recorded vote.
Results: No exceptions were noted as a result of our procedures.
2. We recalculated the mathematical computations reflected in the City worksheets.
Results: No exceptions were noted as a result of our procedures.
3. We compared the current year information used to determine the current year limit
and found that it agreed to worksheets prepared by the City and to information
provided by the State Department of Finance.
Results: No exceptions were noted as a result of our procedures.
4. We compared the amount of the prior year appropriations limit presented in the
worksheets to the amount adopted by the City Council for the prior year.
Results: No exceptions were noted as a result of our procedures.
1
541
This agreed-upon procedures engagement was conducted in accordance with attestation
standards established by the American Institute of Certified Public Accountants. We were
not engaged to and did not conduct an examination or review, the objective of which would
be the expression of an opinion or conclusion, respectively, on the worksheets referred to
above. Accordingly, we do not express such an opinion or conclusion. Had we performed
additional procedures, other matters might have come to our attention that would have
been reported to you. No procedures have been performed with respect to the
determination of the appropriation limit for the base year, as defined by the League
publication entitled Article XIIIB Appropriations Limitation Uniform Guidelines.
This report is intended solely for the information and use of the City of Huntington Beach,
California, and is not intended to be, and should not be, used by anyone other than the
specified parties.
u"P
Irvine, California
December 16, 2020
2
542
Davis Farr LLP
DavisFar
2301 Dupont Drive I Suite 200 1 Irvine,CA 92612
CERTIFIED PUBLIC ACCOUNTANTS Main:949.474.2020 1 Fax:949.263.5520
Independent Auditor's Report on Internal Control Over Financial Reporting
and on Compliance and Other Matters Based on an Audit of the Air Quality
Special Revenue Fund Performed
in Accordance with Government Auditing Standards
City Council
City of Huntington Beach
Huntington Beach, California
We have audited, in accordance with the auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government
Auditing Standards issued by the Comptroller General of the United States, Air Quality
Management District Fund of the City of Huntington Beach, California, as of and for the year
ended June 30, 2020, and the related notes to the financial statements, which collectively
comprise the Air Quality Management District Fund of the City of Huntington Beach's basic
financial statements, and have issued our report thereon dated December 16, 2020.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Air Quality
Management District Fund's internal control over financial reporting (internal control) to
determine the audit procedures that are appropriate in the circumstances for the purpose of
expressing our opinions on the financial statements, but not for the purpose of expressing an
opinion on the effectiveness of the Air Quality Management District Fund's internal control.
Accordingly, we do not express an opinion on the effectiveness of the Air Quality Management
District Fund's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to
prevent, or detect and correct, misstatements on a timely basis. A material weakness is a
deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable
possibility that a material misstatement of the entity's financial statements will not be
prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency,
or a combination of deficiencies, in internal control that is less severe than a material
weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first
paragraph of this section and was not designed to identify all deficiencies in internal control
that might be material weaknesses or significant deficiencies. Given these limitations; during
our audit we did not identify any deficiencies in internal control that we consider to be material
weaknesses. However, material weaknesses may exist that have not been identified.
543
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Air Quality Management District
Fund's financial statements are free from material misstatement, we performed tests of its
compliance with certain provisions of laws, regulations, contracts, and grant agreements,
including applicable provisions of Assembly Bill 2766 (AB2766) Chapter 1705 (Health and
Safety Code Sections 44220 through 44247), noncompliance with which could have a direct
and material effect on the determination of financial statement amounts. However, providing
an opinion on compliance with those provisions was not an objective of our audit, and
accordingly, we do not express such an opinion. The results of our tests disclosed no instances
of noncompliance or other matters that are required to be reported under Government
Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness
of the entity's internal control or on compliance. This report is an integral part of an audit
performed in accordance with Government Auditing Standards in considering the entity's
internal control and compliance. Accordingly, this communication is not suitable for any other
purpose.
X�1'
[ter°
Irvine, California
December 16, 2020
544
City of Huntington Beach
FY 2019/20 Year-End Audit Results &
FY 2020/21 Mid-Year Budget Update
Huntington Beach City Council
February 16, 2021 02-A..
EACH
Overview
• FY 2019/20 Audit and Year-End Results
• FY 2020/21 Mid-Year Budget Update
• FY 2021/22 Budget Development Calendar
SUPPLEMENTAL
COMMUNICATION
oft. 2�/& 0.2/
Agenda Clem No.; 12 ! 2/— 1-241)
FY 2019/20 Audit & Year-End Results
MUNTINGTON BEACH
FY 2019/20 Audit Results
G�9
• Auditing firm of Davis Farr LLP audited the
City's financial statements and internal C„ Fi.—.oer—A„—Ma
controls certificate of
Achievement
for Excellence
in Financial
• FY 2019/20 Comprehensive Annual Financial Reporting
Report (CAFR) received an Unmodified
(Clean) Audit Opinion "".wd1.
City of Hnntingtoo Reach
California
Far,a C omrvel<u 'An W
• The City's CAM is award winning—received Fh,1 .1 Y—I
f m the},ua]Y<.v Lnd<d
the Government Finance Officers Jw 10'01Q
Association's (GFOA) Excellence in Financial
Award for 34 years n '`"P ;kr, "
FY 2019/20 Audit Reports Issued
• Comprehensive Annual Financial Report
— Issued "unmodified" opinion on December 16, 2020
— This is the highest opinion possible
• AU-C 260 Letter: Communications
• Appropriations Limit Agreed-Upon Procedures
• AQMD Report
• Single Audit Report(in progress,to be completed by March 31,2021)
5
Internal Controls
• Evaluated controls over key accounting cycles:
— Billing and Cash Receipting
— Purchasing and Cash Disbursements
— Payroll
— Banking and Investing
— Grant Management
— Information Systems
• No material weaknesses/deficiencies in internal controls were reported
• No instances of noncompliance with laws and regulations that auditors
believe are direct and material to the financial statements
6
Areas of Audit Focus in FY 2019/20
COVID-19 impact pension OPEB
on revenue and Obligations Obligations
expenses
- - - - --
Testing of Capital { Form 700 testing single Audlt:
for undisclosed Testing of HOME
Asset Activities related party and Highway
transactions Planning Grants
FY 2019/20 Performance (Audited)
Government-Wide Highlights(All Funds):
Description In Thousands
ASSETS
Current and Other Assets $352,633
Capital Assets 857,544
Total Assets 1,210,177
Deferred Outflows—Pensions&OPEB 57,761
LIABILITIES
Current and Other Liabilities 33,152
Long-Term Obligations* 538,081
Total Liabilities 571,233
Deferred Inflows—Pensions&OPEB 14,289
TOTAL NET POSITION $682,416
*Reflects GASB 68 recording of Net Pension Liability of$434.8 million and GASB 75 recording of
Net OPEB Liability$3.7 million
s
FY 2019/20 General Fund (Audited)
Description In Thousands
Total Revenues* $225,487
Total Expenditures 215,636
Excess of Revenues Over Expenditures 9,851
Transfers In 172
Transfers Out (8,948)
Net Change in General Fund Balance $1,075
*Includes one-time revenues totaling$4.5M comprised of the following:
Sales Tax Back Payments totaling$2.3M
Property Sales of$989K
Fire Strike Team Revenues of$458K
Cable 1V Franchise additional quarter of$730K
9
General Fund Balance
Fund Balance Category(In Thousands) FY 17/18 FY 18/19 FY 19/20
Audited Audited Audited
Total Nonspendable,Restricted, $61,004 $72,763 $72,585*
Committed,and Assigned Fund Balances
Unassigned 2,734 - -
Total Fund Balance 63,738 72,763 72,585
Section 115 Trust Bank Balance 4,896 6,250 7,503
Total with Section 115 Trust $68,634 $79,013 $80,088
* Includes$16.5 million Strategic Planning Initiative Assignment
10
FY 2020/21 Mid-Year Budget Update
HUNTINGTON BEACH
FY 2020/21 Mid-Year Budget Update
• Current budgetary performance continues to project that the FY 2020/21
budget is balanced
— Major Citywide restructuring plan that was instituted reduced ongoing General Fund
expenditures by—$6M/year
— General Fund is projected to end the FY 2020/21 with a $549K surplus
Projected
thousands) E
Revenues $223,041
Expenditures less UAL 194,026
CalPERS UAL 28,466
Total Expenditures 222,492
Surplus $549
Mid-Year Budget Adjustment Requests
- Mid-year budget adjustments are requested in 10 separate funds
1. General Fund (100)
2. PD Facilities Development Impact Fund (227)
3. Narcotics Forfeiture Fund (242)
4. Refuse Collection Services Fund (504)
5. Water Master Plan Fund (507)
6. Self-Insurance GL Fund (552)
7. Retiree Insurance Fund (702)
8. Retirement Supplement Fund (703)
9. AB 109 Fund (979)
10. Pedestrian & Bicycle Safety Program Grant Fund (1266)
13
General Fund Adjustments
- Adjustments requested include the following:
—Community Development Department is requesting a net-neutral appropriations
adjustment$44,060 for preparation of a Mitigated Negative Declaration for the
Seacliff Senior Living& Memory Care Facility
— Fire Department is requesting a net-neutral appropriations adjustment of$1.105
million to fund Strike Team deployment costs
— Fire Department is requesting a net-neutral appropriations adjustment of$312,240
to cover ClAF payments,given increased Medi-Cal ambulance transports
experienced this year
— Fire Department is requesting an appropriations increase of$30,250 to fund Metro
Cities JPA dispatch costs,to cover higher than anticipated call volumes
14
Other Fund Adjustments
• Funding is available for all other budgetary requests, most of which
are previously planned administrative adjustments
• Unplanned new appropriation requests relate to recommended
adjustments for the Police Department
— $90K purchase of new van for crisis negotiation team (PD Facilities DIF)
— $70K to fund new technology to perform AB 109 compliance checks(AB 109 Fund)
—$50K in traffic/pedestrian safety funding(Ped./ Bike Safety Grant Fund)
—$12K in law enforcement equipment and supplies(Narcotics Forfeiture Fund)
15
Other Fund Adjustments
• Retirement Supplement Fund,Retiree Insurance Fund,and Self-Insurance GL Fund
adjustments were contemplated as part of the current budget year,and are
administrative changes being requested based on updated actuarial valuations/costs
— $4.9M retirement supplement request is to fund a legacy program that provides enhanced retirement
benefits for employees hired prior to 1998
o Fund has an account balance of—$56.9M,and funding request is in line with most recent actuarial valuation
— $1.31VI retiree insurance is for another legacy program that provides post-employment medical insurance to
those hired prior to 2014
o Fund has an account balance of—$30.7M,and funding request is in line with most recent actuarial valuation
— Insurance premium cost adjustments of$935K is for planned insurance premium costs
• Refuse Collection Fund adjustment($190K) is intended to reflect the recent trash rate
increase
• Water Master Plan Fund changes($340K)are intended to correct an administrative
oversight in the current year budget related to the City's approved cost allocation plan
16
FY 2021/22 Budget Development Calendar
HUNTINGTON BEACH
Budget Development Calendar
Proposed Date
February—May 2021 FY 2021/22 Internal Budget Development Process
May 17,2021 FY 2021/22 Proposed Budget Study Session with City Council
June 7, 2021 FY 2021/22 Budget Adoption: City Council Public Hearing
June 21,2021 FY 2021122 Budget Adoption:Alternate Date
July 1,2021 Fiscal Year 2021/22 Begins
ie
Long-Term Budget Strategy Being Developed
• FY 2020/21 Budget has a projected $6.3M deficit, driven by
increasing UAL costs
— Within the next 5-year period, UAL payments are projected to increase by—$10 million
• UAL cost increases are driving significant future year projected
General Fund budget deficits
thousands) Projected"b il �7 Projected Projected Projected �
Revenues $223,041 $228,439 $233,277 $237,529 $241,260
Expenditures less UAL 194,026 202,278 207,098 211,327 214,960
CalPERS UAL 28,466 32,501 34,948 36,465 38,149
Total Expenditures 222,492 234,780 242,046 247,792 252,109
Surplus 7= $549 -$6,341 -$8,769 -$10,263 -$11,849
UAL Refinance, other Budget Adjustments
Being Considered
• In March, staff will present a possible UAL refinance plan and UAL
funding policy for City Council consideration
— Staff has been assessing strategies to address UAL cost increases since late 2019
— With the City in position to achieve rates in the 2-3%range, refinancing UAL costs would
stabilize the City's existing budget situation
• Additionally, as part of the FY 2021/22 budget development
process, staff is currently working to assess other budget
adjustment / stabilization strategies
— These efforts are being made through the lens of maintaining all existing service delivery
levels,while reigning in other controllable costs
Recommended Actions
1. Receive and File FY 2019/20 Comprehensive Annual
Financial Report (CAFR)
2. Approve mid-year budget adjustments to the FY 2020/21
Revised Budget
Questions?